The broad automotive industry continues to feel the harsh economic effects of the pandemic, but the aftermarket parts sector could see growth in the coming year.
As with most things related to the economy following the emergence of COVID-19 in 2020, the automotive industry experienced significant setbacks, from the manufacturing side all the way to new car showrooms at retail outlets. Demand has been down and recovery of any type is expected to be slow.
But some areas of the industry have not been as adversely impacted by the pandemic. For example, aftermarket suppliers and even some component manufacturers have seen steady business or growth in market share. Driven by a need to maintain existing automobiles or even other equipment, suppliers of everything from tires to Eaton pump parts have experienced the impact of COVID-19 differently than the broader automotive industry.
In general, the market for automotive aftermarket parts in the U.S. could see an increase of more than $11 billion in revenue, or nearly 2 percent growth, through 2025, according to an analysis by Technavio. The analysis concludes that the pandemic may continue hindering the growth of various industries, including the broad automotive market, but some sectors like aftermarket automotive parts will continue to see growth opportunities, thanks to expanding use of e-commerce platforms to maintain and acquire replacement parts as part of the trend of reliance on existing automobiles.
This growth trend contrasts sharply with the broader suffering experienced in the global automotive market that faced huge declines in the wake of the pandemic. Profits likely will decline by $100 billion, or by about 6 percent from two years ago, when all the financial books on 2020 are closed for the top original equipment manufacturers, according to an analysis by the consulting firm McKinsey & Company. Some companies serving the automotive industry have kept temporary layoffs and furloughs in place as governments help subsidize lost wages. And some car dealerships continue to struggle with reduced demand in an uncertain economy as millions of U.S. workers remain unemployed since the outbreak of the virus. President Joe Biden signed into law the latest U.S. stimulus plan in March that extends unemployment benefits into September.
There are signs of hope, however, as some forecasts have been revised to show a stronger recovery for the automotive industry this year. Forecasts for light vehicle sales from Frost & Sullivan’s mobility team were revised from an earlier projection of 73.6 million to 77 million, according to Forbes. While this is still a significant drop of 15.1 percent in year-over-year activity, the recovery should be quicker for the devastated automotive sectors, according to the forecast, with the industry expected to surpass pre-pandemic sales activity in just over two years.