Digital Auto Care Factbook 2016 - 15

2014 - 2018 FORECAST ASSUMPTIONS
2015 Channel Forecast Model Review:
The most recent Economic Census data was incorporated into the model during the 2012 update.
The complete set of relevant data from the study won't be released until 2016. The most significant
'historical' changes within this current forecast refer to the results for 2014. The table below highlights
the growth projection for 2014 from last year's forecast for the total aftermarket as well as three of the
largest sales channels. The three channels shown make up over 50% of total aftermarket sales.
Our previous forecast for 2014 total aftermarket sales growth was
3.1%. Our new forecast has revised that growth upwards, to the
current value of 3.5%. The revisions were fairly balanced across the
major channels. While new vehicle sales came in above our estimate,
total vehicles in operation exceeded our forecast as well. More
importantly, the labor force grew faster than expected and combined
with lower gas prices to result in an increase in miles driven that was
much higher than forecast.

2015 Update
2014
Estimate

2014
Final

Total Industry Sales (% Change)

3.1%

3.5%

New Car Dealer Sales (% Change)

3.0%

3.6%

Auto Parts Stores (% Change)

3.3%

3.5%

General Auto Repair (% Change)

2.6%

3.1%

Forecast Assumptions:
The long-term economic view for the United States remains very positive. Most of the direct benefits to consumer
spending from lower gasoline prices have already been injected into the economy. Multiplier effects and the increased
buying power from lower inflation will drive a continuation of this growth. Trade impacts and falling industrial
investment will restrain GDP growth despite strong underlying consumer demand. Employment growth continues
to boom, which may spur interest rate hikes but that is not expected to have a material effect on the economy's
2015 growth momentum. The consumer outlook for the next two years is looking brighter due to elevated levels of
consumer confidence, lower energy prices, housing market improvement, and stronger income support.
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Market Forces Driving the Auto Care Industry
* While 2015 has gotten off to a slow start, full year
Nominal GDP growth should reach 4% for the year, and
is forecast to average 4.4% annually from 2015 through
2018. Disposable income growth is expected to grow at
a similar rate of 4.5% during the forecast period, which is
the highest four-year stretch of disposable income growth
since ten years prior.
* New vehicle sales are expected to come in just under 17
million units in 2015, a level not seen since 2005. That
will result in an average of over 16.25 million vehicles sold
annually from 2013 to 2015, which is a three-year average
not seen since prior to the recession.
* By the close of 2014, the 252 million vehicles on the road
just topped the pre-recession high of 2009. From 2014 to
2018, the total vehicles in operation should increase nearly
10% to just under 277 million vehicles.
* The addition of 25 million vehicles to the fleet will come
while the mix of vehicles continues to shift. While vehicles
12+ years old are predicted to increase 15%, those
5-11 years old will decline by 21% as the new to 5 year
segment will grow 32%.
* The average vehicle age remains unchanged at 11.5 years.
* The significant fall in gas prices that began in late
2014 was driven by a combination of over-supply and
weakened demand. As a result, gas prices are expected
to remain depressed through the forecast period, with the
average gas price not expected to return to the $3/gallon
range until late 2018.

* In the 3 months of November 2014 to January 2015,
nominal consumer spending on gasoline fell by $100
billion, resulting in a significant consumer dividend that
has helped spur overall consumption.
* Total miles driven increased 1.7% in 2014. While miles
driven was trending up slightly throughout 2014, when
gas prices started to fall the miles traveled figure started
to accelerate its climb, with December 2014 and January
2015 numbers each up 5% compared to the previous year.
* With gas prices expected to remain low, combined with a
steadily increasing labor force, total miles traveled should
return to steady growth rates in the 2% range.
* With the driving age population expected to increase 1%
annually, vehicle miles per capita will finally start to see
growth again.
* Continued growth in new vehicle sales and rising
disposable income should benefit the dealer and retail
channels within the aftermarket.
* A rising labor force and falling gas prices have been a
boon to vehicle miles traveled, but long-term demographic
problems remain. The labor force participation rate (those
working or looking for work) remains at levels not seen
since the late 1970s and while it should increase slightly
through 2018, it is not expected to top levels seen as
recently as 2012 as baby boomers retire out of the work
force. There is also a demographic shift, as those baby
boomers are reducing their vehicle fleet and usage at a
faster rate than millennials are increasing theirs.

The IHS forecast for total US aftermarket sales calls for growth of 3.9% in 2015. Coming on the heels of an upward
revision to 2014, the 2015 aftermarket sales is expected to exceed $256 billion. Growth should accelerate further in
2016 before cooling a bit in 2017 and 2018. Total aftermarket sales will reach $284 billion by 2018. The long term growth
from 2013 to 2018 will be 3.6% annually. Retail sectors are expected to see the largest growth during the forecast
period, increasing at a 4.0% CAGR during the 5-year period. Revenue through the dealer channels is expected to grow
at a 3.5% annual rate. The service sector is forecast to top $100 billion in revenue in 2017 and reach $103 billion by
2018. The dealer channel will exceed $84 billion in 2018 while the retail sector will come in at just over $96 billion.
2016 Digital Auto Care Factbook Copyright © 2015 Auto Care Association

Digital Auto Care Factbook 2016

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