Digital Auto Care Factbook 2018 - 11

2015-2020 Forecast Assumptions
2016 total now $277 billion, as compared
to the previous estimate of $268 billion.
For 2016, the revised model shows the
aftermarket grew by 4.3%, which is an
increase over the projected 4.1% rise
in last year's forecast. The big picture
economic drivers were either largely
unchanged from our forecast or came in
just under our initial forecast, but those
were offset by strong usage numbers in
the form of vehicle miles traveled as well
as high consumer optimism measures
that resulted in consumers showing a
willingness to spend on their vehicles. The
table below summarizes the changes in
2016 aftermarket sales across some of
the major sales channels.
2017 Aftermarket Forecast Update
2016
Estimate
(% change)

2016 Final
Result
(% change)

Total Aftermarket
Sales

4.1%

4.3%

New Car
Dealer Sales

4.5%

4.4%

Auto Parts
Stores

3.1%

3.6%

General
Auto Repair

4.1%

4.6%

combined with a confident consumer should result in a strong outlook for the U.S.
aftermarket.

Market Trends Influencing the Aftermarket
* Long-term economic growth will improve going forward, but will remain moderate on
an annual basis. Full year nominal GDP growth will peak in 2018 at 5% before falling
back slightly in 2019 and 2020. Although domestic demand will be slightly stronger
than that as international trade will be a drag on growth through 2018.
* Consumer spending, currently 69% of GDP, is driving the economy's ebb and flow.
Consumer confidence/sentiment remains buoyant, supported by the fundamentals
of rising employment, real incomes, and household net worth. Household finances
are in good shape, thanks to rising home prices and stock prices, moderate use of
credit, and substantial deleveraging over the past decade.
* Disposable income growth will likely jump to 5.6% in 2018, from a projected 4.3% in
2017 and should remain over five percent annually through 2020.
* Gas prices are expected to rise and take back the 10% decline seen in 2016 and
remain in the $2.45 area through 2018 before rising in 2019 and 2020, with the 2020
average expected to hit $3.00 a gallon.
* Total vehicle miles traveled in 2016 increased by 2.8%, which trails only 2015's
growth of 3.5% as the highest annual growth rate seen in twenty years. With payroll
employment growth expected to moderate going forward, along with an uptick in gas
prices, it's likely this growth rate falls back to closer to 2% annually going forward.
* 2016 saw new vehicle sales increase by 0.5% from 2015, to 17.6 million. Sales should
take a small step back in 2017 before staying in the 17.5 range through 2020.
* The recent rebound in new vehicle sales hasn't caused a drop in the number of
vehicles on the road, as annual vehicles in operation (VIO) growth averaged 2.1%
annual from 2012 to 2016. That growth rate will begin to slow going forward, but it
will remain positive. 2017 should end with just under 272 million VIO. By 2020, the
VIO should top 284 million. At that point, there will be more than 40 million more
vehicles on the road than in 2010.

Forecast Assumptions
Looking at the big picture, economic
growth has been slowly picking up,
on average, since the fourth quarter of
2015. The good news is that even before
any policy changes, the US economy
is on a firmer footing than it was a year
ago. Moderately pro-growth policies
are already built into the IHS Markit
forecast, with nominal GDP growth, after
a slow first quarter, to average nearly 5%
through the rest of 2017. Healthy gains
in employment, real disposable income,
and household wealth will continue
to fuel consumer spending. Nominal
consumption growth will hold at 4.5% this
year and pick up to 4.8% in 2018, when
tax cuts boost both spending and saving.
Miles traveled should remain steady, and

* The trend in shifting vehicle demographics will continue as vehicles within the
traditional sweet spot of 6-11 years old will continue to decline with the VIO growth
coming from vehicles less than five years old and those vehicles that are 12+ years old.
The 2017 IHS Markit forecast of the U.S. aftermarket is for 2017 total sales to rise 3.5%,
an increase of just under $10 billion. Growth will cool slightly through 2020, averaging
3.3% annually and resulting in 2020 U.S. Aftermarket sales topping $316 billion, an
increase of nearly $40 billion from 2016.
Through 2020 it is expected that the service market will retain its 2016 share of sales of
34.6%. There will be some shifting in share though, as the dealer market is expected
to see their (non-warranty) market share fall from 29.9% in 2016 to 29.0% in 2020. The
retail sector will see its share rise from 35.5% to 36.4% during that same time frame.
Growth in the retail sector has been driven by warehouse clubs on and online channels.
Without those two channels the retail sector would average only 2.8% growth annually.

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Table of Contents for the Digital Edition of Digital Auto Care Factbook 2018