The State of the Heavy-Duty Aftermarket

A “perfect storm of challenges” is the way Mike Hawthorne, president and CEO of Bendix, described the condition of the heavy-duty aftermarket during a session at the Heavy Duty Aftermarket Dialogue conference on Jan. 24 in Texas.

While he said that he “does not have a silver bullet to shoot at the monster,” he does see “some opportunity for the supply chain to get untangled.” However, he believes the logistics problems will continue to overwhelm the supply chain.

To weather the storm, Walt Frankiewicz, president of Haldex America and executive vice president of Haldex AB, said aftermarket participants need to remain flexible and adapt to changing market conditions. The resiliency of the aftermarket is one of the things John Coll, senior vice president of global marketing, sales and services at Allison, said has helped the aftermarket stay strong during these difficult times.

It was no surprise that during the panel discussion, the issue of parts availability came up as one of the hardest problems to solve. Hawthorne said the best aftermarket companies can do is “make everyone equally unhappy.”

All three panelists said that truck-down situations were the number one priority for parts triage on a day-to-day basis.

“When someone is down, we feel a responsibility to get them parts to get back on the road,” Hawthorne said.

Coll said the best way to get through these challenges is “by sitting down and working through them together.”

Frankiewicz added that “there is one characteristic of our industry that differentiates us from automotive. And that is the relationships, mutual trust and integrity in all the industry. These relationships are paramount and are what will get us through.”

The Economy and the Aftermarket

About 90% of dealers and distributors have experienced major parts availability issues and delivery delays, according to a recent survey presented by John Blodgett, vice president of sales and marketing at MacKay & Co., during an outlook session on the aftermarket industry economy.

This means fleets are experiencing delays in getting the parts they need. Interestingly, when parts are unavailable, 44% of customers are waiting until the preferred part arrives as opposed to selecting another brand of the same part.

When dealers and distributors were asked what manufacturers could do to help them, 79% said have better parts availability and 16% said have more frequent and better communication. Fleets responding to the same question said suppliers should stock more inventory (38%) and 21% said they want more frequent and better communication.

In response to parts shortages, fleets indicated that thy are stocking more parts and have increased their inventory levels (31%) and are ordering larger quantities when possible (22%).

The U.S. aftermarket parts demand for 2021, which during last year’s Dialogue Blodgett predicted would be up 11.8%, was actually up 19.7% over 2020. Parts pricing last year was up 6.7% over 2020 and Blodgett is predicting a 5% parts price increase for 2022.

He also forecast U.S. aftermarket demand (Class 6-8 trucks as well as trailers) to be at about $39 billion for 2022, nearly $41 billion for 2023, and growing to about $47 billion by 2026.

The health of the trucking industry and the trucks parts and service aftermarket are influenced by the state of the general economy. Bob Dieli, president and founder of RDLB and MacKay & Co. economist, said that the economy is in a period of economic expansion transitioning quickly from the recent recession. He believes the economy is entering another boom phase.

What worries Dieli about the boom phase is its stability, sustainability and the possibility of a black swan — an unpredictable event that is beyond what is normally expected.

“We may have some sort of unpleasantness ahead of us for the next 12 to 18 months,” he said.

In spite of that, three of the factors in his forecast are positive (green) — total truckable economic activity, consumption and investment. He was more cautious about three — exports, imports, and government.

Kevin Depew, deputy chief economist at RSM, also weighed in on what to expect from the economy.

“Supply chain disruptions will continue through mid-year” and inflation as measured by the Consumer Price index might be as high as 7% to 8%. He also predicted that wages will rise above inflation as the labor supply issue will continue to be a factor. However, he added, “People will be surprised at how quickly goods pricing decreases particularly when we get to the endemic stage [of COVID] and when spending on services goes up.”

Washington and the Aftermarket

The aftermarket is not immune from the goings on in Washington, D.C., according to Ann Wilson, senior vice president of government affairs at the Motor & Equipment Manufacturers Association.

While the infrastructure bill passed, the Build Back Better bill is stalled in the Senate. During a presentation at HDAD, Wilson said there are discussions to see if “chunks” of the $4 trillion bill can be passed.

“One of the chunks is the section on energy and climate,” Wilson said, adding that President Biden has made the climate a priority.

Wilson talked about what she called the big three — supply chain, fuel efficiency, and emissions.

“There are some levers the federal government can pull to alleviate supply chain issues,” she said. One of those is the Chips Act, which would provide $2 billion to fund chip manufacturing in the U.S.

“This is not corporate welfare,” she said. “It will allow us to remain competitive in the global market.”

Safety is also high on the President’s agenda, with a laundry list of safety mandates under consideration for both autos and trucks. These include automatic emergency braking, rear underride protection, side underride protection, connected vehicle technology, and a new crash causation study.

For Wilson, the must-win areas for trucking are safety technology, fuel efficiency, supply chain, workforce issues and trade tariffs on Chinese imports

Access to repair information is also a must win, she said, and there is an aggressive agenda to provide consumers with access to repair information. MEMA and HDMA are working to make sure the heavy-duty aftermarket is included in those discussions.