As 2018 draws to a close, we checked in with aftermarket experts to get their thoughts on the aftermarket for 2019.
Utilization drives parts sales
Approximately five years ago, Chris Brady, president of Commercial Motor Vehicle Consulting, developed the Parts Aftermarket Leading Retail Sales Indicator, to identify changes in the market. Recent data shows that parts aftermarket sales will gain momentum in the coming months.
“What is driving the market is high utilization of the fleet,” Brady says. He adds that the truck population is also expanding, so not only will there be a strengthening of sales for brake pads and linings, but also, “you are going to see an acceleration in general parts sales in the aftermarket.” While Brady sees a downward trend in truck utilization during the second half of 2019, “utilization will still be relatively high, so the truck aftermarket for 2019 should be pretty strong.”
A main concern for fleets is will there be enough capacity in the marketplace to meet their aftermarket parts needs. “Do the channels of distribution have the parts on hand to satisfy the repair in a timely manner? This is going to be related to the spec of the vehicle, the age of the vehicle and things of that nature,” he says.
Price increases likely
MacKay & Company’s DataMac service is a five-year outlook on the aftermarket. The most recent update (August 2018) showed a 2.5% increase in projected demand for replacement parts for 2019 over 2018, according to John Blodgett, vice president of sales and marketing.
Blodgett anticipates that when DataMac participants are surveyed again in the first quarter of 2019, the data will show that prices “are going to be higher, probably quite a bit higher, than what we have seen in the past three years.”
The survey also looks at anticipated growth in parts categories. The biggest growth areas for 2019 is electronics, up about 6% over 2018, and power generation up about 4%.
Robert Dieli, president of RDLB Inc. and an economist who works with MacKay, is predicting economic growth to become more volatile, Blodgett says. “I am telling folks that it is time to start paying more attention to the economy, and particularly things like employment and inflation, and what the long-term outlooks are for that.”
Leaving the old ways behind
“I think 2019 will be a historic tipping point,” says Bill Wade, managing partner, Wade & Partners. “We are leaving a whole way of doing business. It is not just changing; we are departing it.”
Fleets will have the same expectations of their vehicle parts purchasing as they do of purchases they make in their personal lives.
“It will no longer be a marketing republic; it’s becoming a pure marketing democracy,” Wade says. That means the fleet buyer determines who he wants to buy from, how he wants to buy, and how he wants the parts shipped. “The new overarching thing is that the customer gets to describe and create the distribution channels. This has never happened before in the history of the aftermarket.”
It will be up to manufacturers to make that palatable to their distribution channels, Wade says. “The customer does not care about whether a sales territory gets proper credit for a sale; he just wants to get his parts.”
Wade contends that recent research indicates that three-quarters of people in industrial settings don’t want to see a salesperson, because they can now do their own research online before making a purchase. This will put pressure on fleets to make sure their people are trained properly.