Publisher's Statement - June 2013
Diminished ‘sweet spot’ under attack
The aftermarket sweet spot, generally defined as vehicles between six to 12 years old, peaked in 2011 at 104 million and is now estimated to be at about 101 million. The peak number resulted from 15 to 16 million vehicles being sold, per year, in the years leading up to 2009.
Sales of light vehicles in 2009, however, plummeted to 10.4 million, the lowest sales total in 27 years, according to Reuters. Beginning in 2014, as these vehicles come out of warranty and enter the sweet spot, it begins a six-year period of a diminished sweet spot that is estimated to drop to 82 million by 2018. The decline of 22 million over six years is directly linked to new car sales having dropped over the last half decade.
In March, we reported in this column on a recent AASA (Automotive Aftermarket Suppliers Association) Industry Analysis that describes a shrinking, shifting sweet spot in an expanding vehicle parc anticipated now through 2018. The analysis provides clarity to the concept of a diminishing sweet spot while simultaneously reporting the total vehicle parc of more than 243 million vehicles in operation is not shrinking but will continue increasing in future years.
The industry, especially as represented by its associations, should remain vigilant against unneeded or uninformed reduction of the vehicle parc. Under the “green” banner, there is building pressure to turn the fleet faster to meet new standards and opportunities without adequate provisions of protection for vital industry segments.
Resisting scrappage and vehicle retirement programs
Following the recent defeat of a U.S. Congressional proposal to create a national scrappage or “Cash for Clunkers” program, bills are now being introduced and resurrected at the state level. In most of these bills, vehicles traded in for new-car vouchers will be destroyed, regardless of historical or collector value, and without concern for used parts and cores.
In an open letter to President Obama, SEMA expressed a commitment to cooperate with the effort to rebuild the U.S. auto industry but also expressed its opposition to vehicle scrappage programs. While SEMA agrees with programs to stimulate new-car sales with vouchers and tax deductions, SEMA strongly opposes tying vouchers to scrappage programs.
Now, in California, S.B. 459 has been amended to provide additional assistance, with vouchers, to vehicle owners who purchase new, fuel-efficient vehicles and to retire older vehicles. S.B 459 is also an attempt to revitalize a flawed and ineffective scrappage program. It ignores the fact that these programs result in probable loss of rare parts for restorations.
It also potentially denies low-income vehicle owners available parts from older vehicles in order to maintain existing vehicles.
Scrappage programs harm independent repair shops, auto restorers, customizers and their customers. SEMA opposes scrappage programs, especially those that simply target old cars and exclude recycling, repair, and retrofit provisions.
From the remanufacturing perspective, vehicle retirement and scrappage programs take cores out of the cycle and eliminate a portion of the customer base owning older vehicles. Unlike Europe where OEs are required to take back retired vehicles and reuse all salvageable parts and materials, the U.S. relies on its remanufacturing sector. With the likelihood that vehicles will have extended lifecycles up to 20 years, provisions must be made in all legislative vehicle retirement bills to protect the interests of the recycling, repair and customization segments of the industry, as well as consider requirements for the handling of scrapped vehicles to ensure the recycling of cores.