As we usher in a new year, we thought we would take a look into the ol’ crystal ball and try to see what issues technicians, shop owners and others associated with the aftermarket can expect in 2006. These are not ranked by order of importance, but as a guide to what one can expect in the relationship between the auto manufacturing industry and the automotive aftermarket.
Go Get Training: Service technicians can expect to see more turbochargers, smaller displacement engines, cylinder deactivation, multiple valves per cylinder and direct injection technologies on the vehicles entering their shop. Direct injection, which was developed for diesels and is now available on gasoline engines from imports such as Toyota, Volkswagen, Mitsubishi and others, shoots fuel directly into the combustion chamber instead of an intake port for more air/fuel efficiency, allowing automakers to squeeze more miles per gallon out of these engines.
More Hybrids: This means a need for more training on these powerplant designs. U.S. hybrid-electric vehicle sales volumes are anticipated to grow by 268% between 2005 and 2012, according to J.D. Power and Associates Automotive Forecasting.
Hybrid vehicle sales are expected to grow from approximately 212,000 vehicles in 2005 to 780,000 by 2012. Despite the large increase in sales volume, vehicle models utilizing a hybrid-electric powertrain still will remain a small portion of the market, growing from 1.3% of U.S. light-vehicle sales in 2005 to 4.2% market share by 2012.
Currently, there are 11 hybrid models available in the U.S market, and by 2012, that number could increase to 52 models. By 2012, consumers will have the opportunity to purchase a hybrid vehicle in nearly all segments, including full-size pickups, minivans and luxury cars.
Right To Repair: We expect to see more congressional support (currently 70 members) for the Right to Repair Act bill (H.R. 2048). However, as more congressmen join on, we also expect the debate on the issue to grow before an outcome is finalized.
Counterfeiting: Watch for more action against those counterfeiting in manufactured automotive products. Our advice to shop managers – keep an eye on what you buy. If it sounds too low of a cost to be the real thing, it probably is. Or isn’t.
Steady Shop Work: I don’t see much of a reason for gasoline fuel prices to drop below the $2-a-gallon mark and I wouldn’t be shocked if fuel averaged close to $2.50 a gallon come summer. Though fuel costs remain high, American drivers will complain, but get used to the prices and continue to rack up the miles driven on their vehicles, leading to steady service and repair flow to independent shops.
Warranty/Recall and Repairs: While the number of autos ordered to return to dealerships for repairs was down last year to about 17 million compared with about 31 million in 2004, the flood of new vehicle lines, new vehicle makers and new technologies could dent the "quality image" of some of the higher-end vehicles. I expect a 2006 vehicle recall total of 20 million.
Sub-Compact Cars: Though the Smart car won’t make its debut in the U.S. this year, more emphasis on the environment and high fuel prices mean you can expect to see growth in the sub-compact sector such as Chevy Aveo, Toyota Scion, Hyundai Accent, Kia Rio and the Suzuki Reno. The good news – more room to squeeze your vehicle within the lines in parking lots. Bad news – even tighter engine compartments to deal with.
AAIA Is Looking For You: In response to its members calling for a national platform to represent the interests of independent vehicle service and repair businesses, the Automotive Aftermarket Industry Association (AAIA) in November announced the creation of the Independent Service Providers (ISP) segment and is recruiting shop members. AAIA president and CEO Kathleen Schmatz said ISP will operate under AAIA, adding the aftermarket industry has long needed a forum for more direct communication between independent service providers and the rest of the supply chain. Schmatz said the new segment is non-competitive and non-threatening to current AAIA member program groups, franchises and state and regional associations. She said ISP would help address issues such as OE attempts to limit aftermarket access to service information, extensive promotion of supposed advantages of purchasing dealer-supplied parts and service, improved dealer customer service and extended dealer warranties.
Price Check: Look for suppliers to increase prices on some automotive parts due to higher steel costs and higher energy/transportation costs.
The Price of Health: Businesses can expect higher health care costs, which will impact employee salaries and benefits. If you are a technician who is lucky enough to have a group health plan, you will likely have to pay a higher deductible and/or co-pay in 2006 or in the next few years to come.
Baby Boomers Buffing Up with Muscle Cars: Car auctioneers are reporting an explosion in the value of muscle cars, with some saying a few vehicles are appreciating like fine art. In fact, last year, a rare 1971 Plymouth Hemi Cuda convertible sold for $3 million at a classic car auction! Though muscle cars of the 1960s and ’70s did attract a lot of attention in their day, they only accounted for less than 10% of overall sales, and abusive, young drivers drove them close to extinction. The segment "died" in the late 1970s as higher gas prices and new emissions standards took effect.
These days, while most muscle cars can still be bought for less than $50,000, a few have skyrocketed into six figures and beyond, such as Hemi V8-equipped Dodge/Plymouth muscle cars, 454 Chevelles, 427 Camaros and many Shelby Mustangs. Many in the muscle car business expect values will stay firm for at least the next four years, bringing profitable opportunity to some shops.
New #1: Toyota could top General Motors as world’s largest auto supplier. GM, which produced about 9 million vehicles in 2005, has seen its market share erode over the past 10 years. Toyota, seeing market share growth, said it plans to build 9.06 million vehicles in 2006.
Finding Techs: The hiring of qualified technicians continues to be a concern for independent shop owners, as they struggle to compete with dealerships and other industries that are absorbing those entering the workforce. Shops may need to look to increasing compensation and offering affordable benefit programs to attract more qualified techs to their shops. The development of apprentice or mentor programs between independent shops and their local technical schools could prove to be a popular program for addressing the issue of students acquiring needed diagnostic and troubleshooting skills.
Growth of Hispanic Population: There are close to 50 million Hispanic people residing in the U.S. today (17% of the U.S. population) and that number is expected to double by 2050. Though some may think the Hispanic population is confined to only the southwest states, California and Florida, each state in the U.S. has a growing Hispanic population. As a shop owner, you may experience more Hispanic customers. Which may be a good idea to have or consider hiring Hispanic employees and technicians who could be helpful as a translator to Spanish-speaking customers. A growing number of Hispanic technicians are entering the industry, and may help reduce the current qualified technician shortage.
The Chinese Are Coming! Well, maybe just visiting for now, as a silver midsize sedan from Geely Motors becomes the first Chinese automaker in the nearly 100-year history of the Detroit Auto Show to display a "made-in-China" car. The Geely 7151 CK is expected to go on sale in the U.S. in 2008 with a price tag of $10,000.
Geely joins a few other Chinese automakers that include Great Wall Motor Company Ltd., Chery Automobile Co. and Hebei Zhongxing Automobile that are gearing up to sell vehicles in the U. S. in the next few years. How Americans take to these vehicles is up to the Chinese. If the prices are low and the vehicle quality holds up, it could be more trouble for the Big 3 automakers.
The Associated Press, aftermarketNews.com, J.D. Power and Associates, Detroit Free Press and Automotive News contributed some information used in this article.