Lang Aftermarket iReport: Low ‘scrappage’ impacts Aftermarket

“New car and light truck annual sales reached record heights between 2015 and 2018. Typically, this would generate a sharp rise in vehicle scrappage (vehicles removed from operation) across the U.S. However, despite robust annual sales of new vehicles, light vehicle scrappage plunged to a 10-year low between 2015 and 2018.

“Low scrappage in the face of rising new vehicle sales reflects the longer life of today’s vehicles plus the willingness of Americans to keep driving older vehicles. This has implications for a wide range of aftermarket issues.”

— Jim Lang, publisher, Lang Aftermarket iReport

Low Vehicle Scrappage

New car and light truck sales recorded a wild ride over the past 10 years, plunging nearly 40% between 2008 and 2010 before slowly climbing back to 16.8 million during 2014.

Over the next four years, annual new vehicle sales averaged more than 17 million, a record-high level. This rollercoaster ride was accompanied by a strong market share of foreign nameplate new cars and light trucks.

Higher Scrappage Expected

Many analysts expected a sharp spike in vehicle scrappage between 2015 and 2018 resulting from strong new vehicle sales.

However, the opposite occurred, as the average annual vehicle scrappage rate over this four-year span was one-fifth lower than 10 years earlier.

Longer Vehicle Life

Cars and light trucks on U.S. roads are lasting much longer than they did just a few years ago. Vehicles are currently being scrapped at an average age several years older than during the 1990s.

If this trend continues (and indications are that it will, based on improved manufacturing quality and more durable materials) scrappage could remain low for the foreseeable future.

Higher New Vehicle Prices

The rapidly escalating price of new vehicles (up nearly 30% over the last 10 years) is causing many consumers to keep vehicles longer and is also boosting the price of used vehicles, which tends to reduce the scrappage of older vehicles.

Low Scrappage Impact

Low light vehicle scrappage in the U.S. will have a number of important consequences for the aftermarket, including (but not limited to) the number of vehicles in operation (VIO), average vehicle age, vehicle age mix, foreign and domestic nameplates on the road, as well as aftermarket inventory requirements and parts proliferation.

VIO Growth

Moderate scrappage rates coupled with strong new vehicle sales will fuel the growth of vehicles in operation (VIO) across the U.S., reversing the trend of flat (and sometimes lower) annual VIO levels between 2008 and 2013.

Changing Vehicle Average Age & Age Mix

Longer vehicle life will increase the number of cars and light trucks in operation and expand the population of older vehicles on U.S. roads. Both of these developments will help boost the average age of vehicles.

Foreign and Domestic Nameplate Mix

The survival of older vehicles (the majority of which are domestic nameplates) will slow the share grow of foreign nameplates on U.S. roads.

Growing Inventory Demands & Parts Proliferation

An increase in the number of vehicles in operation, particularly among older vehicle age groups, will increase the need for aftermarket distribution channels to carry vehicle parts for a greater number of years than historically has been necessary.

This will exacerbate the problems of parts proliferation and inventory management in the car and light truck aftermarket.

Six Major Takeaways

  • Despite a sharp increase in new car and light truck annual sales in the U.S. during 2015 through 2018, light vehicle scrappage rates over this four-year span fell to a 10-year low.
  • Vehicles are lasting much longer today than they did just a few years ago, with scrappage occurring at an increasingly higher vehicle average age.
  • Low scrappage coupled with strong vehicle sales have fueled the growth of vehicles in operation (VIO) across the U.S.
  • The higher average age of cars and light trucks on U.S. roads and the population growth of vehicles will be two of the most significant consequences of vehicles lasting longer.
  • The increased survival of older vehicles (a majority of which are domestic nameplates) will slow the VIO share growth of foreign nameplates in the U.S.
  • As vehicles remain in operation longer, the aftermarket inventories carried by Distributors, Retailers, and Manufacturers must include components for an expanding vehicle age range, increasing problems of parts proliferation and inventory management.

Copyright 2019 by Lang Marketing Resources, Inc.

NOTESpecial thanks to publisher Jim Lang for granting us permission to publish the Lang Aftermarket iReport.