Study: auto sales rev-up for '93; service, repair spending increases as parts, motor oil expenses dip - Automotives Parts and Accessories Association study

Discount Store News, May 17, 1993

Service, Repair Spending Increases As Parts, Motor Oil Expenses Dip

Retailers of auto parts and accessories can take some comfort in developments in the auto industry, even though aftermarket sales showed scant growth last year after falling 7% in 1991.

New car and truck sales will increase 10.8% in 1993 and 5.7% more next year, the U.S. Commerce Department projects. That compares with a 5.7% gain in '92, and sales are expected to regain much of the ground lost in '91, when sales plunged 11.3%.

The number of cars in use grew only 0.4% in 1991, as the percentage of cars scrapped equaled a record 99.4% of those newly registered: 8,565,000 cars scrapped, compared to 8,616,000 cars newly registered.

Another positive note: American motorists drove their cars 3% more in 1992, the U.S. Department of Transportation estimates, compared to a 1.0% increase in the '91 recession and 2.1% in 1990.

In its 1993 Aftermarket Factbook, the APAA (Automotives Parts & Accessories Association) spells out the bad news: aftermarket sales fell 7% in 1991, the most recent year for available figures, to $147.9 billion.

The study concludes that accessories sales, such as auto sound and wheel covers, was the only merchandise category to increase over the previous decade, while parts, oils, chemicals and tires all lost ground to the surge in consumer spending for service and repair.

The APAA has yet to analyze and compile sales figures for 1992, said Judy Broseker, director of market research for APAA. But sales probably were flat to low single digit growth. Lang Marketing Resources, a Wayne, N.J.-based automotives market research firm, for instance, estimated that 1992 sales of products for passenger cars increased 1.3% last year, although aftermarket sales for truck products grew 6.2% over 1991.

As usual during a recession, car owners put off preventive maintenance in the '91-'92 recession, Broseker said, and did only necessary maintenance and repair.

A major finding that emerges from the APAA study is that consumer outlays have shifted from DIY expenditures toward the service sector over the past decade.

From 1982 to 1991 the percentage of the consumer aftermarket dollar spent for repairs and service increased to 50.2% from 35.4%. That growth came largely at the expense of replacement parts, which fell to 28.7% from 38.9%. Motor oil dipped to 2.2% from 4.3%, while chemicals slipped to 1.9% from 2.7%. Because today's radial tires last longer, the percentage for replacement tires slipped to 9.5% from 12.0%.

Accessories, however, increased to 7.4% from 6.6%.

The shift in consumer spending reflects an aging baby boomer population, as well as the increased complexity of cars in the '90s, Broseker said.

"The older baby boomer generation has more money and less time so wants the convenience of service," she said.

Repairing cars today often requires electronic diagnostic equipment and costly special tools, Broseker added. If costs for them come down, DIY repairs might increase, she said.

Recognizing the service trend, Kmart has reversed its decline in auto service centers, now in about 990 out of 2,300 U.S. stores, and is starting to install service centers in selected new units. It also launched a quick lube operation in several hundred service centers.

Wal-Mart, the only other discounter remaining in the service business, is selectively adding service centers in new stores and also offers quick lube service in some centers. Now operating service centers in about 450 out of more than 1,900 stores, Wal-Mart plans to increase the number of centers that can mount tires by 50% in 1993, Paine Webber reported in a recent AutoParts Scorecard.

Of the $10.7 billion accessories market in 1991, electronics such as auto sound, car phones, radar detectors and security, accounted for the largest chunk, $5.7 billion, or 52.6%, the Factbook estimated. Wheels and covers accounted for the second largest share, $1.2 billion, or 11.1%. Truck accessories accounted for 7.6%; hand tools, 7.8%; wipers, 4.4%; seat covers and cushions, 6.2%; and floor mats, 2.0%.

Miscellany, including lighting, mirrors, safety equipment, DIY books and car covers accounted for the remaining 8%.

Of $2.79 billion in chemical sales--another major category for discounters--functional products, such as anti-freeze, fluids and greases, accounted for $1.21 billion, or 43.4%.

Maintenance chemicals, additives, degreasers, and paint, accounted for 35.1% of chemical sales, while appearance chemicals, waxes, protectants and washes, accounted for the balance of 21.5%.

Out of 517,400 U.S. outlets that sell auto parts and accessories, discount stores operated 8,200 outlets in 1991, while auto parts chains operated 41,000 units, the Factbook noted.

Warehouse clubs accounted for 5% of auto parts and accessories sales in 1992, the PaineWebber research report concluded and 8% of tire sales. Chains, including Sears, Montgomery Ward, Kmart and Wal-Mart, took a 19% market share of replacement tires in '92.