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2018 Automotive Aftermarket Year-End Webinar

2018 started strong for the Aftermarket. Frequent and sustained winter storms that hung around well past their welcome helped our industry grow 4.0% in dollars through November; December brought the number down to 2.5%<br>

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2018 Automotive Aftermarket Year-End Webinar

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  1. 2018 Automotive Aftermarket Year-EndWebinar Nathan H. Shipley Executive Director of Industry Analysis, Automotive nathan.shipley@npd.com 713-576-5159 January 30,2019 Copyright 2018. The NPD Group, Inc. All RightsReserved. This presentation is proprietary and confidential and may not be disclosed in any manner, in whole or in part, to any third party without the express written consent ofNPD.

  2. Presentation will last approximately 30minutes. No Q&A due to highattendance. NPD’s Retail Tracking Service tracks 29 front of store automotive product categories. It excludes application-specific parts and all commercial volume. NPD estimates that the Retail Tracking Service covers 71% of the U.S.DIY Retailmarket. All data and statements are based on calendar year 2018 data unless otherwisenoted. Housekeeping DocumentThcleasNsiPfiDcaGtiroonu:pE,xItnecr.na|l PPurobplircieUtsaery andconfidential

  3. Macro Consumer, Retail, and MobilityTrends 2018 Aftermarket Performance Brief look at the e-Commerce channel 2019 Forecast Areas ofDiscussion DocumentThcleasNsiPfiDcaGtiroonu:pE,xItnecr.na|l PPurobplircieUtsaery andconfidential

  4. CONSUMER, RETAIL, AND MOBILITYTRENDS DocumentThcleasNsifPDicatGrionou:pE,xteIncrn.al| PuProbpliriec Utasery andconfidential

  5. Retail isRebounding After plunging into the negatives, US Retail sales have stabilized, growing 2.6% in the last 12Months 2.9% 2.6% 2.6% 1.9% 0.4% -0.2% -0.2% 12MEJun'17 12ME Sep'17 12ME Dec'17 12MEMar'18 12MEJun'18 12 MESept'18 12 MEDec'18* Source: The NPD Group/ConsumerTracking Service Auto, Beauty, Office Supplies, Housewares, Juvenile – RetailTrackingService Video Games – Market Dynamics Report; Video Entertainment – VideoWatch® Nielsen data fromNielsenAnswers Includes Accessories, Apparel, Auto, Beauty, Footwear, Housewares, Juvenile, Office Supplies, SDA, Tech, Toys, Video Games, Video Entertainment, CREST®, and Nielsen CPGcategories *Preliminary; not all industries captured at time ofpresentation DocumentThcleasNsiPfiDcaGtiroonu:pE,xItnecr.na|l PPurobplircieUtsaery andconfidential

  6. U.S. Vehicle & Driver PopulationTrends While the size of the vehicle population continues to grow, the average age of vehicles continues to trendolder Source: Experian; U.S. Department ofTransportation DocumentThcleasNsiPfiDcaGtiroonu:pE,xItnecr.na|l PPurobplircieUtsaery andconfidential

  7. Miles-Driven GrowthRate The miles-driven growth rate has slowed over the last 18 months, taking us down to our new normal. October 2018 only grew at+0.6%. 12ME Oct.2016 12ME Oct.2018 +2.7% +0.44% vs.2015 vs.2017 Source: U.S. Department ofTransportation DocumentThcleasNsiPfiDcaGtiroonu:pE,xItnecr.na|l PPurobplircieUtsaery andconfidential

  8. Consumers spent over $400B on gasoline in 2018,$43.4B more than in 2017. Spending on gasoline increased 12.1% in 2018 compared to the prioryear. Consumer Spending on Gasoline 12.1% 11.3% -1.7% -2.9% -8.9% -24.0% CY2015 CY2013 CY2014 CY2016 CY2017 CY 2018 Source: U.S. Energy InformationAdministration DocumentThcleasNsiPfiDcaGtiroonu:pE,xItnecr.na|l PPurobplircieUtsaery andconfidential

  9. There has been a tremendous amount of volatility in gasoline prices over the last 14 years compared to the 10 yearspreceding this period. Multiple runs from $1.xx to $4.00 have taken place with prices in 2018 hitting the $3.00mark. Third run of increasing prices; currently at$3.00; miles driven growth rate stabilizing afterdecline First run to $4.00;behavior shifts and declining miles driventrends Second run to $4.00; miles driven growth rate improvingpost-recession 25 Years: Gasoline PriceTrend $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 Dec-1994 Jun-1995 Dec-1995 Jun-1996 Dec-1996 Jun-1997 Dec-1997 Jun-1998 Dec-1998 Jun-1999 Dec-1999 Jun-2000 Dec-2000 Jun-2001 Dec-2001 Jun-2002 Dec-2002 Jun-2003 Dec-2003 Jun-2004 Dec-2004 Jun-2005 Dec-2005 Jun-2006 Dec-2006 Jun-2007 Dec-2007 Jun-2008 Dec-2008 Jun-2009 Dec-2009 Jun-2010 Dec-2010 Jun-2011 Dec-2011 Jun-2012 Dec-2012 Jun-2013 Dec-2013 Jun-2014 Dec-2014 Jun-2015 Dec-2015 Jun-2016 Dec-2016 Jun-2017 Dec-2017 Jun-2018 Dec-2018 Source: U.S. Department of Transportation; Rolling 12Months DocumentThcleasNsiPfiDcaGtiroonu:pE,xItnecr.na|l PPurobplircieUtsaery andconfidential

  10. Almost 2/3rds of consumers told us that they are not concerned about higher gasoline prices today. The majority told us that they know prices fluctuate and this increase is likelytemporary. I am not concerned atall I am not very concerned as the economy is strong and this change is not impacting my ability to spend in other areas I am not very concerned as I know gasoline prices fluctuate and this change is likelytemporary Consumer Concern over GasolinePrices 70% 66% 64% 64% 62% 61% TotalAnswers 18-24 25-34 35-44 45-59 60+ The NPD Group, 2019 ConsumerOutlookSurvey Base: Vehicle Owners,TotalAnswers Survey fielded August2018 DocumentThcleasNsiPfiDcaGtiroonu:pE,xItnecr.na|l PPurobplircieUtsaery andconfidential

  11. 2015 2016 2017 2018 Gasoline Brand Switching As gas prices started to increase in 2018, major fuel brands posted a significant decline in share while traditionals and other smaller brandsincreased. 38.2 38.9 41.3 40.0 29.7 28.7 26.5 27.3 19.6 19.0 18.8 19.0 12.6 13.4 13.3 13.6 Majors Traditionals HVRs Others The NPD Group, Motor FuelsIndex DocumentThcleasNsiPfiDcaGtiroonu:pE,xItnecr.na|l PPurobplircieUtsaery andconfidential

  12. AFTERMARKETTRENDS DocumentThcleasNsifPDicatGrionou:pE,xteIncrn.al| PuProbpliriec Utasery andconfidential

  13. Several companies announced major game-changing moves in 2018.In addition to the points below, eBay launched “shop by diagram” technology and GoodYear announced a new urban storeformat Aftermarket News in2018 February May July September October Announcesadditional round of fundingfrom ExxonMobil and GeneralMotors Announces tire partnership with Sears. Pep Boys and Monro Auto Service/TireCenters announced / expanded in 2018 aswell Amazonannounces launch of Amazon Basics MotorOil Announces free next- day shipping in 83 markets if ordered by 10:00 PM the dayprior Walmart & Advance announcepartnership DocumentThcleasNsiPfiDcaGtiroonu:pE,xItnecr.na|l PPurobplircieUtsaery andconfidential

  14. 1 2 3 Aftermarket DisruptionThemes Our industry is on a path of disruption coming from multipleangles TheConsumer Where they Shop /Buy How they getaround DocumentThcleasNsiPfiDcaGtiroonu:pE,xItnecr.na|l PPurobplircieUtsaery andconfidential

  15. 2018 started strong for the Aftermarket. Frequent and sustained winter storms that hung around well past their welcome helped our industry grow +4.0% in dollars through November; December brought the number down to+2.5% CY2015 CY2016 CY2017 52 WE1/5/19 4.1 AftermarketPerformance 3.6 3.3 2.6 2.5 2.2 2.0 1.9 1.7 0.7 -1.1 -1.5 Dollars EQUnits AveragePrice The NPD Group/Retail TrackingService DocumentThcleasNsiPfiDcaGtiroonu:pE,xItnecr.na|l PPurobplircieUtsaery andconfidential

  16. January and February 2018 were the best performing months in recenthistory 8.6% 7.9% 7.5% Dollar Volume Growth Trend 4.6% 3.8% 3.8% 3.2% 3.2% 2.5% 2.1% 0.2% -3.9% Jul-18 Apr-18 Jun-18 Nov-18 May-18 Jan-18 Mar-18 Feb-18 Sep-18 Dec-18 Aug-18 Oct-18 Source: The NPD Group/Retail TrackingService DocumentThcleasNsiPfiDcaGtiroonu:pE,xItnecr.na|l PPurobplircieUtsaery andconfidential

  17. While the monthly numbers show a modest decline for the month, thelast two weeks posted significantdeclines 5.0% 3.0% December 2018 byWeek 0.0% -5.0% -3.9% -5.2% -5.5% -10.0% -15.0% -13.1% -20.0% -18.1% Dec-18 WE Dec 082018 WE Dec 152018 WE Dec 222018 WE Dec 292018 WE Jan 052019 The NPD Group / Retail TrackingService DocumentThcleasNsiPfiDcaGtiroonu:pE,xItnecr.na|l PPurobplircieUtsaery andconfidential

  18. In spite of general market trends, the accessories and appearance grouping of categories posted a decline in average sellingprice. GrandTotal Accessories&Appearance Chemicals, Additives&Fluids Maintenance & Repair 5.1 Super-CategoryPerformance 4.2 4.1 3.7 2.5 1.9 1.2 -0.6 -0.9 -1.5 -1.7 -1.7 ASP The NPD Group / Retail TrackingService Dollars Units 52WEJan052019vs.YAG 18 DocumentThcleasNsiPfiDcaGtiroonu:pE,xItnecr.na|l PPurobplircieUtsaery andconfidential

  19. The worst performing categories are likely impacted by a shift to e-commerce while the paint category has suffered as interest in peelable coatingswanes Dollar Change by Automotive Category(%) 52 WE 1/5/19 vs.YAG Total Automotive Aftermarket +2.5% 15.2 10.2 Dollar Volume Pct. Change by Category 6.5 5.9 3.5 2.9 2.7 2.3 2.0 1.71.6 1.6 1.61.4 1.4 1.31.2 1.2 1.11.0 0.4 0.2 0.0 -0.6-0.6 -0.8 -2.3-3.0 -8.3 Wash.Fluid Perf.Chem. Towing Ext.Acc. Batt.Acc. Filters Tape Paint Trans.Fluid App.Acc. Electrical Lighting FluidMgt. HandCare Sealants Greases Tire/WheelAcc. App.Chem. Int.Acc. BodyRepair Wipers Refrigerants MotorOil Antifreeze SparkPlugs AirFresh LD ShopEquip. Batteries CargoMgt. Source: The NPD Group / Retail TrackingService DocumentThcleasNsiPfiDcaGtiroonu:pE,xItnecr.na|l PPurobplircieUtsaery andconfidential

  20. Overall average price during the 2018 period increased 4.1% on top of a similar increase in 2017. The majority of categories had an increase in selling price during theperiod. Average Price Change by Automotive Category(%) Total Automotive Aftermarket +4.1% 52 WE 1/5/19 vs.YAG 9.3 8.4 Average Price Pct. Change byCategory 7.4 7.2 6.9 5.8 4.7 4.4 4.8 4.1 3.9 3.43.3 3.0 2.9 2.8 2.8 2.7 2.6 2.5 1.9 1.9 1.9 1.0 -0.7 -1.5 -1.0-2.0 -7.0 Paint Towing Batt.Acc. Filters Tape Trans.Fluid Ext.Acc. Wash.Fluid Perf.Chem. App.Acc. Electrical HandCare Sealants Lighting FluidMgt. BodyRepair Wipers SparkPlugs Greases App.Chem. Tire/WheelAcc. Int.Acc. Refrigerants MotorOil CargoMgt. Batteries AirFresh Antifreeze LD ShopEquip. Source: The NPD Group / Retail TrackingService DocumentThcleasNsiPfiDcaGtiroonu:pE,xItnecr.na|l PPurobplircieUtsaery andconfidential

  21. 8.8% 7.3% 100% Private LabelPerformance Dollar GrowthRate Private label grew8.8%, compared to3.8% in the totalmarket Unit GrowthRate Overall market unit volume declined -1.1%, while private label grew 7.3% Increase inDistribution Private labeldistribution has doubled since2014 The NPD Group/Retail Tracking Service / YTD10.6.18 Excludes filters andbatteries DocumentThcleasNsiPfiDcaGtiroonu:pE,xItnecr.na|l PPurobplircieUtsaery andconfidential

  22. 8.0 Expanded ChannelPerformance In aggregate, the expanded channel market declined -1.6% in 2018. Every channel within this aggregate declined with the drug channel declining the most at-8.9% 5.8 6.0 4.0 2.0 0.0 1.6 1.0 0.5 -0.6 -2.0 -1.6 -1.6 -2.2 -2.3 -2.5 -4.0 -3.0 -3.1 -6.0 -8.0 -10.0 -6.8 -7.6 -8.9 Dollars EQUnits AveragePrice GrandTotal Convenience Drug Grocery Mid-Tier/Value The NPD Group / Retail Tracking Service: ExpandedChannels 52WEJan052019vs.YAG DocumentThcleasNsiPfiDcaGtiroonu:pE,xItnecr.na|l PPurobplircieUtsaery andconfidential

  23. E-COMMERCE DocumentThcleasNsifPDicatGrionou:pE,xteIncrn.al| PuProbpliriec Utasery andconfidential

  24. 43% 40% E-commerce: RetailPenetration 12 months ending September2018 29% 28% 23% 22% 22% 20% 18% 15% 9% 5% 5% 1 1 1 3 1 2 2 2 2 0 1 3 4 Commercial Food Office Supplies* Small Appliances Prestige Beauty Video Games Consumer Electronics CPG** Auto*** Toys Apparel Footwear Accessories Media Entertainment Source: The NPD Group/ US Consumer Tracking Service, except Office Supplies and Beauty: Retail Tracking (POS)Service, Consumer Electronics: CheckoutTracking **CPG number sourced fromNielsen” *Excludes CommercialChannels ***% of buyers online via NPD Car CareTrack DocumentThcleasNsiPfiDcaGtiroonu:pE,xItnecr.na|l PPurobplircieUtsaery andconfidential

  25. Units(Millions) 109 87 Dollars(Billions) Automotive E-commerce SalesTrend* Automotive E-commerce has experienced double digit growth in dollars and units the past twoyears $4,459.4 77 +31% $3,405.1 +13%+26% $2,832.7 +20% 12 ME Nov 2016 12 ME Nov 2017 12 ME Nov2018 12 ME Nov 2016 12 ME Nov 2017 12 ME Nov2018 *Tires and WheelsRemoved Source: The NPD Group/CheckoutE-commerce DocumentThcleasNsiPfiDcaGtiroonu:pE,xItnecr.na|l PPurobplircieUtsaery andconfidential

  26. 15% $145 2.3 $63 Stats on the E-commerce AutoBuyer They’re mainstream and purchase about 2 auto products a yearonline E-CommerceAuto penetration Nearly 15% of all U.S. e-commerceshoppers bought an auto product in the last 12months Online Spendper e-commerce Autobuyer Online, on average, consumers spent $145 on Auto products inthe lastyear Average # of Auto Online Orders in aYear Online auto spenders made an average 2.3auto purchases a year, increasing over lastyear Average Online Auto Ordervalue The average Auto purchase was $63, about the same as lastyear Source: The NPD Group / Checkout E-commerce, 12ME November2018 DocumentThcleasNsiPfiDcaGtiroonu:pE,xItnecr.na|l PPurobplircieUtsaery andconfidential

  27. The Exterior Accessories Category has seen buyer count increase by 50% over the last12 months Almost 80% of the e-commerce dollar volume is picked up at a retail location vs. beingdelivered to ahome 6.8MM 2% E-Commerce by theNumbers 50% 80% Almost 7 million consumers purchased an exterioraccessory on the internet in the last 12 months AmazonBasics Motor Oil had a 2% share of e-commerce motor oil sales volume in November. The product was launched inJuly Source: The NPD Group / CheckoutE-commerce DocumentThcleasNsiPfiDcaGtiroonu:pE,xItnecr.na|l PPurobplircieUtsaery andconfidential

  28. LOOKINGFORWARD DocumentThcleasNsifPDicatGrionou:pE,xteIncrn.al| PuProbpliriec Utasery andconfidential

  29. Aftermarket TrendDisrupters Many factors are changing the landscape of the automotive aftermarket. Some are short term, while others are here tostay. Import Tarriffs &USMCA Truck Driver, Technician, & Counter-PersonShortage OEMCreativity DocumentThcleasNsiPfiDcaGtiroonu:pE,xItnecr.na|l PPurobplircieUtsaery andconfidential

  30. We expect the DIY market to be flat in 2019, based on the following inputs DocumentThcleasNsiPfiDcaGtiroonu:pE,xItnecr.na|l PPurobplircieUtsaery andconfidential

  31. AveragePrice Continuing to increase in the 3-5%range MilesDriven Growth rate stable but relatively low (in the0.3% - 0.5%range) CarPricing 2019 index points to flat/decliningprices Major Inputs for 2019Forecast DocumentThcleasNsiPfiDcaGtiroonu:pE,xItnecr.na|l PPurobplircieUtsaery andconfidential

  32. Thankyou Nathan H.Shipley Executive Director of Industry Analysis, Automotive nathan.shipley@npd.com 713-576-5159 DocumentThcleasNsiPfiDcaGtiroonu:pE,xItnecr.na|l PPurobplircieUtsaery andconfidential

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