Drivers have been returning to the road after staying indoors earlier in the pandemic, but at the same time global supply chain problems have reduced the availability of new vehicles. Together, that’s meant increasing demand for auto parts.
Those trends were highlighted during recent earnings calls held by eCommerce company CarParts.com and AutoZone, which sells auto parts to both consumers and professional repair shops from its physical stores.
CarParts.com CEO Lev Peker noted that with new vehicles in short supply, used vehicles are in high demand. Those used vehicles will require maintenance and repairs as they are reconditioned before being sold. In addition, the soaring prices of both new and used vehicles means consumers are likely to hold on to the vehicles they already own.
“With 300 million cars on the road and the total addressable automotive aftermarket being over $300 billion, we remain firm in our belief that it will be a strong and enduring demand for companies that can help the average driver with car repair and maintenance,” Peker said during the company’s earnings call.
Investing in Maintaining Vehicles
Similarly, AutoZone Chairman, President and CEO Bill Rhodes said during an earnings call that the rising cost of new and used cars, aging cars and the increase in miles driven are fueling demand for auto parts. As cars are driven more miles, more parts will fail.
Rhodes noted that some new cars are selling for more than the sticker price, and used car prices are up 60% from where they were before the pandemic.
“If you look at the used car price dynamic just in general, those higher residual values are actually encouraging our customers to invest in maintaining their vehicles because they’re comfortable that the value is actually holding,” Rhodes said.
Helping Customers Get Out and Drive
At the beginning of the pandemic, Rhodes said, sales of auto parts dropped rapidly. Retail sales rebounded quickly with the April 2020 stimulus, but commercial sales lagged and took several months to recover.
“We believe the macro backdrop is in our favor for the near- and long-term,” Rhodes said. “Our customers across the Americas want to get out and drive, and we’ll be there when they need helpful advice.”
The reduced supply of new cars has meant that the cars on the road are being kept longer, so the average age of the car park is increasing. Citing figures from Experian, Peker said almost one-third of all vehicles in operation are 6 to 12 years old.
“These vehicles are too old for their original warranties and require more replacement parts, which we expect to be a strong tailwind in driving our success for the foreseeable future,” Peker said.
Deploying Technology to Improve, Expand Service
As these auto parts distributors and retailers work to meet the growing demand, they’re also implementing new technology.
AutoZone has been adding technology to speed deliveries of parts to its commercial customers and is seeing the results. Rhodes said the company has enhanced how it interacts with customers online, gained a better understanding of delivery times, and rolled out handheld devices that ensure that when staff and delivery drivers are picking products to be delivered, they’re getting the right ones.
“Our delivery times are dropping as we leverage new technologies that have been deployed,” Rhodes said, adding that the company has driven down delivery times 15% and will continue to do so.
CarParts.com aims to use technology to help its customers find and book appointments with professional shops that will install the parts it sells online. Over the next 12 to 18 months, the company will build automation into the process with the end goal of enabling customers to pay for the part and the installation on its website.
“Over the past several quarters, we have been testing various approaches to assist our customers in finding mechanics to help with the repairs,” Peker said. “The early results have been encouraging and the pace of interest continues to grow.”
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March 04, 2022 at 03:46AM
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