Automotive Aftermarket Industry Update Q1 2025
Read more about M&A activity and trends in this sector
Share
Automotive Aftermarket Summary
Sector Commentary
- As 2025 unfolds, the Trump administration tariffs are disrupting global markets, presenting both challenges and opportunities for the U.S. automotive aftermarket industry
- The tariffs which impose a 25% duty on automotive components impact over $460 billion worth of annual imports of vehicles and auto parts, and includes key components such as engines, transmissions, powertrain parts, and lithium-ion batteries as well as lower-priced items such as tires, shock absorbers, spark plug wires, and brake hoses
— According to Cox Automotive, approximately 44% of automakers’ repair parts are imported - As tariffs cause a notable increase in the price of new and used cars, purchasing vehicles would become unaffordable to many, thereby dampening auto sales. As a result, car owners may hold onto their vehicles longer, leading to more frequent repairs and a higher demand for replacement parts & services
- Small and medium-sized repair & maintenance businesses might also face financial strain by incurring the upfront costs on imported parts. This capital restriction may lead to cash flow issues, potentially forcing these businesses to scale back operations, delay payments, and reduce inventory
– May also lead to inventory shortages as parts become more expensive and harder to obtain, potentially delaying repairs and further escalating costs for consumers - As repair costs rise, insurance companies are expected to adjust their pricing models to cover the anticipated increase in collision repair claim amounts. Consequently, consumers may experience higher auto insurance premiums, with market experts estimating an increase of 6-10% by the end of 2025
- Amid this environment, as intended, domestic parts manufacturers are set to benefit despite higher costs for imported raw materials. Utilizing U.S.-based production and assembly offers a competitive edge over companies that depend entirely on imported parts, which may face tighter margins and reduced market share
- Also, Artificial intelligence (AI) continues to transition from futuristic concept to practical tool. Industry participants are using AI for predictive maintenance and optimized inventory management, reducing stock-outs and overstocking, while also aiding in timely delivery of critical parts, enhancing customer relationships, and improving efficiency
- 3D printing is revolutionizing the supply chain with its potential for on-demand parts production close to where they are needed. It also enables rapid prototyping and faster launches of new aftermarket parts – resulting in more resilient supply chains that are less vulnerable to global disturbances
- Against this backdrop, cautious deal-making is expected, with acquirors focused on technologically advanced, resilient companies more insulated from macroeconomic risks
Industrial markets
KPMG Corporate Finance LLC’s investment bankers have extensive Industrial Markets transaction and industry experience, which enables them to understand the industry- specific issues and challenges facing our clients.
Download the document
Meet our team
In today’s market, you need an advisor with objective insight at every step of the transaction process. We work with you throughout the full deal cycle to create value and successfully execute your deal strategy.
Ford Phillips
Managing Director, KPMG Corporate Finance LLC
Ford Phillips
Managing Director, KPMG Corporate Finance LLC