Automotive Aftermarket Industry Update Q4 2024

Key themes that emerged in the U.S. automotive aftermarket sector in Q4 2024 included the rising cost of acquiring vehicles, the growing number of aging vehicles in operation needing maintenance, and the mounting uncertainty regarding the regulatory environment given the changing U.S. political landscape

Higher automobile prices, both new and used, are prompting consumers to keep vehicles for longer periods and focus on repairs and maintenance rather than replacement. According to the December 2024 Consumer Price Index, prices for used cars and trucks saw an uptick of 1.2% in December on a month- over-month basis, while new vehicle prices increased by 0.5% during the same period

Credit card and auto loan balances continue to rise. A Q3 2024 report from the Federal Reserve Bank of New York indicates that credit card balances have increased by $24 billion to $1.17 trillion from the second quarter, and auto loan balances have climbed by $18 billion to $1.64 trillion quarter-over-quarter. As a result, Americans are turning to cost-effective aftermarket solutions to maximize vehicle longevity and affordability

With more vehicles on U.S. roads and a surge in vehicle miles driven, the likelihood of accidents and collisions is increasing. As a result, demand for repair services is growing, with consumers spending more dollars both on routine maintenance needs and collision-related repairs

However, the aftermarket sector could face challenges due to the Trump administration's proposed tariffs on imported goods. According to the Auto Care Association, the tariffs could raise costs for imported parts and strain trade relationships with key partners such as Canada. Amid the changing trade policies, small to mid-sized businesses foresee difficult times due to the potential increase in parts / materials costs as well as supply chain delays

Despite these headwinds, the automotive aftermarket remains an attractive avenue for private equity investors. In particular, the collision repair industry continues to draw interest due to the strong returns and growth potential. Private equity-backed consolidators are actively acquiring single and multiple- location operations, building regional and super-regional platforms. This trend is expected to continue, leading to a busy year for consolidation in the sector