Automotive Aftermarket Industry Update Q4 2025

• The US automotive aftermarket industry ended 2025 amid a complex environment characterized by policy changes, tariff volatility, shifting consumer preferences, and supply chain pressures
• The expiration of federal tax credits contributed to a slowdown in electric vehicle (EV) sales during Q4, while demand for hybrid vehicles rose as consumers prioritized fuel savings. The slowed transition to fully battery-electric models gives service providers additional runway to enhance their EV-specific repair capabilities
• On the policy front, the US Department of Commerce is considering expanding the list of auto parts subject to Section 232 tariffs, which currently cover engines, transmissions, powertrain parts, and electrical components, while widely used sheet-metal parts, such as hoods and fenders, remain largely exempt. Further tariff expansions could result in higher parts costs, thus squeezing margins for aftermarket players
• Automakers are also seeking to preserve and extend the United States–Mexico–Canada Agreement (USMCA), which provides preferential tariff treatment for auto parts traded among its member nations. With a mandatory joint review scheduled for July 2026, uncertainty surrounding the USMCA introduces elevated risks to cross-border parts availability and pricing, further compounding tariff-driven cost pressures on the automotive aftermarket
• In addition, higher everyday costs are making consumers more selective, reshaping spending patterns and influencing purchase choices. Consumer demand in certain segments is shifting toward lower quality manufacturers and budget-friendly parts. Moreover, many consumers are also deferring essential services. Together, these behaviors create strong opportunities for value-focused aftermarket businesses to capture the rising demand for affordable solutions

— A recent 2025 Circana survey reported that 26% of consumers opted for more economical tires in their latest purchase to reduce expenses

— Nearly four in ten cars in the US⁽¹⁾ are overdue for essential services, including brake inspections, suspension checks, and fluid changes. As these needs become unavoidable, auto shops are well-positioned to capitalize on the resulting pent-up service demand

• In 2025, US auto sales surpassed expectations, driven partly by a Q3 rush ahead of the EV-incentive cutoff and strengthened by Fed rate cuts that bolstered buyer enthusiasm. Looking ahead to 2026, market sentiment remains mixed
• While easing interest rates and maturing leases could continue to support sales, factors such as stretched consumer budgets, constrained supply of semiconductors and rare-earth materials used in auto components, tariff-related risks, and slower EV adoption could soften momentum. For the aftermarket, these dynamics are expected to shape replacement choices and maintain steady demand as consumers invest in extending the life of their older vehicles and rely more heavily on cost-effective parts and services
• Even with the macroeconomic uncertainties, the US automotive aftermarket continues to be an appealing space for M&A, supported by aging vehicle fleets, longer ownership horizons, and steady, needs-based demand. Driven by these factors, private equity buyers are pursuing platform strategies and targeted bolt-on acquisitions, with strong interest in businesses with predictable cash flow and consolidation potential, particularly those with multi-location footprints or established distribution networks

Deal Highlights

• Bertram Capital Management has acquired Left Lane Auto, an automotive repair company offering tire sales, installation, and general maintenance services
• Boyd Group Services has acquired Joe Hudson’s Collision Center, a provider of automotive collision repair services across the southern US
• LFM Capital has acquired Vintage Air, a producer of aftermarket air conditioning systems for classic and custom vehicles

Equity Market Overview

• Over the last twelve months, the S&P 500 Index and the Dow Jones Industrial Average Index increased by 16.7% and 13.4%, respectively, while the Automotive Aftermarket Index⁽²⁾ recorded growth of 5.3%
• However, in Q4 2025, the Automotive Aftermarket Index⁽²⁾ declined 14.1%, as performance moderated across all aftermarket segments
• The Retailers & Distributors segment grew 7.7% over the past year. However, it declined 15.8% in the fourth quarter
• The Parts Suppliers and Enthusiast Products segments also softened in Q4 2025, experiencing declines of 6.4% and 0.3%, respectively
• The Service Providers segment continued to underperform, declining 8.1% in Q4 2025

Footnotes:

⁽¹⁾ CARFAX data released on 18th November 2025.

⁽²⁾ The Automotive Aftermarket Index composition is provided on Page 5 on PDF.