The COVID-19 pandemic impact is anticipated to lower replacement/scrappage of existing vehicles in use – making the parc last longer – and bringing opportunity for repair and maintenance parts and components, according to research undertaken by GlobalData.

The  COVID-19  pandemic is  leaving  a  deep  mark on  the  global  automotive  industry. While  China  may  be  in  the  process  of recovery, the rest  of  the world is  facing shutdown  to  combat  the  situation.  The  global  impact  of  Covid-19,which  was initially majorly on  the  supply-side, soon  turned  to  the  demand-side  as  most  markets  across  Europe,  North  America  and Rest  of  Asia  witnessed  lockdown.  This  meant  a  decline in  footfalls  in  dealerships  and  eventually  weaker  demand  for automotive products and related services. Customers globally  have  either  parked  or  cancelled  their  vehicle  purchase  decisions  as  the  governments emphasize 'social distancing'.

However, a  much  bigger  impact  will  be  witnessed  on  new  vehicle  sales  as  the  economic after-effects – declining wages, disposable income and employment – kick in. And the aftermarket, a profitable area for many vehicle manufacturers, will be impacted, GlobalData's research suggests.  

Research analyst Bakar Sadik Agwan says that global markets are expected to witness fewer new  sales  and  slower  replacement  of  older  vehicles  from  the  existing  parc  both  in  the  private  and  the  fleet  segment making the existing parc's replacement cycle elongated.

"This after-effect tends to have a negative impact on OEMs, but on the flipside, it  poses an opportunity  in  the  aftermarket  to  generate substantial  demand  for  replacement  parts  and consumables as older vehicles continue to be on road," he says.

The announcement  of three-months  relaxation  to  passenger  car  and  commercial  vehicle  owners  to  get  their  annual  vehicle worthiness  test  (MOT) by  the  UK  government and inclusion of  auto  service  and repair  as 'essential' business  by  the  US government signifies that the production and adequate supply for replacement parts and consumables should keep going even during the crisis. Consumables and wear and tear parts are expected to be the key beneficiaries among all aftermarket parts and components.

The  pre-COVID  scenario  of  GlobalData  aftermarket  analysis  estimates  revenue  growth  of  consumables  and  wear and tear parts at 5.9% and 6.3% respectively between 2018 and 2020, globally.

"The opportunity exists – maybe not immediately – as the automotive supply chain disruptions due to COVID-19 has affected both the OEM and the independent aftermarket businesses. However, the opportunity may present itself once the world enters the recovery phase of the COVID-19 crisis," Agwan adds.