Size of U.S. Automotive Aftermarket

1
Size of U.S. Automotive Aftermarket

• 253.1 billion in 2004
• 190.1 billion automotive only
• 2.6 percent of the U.S. gross domestic product
• 5.2 growth in 2001
• 4.6 growth in 2002
• 3.7 projected in 2003
• 4.2 growth in 2004 (estimate)

2
U.S. Automotive Aftermarket Industry Employment

• 4.6 million people employed in the aftermarket
• Construction Industry 6.1 million
• Hospitals 4.0 million
• Automotive Aftermarket 4.6 million
• Federal Government 2.7 million
• Insurance Industry 2.4 million
• Department Stores 2.3 million

3
GDP of Selected Industries

• Real Estate 1,116 billion
• Health Services 547 billion
• Construction 44 billion
• Automotive Aftermarket 245 billion
• Telecommunications 209 billion
• Legal Services 134 billion
• Printing Publishing 106 billion
• Hotels Lodging 87 billion
• Amusement Recreation 81 billion
• Farming 79 billion

4
Aftermarket Contributionto U.S. Economy

• 244 billion, 4.6 million jobs
• Beer 174.9 billion, 2.6 million jobs
• Wine 45 billion, 556,000 jobs
• Hard Liquor 40 billion
• Vodka 8.6 billion

5
Marketplace Snapshot

• U.S. vehicles in operation 226 million
• Average age 9.1 years
• Total miles driven 2.9 trillion
• Average miles per vehicle 12,000
• Licensed drivers 194 million

6
Automotive Aftermarket Sales
7
Service Market Outlet Share
8
Vehicle Durability - U.S. Miles

• 1960s... 92,400
• 1970s 105,600 (14)
• 1980s 132,500 (25)
• 1990s 161,900 (22)
• 2000s 182,400 (13)

9
Global Trends - Vehicle Life

• In both the US and Western Europe, OEM
• technology and vehicle design have resulted in
• Better made, longer lasting vehicles
• Reduced maintenance and longer service intervals

Vehicle Useful Life (in miles)
10
Computers Electronics Rule

• The computer technology in todays cars and light
  trucks is 1000 times more powerful than that
  which guided the Apollo moon mission.
• Every new vehicle has as many as 50 computer
  chips that control everything from airbag safety
  systems and antilock brakes to GPS systems, fuel
  efficiency and emissions.
• Electronics now control more than 86 percent of
  all systems in a typical vehicle.

11
Advanced Technology Vehicles

• Automakers are exploring at least seven
  alternative fuels
• Three million alternative fuel vehicles on the
  road today
• Plus
• Fuel cell
• Hybrid electric
• Clean diesel
• Hydrogen

12
Hybrid Growth
13
Todays Vehicles vs. Apollo 11

• Todays Vehicles Apollo 11
• Memory (in bytes)
• 1,000,000 36,000
• Cycles/Second
• 56,000,000 43,000
• Processor
• 32 bit 14 bit

14
Repair Locations
Repair Outlet Type Number Independent
Repair Shops 125,000 New Car Dealerships
22,000 Independent Collision Shops 46,000 Tire
Dealers 28,000 Fast Lube Centers
6,600 Service Stations /w service
7,500 Retail/Dept Stores 12,000 Total Net
Locations 247,100
15
Cars and Light Trucks Per Service Bay
16
DIY/DIFM NOTES

• Fact 77 percent of all U.S. households contain
  at least one DIYer who maintains, primarily for
  the purpose of saving money. Forty-three percent
  are female.
• Fact 61 percent of DIFMs are female. Most women
  outsource because they lack confidence in their
  ability. Most men outsource to save time.

17
Note Percentages may not sum to 100 percent due
to rounding.
18
Where DIYers Buy Parts

• Auto Parts Stores 67.8
• Discount Store 41.9
• Car or Truck Dealership 7.7
• Independent Parts Store 4.4
• Tire Dealer 3.5
• Membership Warehouse 3.1
• Department Store 2.6
• Other 4.4

19
Super Stores 2004 vs. 2005
20
(No Transcript)
21
North American Replacement Market
Maintenance behavior varies dramatically by age
of vehicle
North America Profile of Replacement Population
Primary Maintenance 6-13 years High Repair garage
Very Old 14 year Moderate Retailer (Do-it-yourse
lfer)
Nearly New 0-5 years Low Service dealer
Vehicle Age Replacement Rate Channel
22
OE Impact on Replacement

• As OE quality improves, replacement timing gets
  pushed back
• For some products, new technology accelerates
  this trend
• Engine parts
• Spark plugs

Average Age of Vehicle at First Replacement
0 1 2 3 4 5 6 7 8
9 10 11 12 13 14 15
Engine Spark Plugs Gaskets Wipers Brake
Pads Chassis Parts
1980
2003
23
Changing Consumer Demographics

• Your future customer is not likely to be young,
  Caucasian or male.
• Get ready for geezers, an ethnic mix and women.

24
Geezer Growth

• The first of 78 million boomers (1946-1964) will
  start retiring in 2008
• The next 45 million Generation Xers cant fill
  their shoes
• By 2025
• 62 increase in 65 year olds
• 74 increase in 55-64 year olds
• 9 increase in 45-54 year olds

25
Ethnic Trends

• White birth comprised 61 in 2000
• will drop to 56 in 2010
• will drop to 42 in 2050
• African-Americans will double by 2050
• Latinos will double by 2050 to 88 million

26
Reaching the Hispanic Market

• 700 billion purchasing power
• 34.4 percent of all Hispanics in the U.S. are
  under 18 years old
• 75 percent of young Hispanics say they speak
  Spanish
• Home Depot, Circuit City, JCPenney
• Bilingual signage, collateral materials, staff,
  gift cards, credit application
• Ikea publishing first Spanish catalog

27
The Female Influence

• Contribute 23 trillion to economy
• 49 of workforce
• Own 36 of businesses
• Directly influence 80 of all purchases

28
The Female Customer

• More than half of all drivers
• Account for 70 of vehicle service decisions
• 90 are involved in maintenance decision-making
  process
• 86 have read owners manual
• 4 think they are severe drivers

29
The Female Customer

• 41 are severe drivers
• 78 feel strongly about maintenance importance
• 68 actually follow maintenance schedule
• 23 had no knowledge of what was covered in their
  warranty

30
The State of the Industry Challenges

• Consumer awareness
• Shortage of qualified technicians
• Prices
• Extended maintenance intervals
• Access to OE information
• Consolidation of suppliers
• OE/new car dealer pressure
• Parts proliferation
• Excess inventory
• Wall Street perception
• Image

31
New Vehicle Dealers Share of the Total U.S. Light
Vehicle Aftermarket Revenue
32
Aftermarket Opportunities

• 60 billion annually in unperformed maintenance
• More vehicles on the road
• Age of vehicle growing 9 years
• (38 percent over 10 years)
• Record useful vehicle life reaches 15 years.
• Female consumer strengths

33
Auto Repair Is Too Good of a Good Deal
34
as a matter of fact

• Prices for auto parts have grown very little in
  the 22 years following the resetting of the CPI
  in 1982.

35
2004 National Car Care Month Check Lanes Show 87
Percent Failure Rate

• Statistics from the NCCM inspection campaign in
  April 2004 continue to underscore the need for
  consumer education.
• 87 of cars failed at least one part of the
  inspection.

• Low washer fluid 26
• Low or Dirty engine oil 34
• Low power-steer fluid 23
• Low transmission fluid 26
• Windshield wipers 14
• Low tire pressure 25

36
(No Transcript)
37
Hows Business ReportJanuary 2005 (U.S. Totals)
38
Hows Business ReportJanuary 2005 (U.S. Totals)
39
Percent of Shops Looking to Hire a Qualified
Technician
40
Aftermarket ManufacturersMergers Acquisitions

• Transactions
• 9,964 in 2004
• 14.8 increase over 2003
• Value
• 777 billion
• 43.7 increase over 2003

41
SUVs/Light Trucks Require Higher Repair and
Maintenance Dollars
53.2
50.6
0.14
0.12
34.1
SUVs/Light Trucks
Operating Costs
42
The Sweet Spot is Here

• Earlier new car sales becoming todays replacers

North America Projected Aging of Fleet
Age 6-13
Age 0-5
2000
2001
2002
2003
2004