I had the chance Monday to speak one-on-one with Paul McCarthy, who recently was named president and chief operating officer of AASA, the Automotive Aftermarket Suppliers Association. Paul has spent the bulk of his career in the automotive space and the last several years as second in command and executive vice president to AASA’s previous president and COO, Bill Long.
This is a critical time for McCarthy to take the helm, as the whole of the automotive, and particularly the aftermarket, faces a range of pressures.
Mark Phillips: First congratulations on your appointment. I wanted to start out with the fact that you have had a lot of interaction with suppliers early on in your career. What did suppliers have as concerns back then that they do now and have those concerns changed?
Paul McCarthy: That’s an interesting question. That’s a very good question. I think some of the concerns have changed quite a bit. Some of the fundamentals don’t change. We always say, “right part, right place, right time” and all the skills to get there and do that and get that message out to consumers, the technicians.. It’s still the same.
But there’s also a lot of things that have changed and changed pretty dramatically.
When you think of it, the needs of our suppliers are based on changes in the external environment. That drives their needs and that in turn, drives what we try to do as an association to help them. We weren’t talking about access to data and telematics and those types of issues and consumer choice the same way 25 years ago. If I think about our industry pre-economic downturn, there were a lot of companies that were worried about the economy, worried about having enough margin to innovate, their customers started to consolidate and that led to other pressures. We were kind of thinking of ourselves as an old tech industry. We had a big change back when we had the technology revolution with emissions standards and safety standards. We were kind of selling the same parts we had been. When you look to the future of our industry, that’s not what we are.
We’re dealing with all the technological implications of the connected car and there’s obviously all the vehicle technology in terms of electrification and automation. So there’s this recognition now that we are anything but an old industry. We are a technology industry; we are an exciting industry; we are an industry where success is driven by innovation and partnership and all the things people talk about in the tech industry. Those, I think, are big changes that I think we’ve all seen that weren’t there at the beginning of our careers.
Phillips: You brought up data issues and access to data. And that kind of dovetails into my question about Right to Repair. It seemed like several years back when the Right to Repair legislation was signed, it felt the issue was finalized. It always seems to be an issue that keeps coming back around again. Can you explain for my readers who may not be up on Right to Repair why it seems to be a perennial sort of issue that seems like it gets solved and then it reoccurs?
McCarthy: That’s a good question, Mark. You know our history. We’ve been around since 1904. It’s kind of fun to go back into our old (history) and you go back into the early teens — as in the 19-teens, the 30s and even post-war, and it’s funny — you can call it by different names, but this is an issue we’ve been fighting since the automobile was invented. To a certain extent, it’s all about market forces.
With Right to Repair, it’s very important to the industry. But the agreement didn’t include some of the technologies which were just around the corner, like telematics, which is so important to this ongoing customer relationship. It’s so important to those customers having that freedom of choice, a choice to pick where, when, and with what my vehicle is repaired and maintained. And it just didn’t cover that. If anything, and even if you go back to 1904, this might be more of an important fight and more of a difficult one because we are talking about new innovations. So, this is more than just protecting our aftermarket business, though it’s certainly about that.
This issue really is about that consumer freedom of choice. It’s a little bit different this time, in that this is also about having a free market and a fair market. The European Commission has put it in terms of this but this is about preventing monopoly. And that may sound technical and frankly, a little bit boring, but it matters. Because if you think about most aftermarket customers, there are a lot of these folks who literally can’t afford the cost if we allow a monopoly power to develop around vehicle repair and maintenance. For just about every aftermarket customer, this is their first or second most valuable asset. This is literally how the vast majority of Americans get to work every day; how they’re able to earn a living wage.
You saw our Joint Channel Forecast Report that we do with the Auto Care Association. It just came out. We are roughly about a $300 billion industry in consumer dollars on the light vehicle side. And if we allow a monopoly power to develop, that would take out of those consumers’ pockets, tens of billions of dollars, maybe a hundred billion dollars. A hundred billion dollars from people who can’t afford it. So, this is a real fight. This is about consumer rights, and arguably about what is right. It’s an important issue for the country, it’s about preserving an American free market. There’s a lot of work we need to do. I won’t kid you. Depending on what we can get agreement on, we may be fighting this issue in a new form in 20 years or 30 years. This really is about protecting the rights of the aftermarket and consumer freedom of choice.
The good news is we feel like we are at a turning point. These types of battles that involve legislation, they take a lot of time. This isn’t something we’re going to fix tomorrow. But it does feel like a turning point in a couple of ways. The first is that it feels like the industry is very much aligned around this. There were still some people trying to figure this all out a couple years ago. Us and the other associations are aligned together. We all bring different capabilities to the table in advancing this fight but we’re all pulling in the same direction and that’s incredibly important.
The second piece of the turning point, which I find is interesting, is you go back a couple of years to when we talked with folks with the money, investors in the industry. They were saying their big fear was, “you’re not going to win this. You guys aren’t going to be here in 20 years.” That’s not what we’re hearing anymore. We’re on the right side of this issue. It’s about consumer rights; this is about consumers’ freedom of choice. We don’t know exactly how long it will take; we don’t know exactly where we’ll end up at the end in terms of what rights will win. But I think the view is, we will win this because it’s simply the right thing for consumers.
We need to be fighting for this tooth and nail, every step of the way as an industry, all aligned and pulling in the same direction. We can’t take our foot off the gas.
Phillips: Aside from political action and engagement with the associations, what can suppliers do to help themselves that they may or may not already be doing, whether it’s engagement with the end-user, any part of the distribution chain, reaching out to the consumers?
McCarthy: That’s a great point. And there may be some announcements forthcoming around that front. I can’t mention a couple of things yet. But broadly, you’re asking the right question. We need to invest in this legislative solution and it will take, we think, some federal legislation, probably multiple steps. We’ll also need regulation and agreement with the automakers. That action on the political front is important: supporting it, conceptually and financially is important.
The great thing the suppliers have is we have production or distribution facilities in almost all 50 states. And so we have that pull. That means we have voters in every Senatorial group. We’ve got voters in every Congressional district. And when we work in D.C., it is so important to say, “hey, I’m a Congressperson and I went to this facility and they told us this was an issue. And this was important. So when I see that bill, I know I have to support it. I have to support those workers, those employees in my district. So the follow-through on the grassroots is connecting with your representative in your district.
The other element is, if you think about it, we have a huge consumer footprint. Think of all the consumer touchpoints we have, whether it’s racing sponsorships, big retail folks with their circulars and weekly e-blasts out to consumers. Those 280 million vehicles… every one of those folks should care about this issue and should know about this issue. We think part of the industry’s next phase is about how we leverage this big consumer megaphone and footprint that we have so that people do know about it.
Phillips: I’ve ridden in a lot of Ubers and Lyfts and seen a lot of wear and tear on vehicles. How much are you hearing from your members or not hearing about ride sharing and its implications?
McCarthy: It is really something we’ve been talking about a lot over the last few years. We had this point of view a couple years ago, when everyone was talking about disruption, and there was some panic and fear, some in the general press not our industry press. We’ve done a lot of research over the last few years and we’ve come out of it cautiously optimistic. It’s a good chunk of the market. But the scenario saying no one is going to own a car in five years, those types of scenarios disappeared. It’s going to be a much more complex ecosystem.
And now that people have seen the ride sharing development, it’s actually turning out to be a very nice market for a lot of folks. There are a number of folks who are increasingly specifically targeting (ride-share driver customers) as a market. Ultimately, the forecasts are saying this will mean more miles driven. Even if you have fewer vehicles, even if you get different use of vehicles, miles driven is going to grow and grow dramatically. And the basic equation is, if you get an increase in miles driven, it’s good for the aftermarket.
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