Tunç Kip, CEO of Temel Gaskets, sat down Tuesday with Auto Care Association President and CEO Bill Hanvey during the virtual Auto Expo Turkiye 2021 conference and trade show to discuss the changes in the automotive aftermarket during the Covid-19 pandemic.
Tunç Kip: The U.S. aftermarket is in a different place now than it was a year ago. What are some aftermarket changes you’ve seen?
Bill Hanvey: Well, to say that the aftermarket is in a different place today than it was a year ago is quite an understatement. We saw trends that we never thought we would, but we turned on a dime and the industry really has rallied. And, you know, the lifeblood of our industry really is vehicle miles traveled, and in 2020, we saw a decline in vehicle miles traveled on a national basis by about 13 percent.
At the onset of the pandemic, in those months of March and April (2020), we saw vehicle mile traveled figures that preceded recorded history. That’s how low it was. We’ve slowly rebounded. We are now tracking as an association vehicle miles traveled with a company called Arity, which gives us almost up-to-date weekly vehicle miles traveled information, rather than having to wait two months for the Department of Transportation to publish those figures. So, you know, we’re quite proud of the fact that we’re able to provide the membership that data.
In many cases, people are getting in a bidding war over used vehicles. Used car sales were significantly down in 2020 as you can imagine. The economic conditions of what took place really curtailed a lot of new car purchases. So the automakers are trying to extend new incentives to buy new cars but yet still the used vehicle is still quite in demand and people are keeping their cars longer, which obviously, we like to hear. Right now the vehicle population, the average age of a vehicle is about 11.9 years. We’re very convinced that in the next year or two, that it’s going to climb over 12 years for the average age of the vehicle.
What’s really interesting is that the fastest-growing segment of the vehicle population in the U.S. is those vehicles that are 16 years and older. Which I found to be fascinating because of the fact, I think people are very intimidated by some of the new technology that’s being introduced.
Along with the fact obviously economically, they want to hold on to their vehicles longer. So really an interesting dynamic as far as vehicle miles traveled. Mass transportation significantly down, ride share, significantly down and people are, you know, that’s where ee think that our growth is going to come from, even though we may not be commuting to the office every day, we may not be using public transportation or flying on a vacation, for example, you’d load up the family in the family wagon and and take the family out. Those are all things that were watching as an association.”
TK: That’s very insightful Bill — 16 years! That’s very interesting. I’m gonna look around a little more from now on. I didn’t catch those older ones. Well, shifting to a related topic, how has the pandemic changed consumer behavior as it relates to vehicle maintenance?
BH: I don’t know if you work on your own car. I try to support the professional, so it’s just that way. Typically the do-it-yourself rate is about 30 percent… So, the do-it-yourself rate is 30 percent on average and during the pandemic that DIY rate rose to 38 percent. So people were using their stimulus checks to buy parts to upgrade their vehicles to install stereos. And thank goodness for YouTube. And I think YouTube has given a lot of people the confidence to do a tune-up, to install a stereo, to do a lift kit.
So, we’re really seeing some interesting dynamics taking place as far as that is concerned. E-commerce has just skyrocketed during the pandemic to show that you know, the consumers are now doing more work. They’re shopping for those parts online. And etailing is a significant part of that not only from standalone e-tailers such as Amazon and companies like Rock Auto,, but individual retailers such as Auto Zone and NAPA and O’Reilly. Their web sales have also increased tremendously during this time as well. And a lot of that has to do with some maintenance delays that people put off and are now beginning to do because they’re either back to work or whatever the case may be. What about Turkey — do you have much DIY business?
TK: In Turkey, it’s a little different actually. This could be because of the availability of maybe houses with garages where you can pull your car in and have your toolbox and do the work on your car yourself. The extent of the work I do on my car just stops where the light bulbs and that’s about it. But yeah, I mean it’s not as common that a person works on his or her own car. Usually the service shops handle that. And again it’s a very different environment on the retail side, too, because we don’t really have in Turkey stores like Advanced, NAPA and AutoZone where you can just pop in and pick up any part you need. I mean, you could just completely redo your car with the parts that you can get from those stores.
BH: Well, it’s certainly not limited to folks that own their own garage. I’ve seen people doing it in the parking lot. So I’ve seen people doing oil changes in the street. We typically call them “shade tree” mechanics. So, Tunc, as a supplier would have been what’s been your biggest challenge during the pandemic?
TK: I mean, the number one challenge that we definitely prioritize the challenge of keeping everyone safe. And that was our first goal before anything else. And so our employees, our customers, anybody, basically, that is within reach of our operation, keeping them safe, and healthy, was our number one goal, and we’re lucky to have had the resources to establish that early on and that we were able to continue production.
We were able to continue new part development and interestingly I guess with the shift of outsourcing over to other parts of the world, we might come back to that. We ended up receiving maybe projects that were coming to us naturally before and so that helped us maybe keep our operation going. But one thing that is becoming more apparent is maybe some challenges and on the raw material side of the supply chain, and that’s affecting everyone. So there are a lot of common raw materials like metal and even moving these the raw materials in containers has become a greater challenge in the recent weeks and months.
So that seems to be a delayed effect of the pandemic where initially it was the ability to produce something but right now you’re ready to produce and you may not have the raw material to do that. So overcoming that challenge is our current topic.
BH: You’re not alone. If it’s any consolation, I hear the same thing from my supplier members as well. And obviously, you know, we have a pretty significant situation in the port of last Los Angeles, where many of the products from overseas are docked. Port congestion is just a mess. They’re trying to get through it. Their trucks lined up for blocks trying to unload these trucks and you know, from you know, just to colloquial standpoint, I’ve heard some of our member companies paying upwards of $10,000 just for a container to be able to get material and then if you get the container, it’s a matter of being able to unload it and get it to your final destination. It really does demonstrate how sophisticated our supply chain is when you think about it, and it’s just a fascinating industry and it was built on a model and we’ve got to continually to to improve our supply chain so that we’re able to meet the demands of the customers.
I’m sure I’ve got another one for you. So, going through the U.S.-China trade war in the pandemic, a lot of companies are re-evaluating their supply chains. Has turkey been at all impacted by us, companies looking to improve their supply chain or looking to go to different places to source their product or raw materials?
TL: Sure. There has been a positive side effect of that for the manufacturers in Turkey due to a few reasons, not just the trade, the change in the trade dynamics, but also due to the fact that raw materials can arrive to Turkey do because of the many ports, we have surrounding country and then they can arrive easily from Europe, from the U.S. We import a significant amount of raw material from our from our U.S. suppliers and so we have a constant incoming traffic. And then also our production and capabilities are just as the same as any European manufacturer or U.S. manufacturers. So that high-quality raw material can be converted into very high-quality products in a short amount of time at competitive pricing, and that really already puts Turkey in a good position on the options when you’re looking for an outsourcing partner.
BH: It appears that the tariffs that are imposed on the 301 tariffs, the 232 tariffs, it appears that they will remain in place for some time and we’re working with the Commerce Department on that. But there’s no sign right now that those tariffs are going to be dispelled or anything of that nature. So it’s another good opportunity for Turkey, for sure.
TK: Sure, sure. Well, again, we’re trying to find ways to create opportunities, to provide greater value. So, anyway, that can happen and we’ll look forward to exploring that.
Bill, what were some challenges of the Auto Care Association that were faced during the pandemic and how have you guys adapted to those?
BH: Well, again, we probably don’t have enough time (laughs). I do want to thank my team, the Auto Care team for just an amazing effort when this first broke out, and subsequent to the pandemic, of being able to turn on a dime literally and refocus basically our entire association to make sure our number one priority was to keep the doors open of our membership — whether you’re a supplier to keep the factories running, whether you’re a distributor to be able to keep those parts moving or whether you’re a shop to be able to repair those vehicles.
So first and foremost, the biggest accomplishment, I think, was the fact that we got our industry declared as an essential service. So we were able to conduct business during the pandemic and sell those parts that consumers were itching to try and put on their own vehicle.
We did a number of Covid surveys with our membership, how it’s affecting our membership…. And we adapted some of the programs that we had based on those surveys. Educational webinars — we’ve probably done, you know, 25 to 30 webinars, beginning with how to take advantage of the essential service; how to take advantage of the PPP, the Paycheck Protection Program and some of the other government programs that were implemented during the pandemic.
So education was key. Information was key. So we had to take that information very quickly digested and bring it back out to the industry in a format that they could utilize. And one of the things I have really been emphasizing during the entire pandemic is making business decisions based on fact rather than on fear and we really have stepped up our game in terms of providing data to the industry in our TrendLens platform that contains 50 economic and industry indicators. So companies, such as yourself, can take a look at that data and make a little bit more fact-based decisions rather than well, ‘I don’t know.’
So that’s why we subscribe to that Arity vehicle miles traveled subscription is because that data needed to be quick and people needed to be able to make decisions.
So data is king. I think that everybody realizes that now and we have done our best to provide the industry the data. I’m quite proud of the team and I’m quite proud of the industry for the way that they have supported the Auto Care Association and in the entire industry, during the pandemic.
TK: That’s wonderful. That’s very insightful and Bill you’ve highlighted a very important point: all these challenges wouldn’t be possible to overcome or would be even more difficult if we didn’t have teams that believed in that supported us and cared so much. So, I’d like to thank our team for that for the same reason. Again, that was a very critical component of going through this period.
We’ve touched a lot of different topics here, but if you were to give one piece of advice that you give aftermarket companies looking to capitalize on some positive indicators coming out of the Covid period, what would those be?
BH: Number one to use the data that’s available to make better business decisions. Vehicle miles traveled, like I mentioned before, may come back, but they’re going to come back in a different way. People may not be doing that five- to six-mile commute to the office, but they’re dropping their kids off at school instead of having them take the school bus. So, it’s going to be really important for us as an association and for the overall community to see how those vehicles are being driven so that you can anticipate repairs. What type of driving is more harsh on particular parts.
Invest in the future. Those folks that saw that inventory was going to be a problem and loaded up on inventory prior to this pandemic, are reaping the rewards of that. And, you know, they had the foresight to say hey look at I hope I hope that that that it all works out and we’re good. Right?
And I don’t think any at any other time in our history is paying attention to your customer and listening to what your customer has to say. That’s always been the foundation of our business. We’re a family, and we rely upon that face-to-face communication. So, let’s not let that get away. You know, and we can hide behind screens or whatever the case might be. But good old-fashioned, customer interaction is always the best solution.
Also, to attend AAPEX would be my next suggestion — we’re live and we’re ready to go. But it’s been an interesting time. It has made me a better leader, I think, as a result. It has made my team closer as a result.
Sometimes a little disruption is not so bad and that’s not to minimize the effects of Covid. But it really has been a wake-up call for our industry. And in many ways it’s been a good wake-up call.
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