During a special quarterly media update from MEMA, Paul McCarthy, president & CEO, MEMA Aftermarket Suppliers, said that despite high interest rates, the aftermarket will continue to see strong demand for repair services.
I asked him the question on a virtual call MEMA began doing during the onset of the pandemic.
“Could we expect consumers to further hold back dollars on repairs?” I asked him. The federal reserve has signaled further interest rate increases could be on the horizon.
“It’s a good question. Well, the first thing is obviously is going to continue to send our costs up and need to be sent to consumers,” McCarthy said. “And I think if you look at the CPI (consumer price index) for auto repairs, it’s been going up pretty significantly. We actually think the the rate of that increase will go down somewhat because some of these input costs are going down because the supply chain crisis is somewhat passed.”
“So the answer is there’s pros and cons of that for the aftermarket,” McCarthy said. “The con is, yes, consumers are being squeezed. And so they are looking for ways of how can I keep the cost of my repair down?” McCarthy said they’ve heard of both consumers and shops being more selective about which repairs to complete.
The flip side though of these rising interest rates, McCarthy added, is it’s made buying new vehicles so expensive. “People are talking about thousand-dollar car payments being the new average and frankly it’s made used car prices, which have come down a bit — but by historical levels are still very high — very expensive,” he said. “So there’s still the need for consumers to reinvest in what they have.”
“So we do think we’ll continue to see strong demand for repair and maintenance. But as part of that, they’ll be looking for value and quality and balance the value and quality when they do this repair and maintenance,” McCarthy said. “They still need the quality because they can’t replace this — they need this vehicle to be safe and last, but they they want to make sure that they can afford it. So net-net, we’re still positive for the aftermarket despite the rising interest rates. We are just a necessity. If you want to go to work, you want to see your family, you need that car and we need to keep it repaired because we can’t replace it. So we still think we’ll be fairly positive. But squeeze on consumers is never good.”
McCarthy added that it’s good for consumers that gas prices have gone down a bit. “That’s been a very good positive both of their ability to afford other things and vehicles and just generally consumers feel better when gas prices go down,” he added.
For the latest news and information on the global automotive aftermarket industry, visit https://aftermarketintel.com. Do you have news? Contact Aftermarket Intel Editor Mark Phillips at firstname.lastname@example.org. He’s on LinkedIn here.
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