THE AFTERMARKET REBOUND
It goes without saying that 2020 has fundamentally changed the world as we know it, however Australia does now seem to have weathered the brunt of the storm
With strict restrictions in place early, Australians shut down their lives for the best part of two months, largely halting the spread of the disease. This did however deliver a seismic hit to many industries, taking away the consumers upon which they rely.
The AAAA COVID-19 Impact Survey has shown a significant financial hit for automotive workshops, in line with other impacted sectors (for example, retail and hospitality).
This revenue hit comes off the back of drastic falls in distances travelled, therefore meaning less wear and tear on components, as well as consumers choosing to delay maintenance because they have less cash in the bank.
We do however now need to start looking forward to the economic recovery. The Australian government has started this process, with promising signs that Australia could be amongst the first to return to a “new normal.”
The question we’re left with now is what that looks like for automotive servicing and maintenance. To provide some context on this, personal vehicle travel in China was estimated to be down up to 80 percent during the pandemic, with TomTom also recording car density down by over 80 percent in parts of Italy and Germany.
The crisis was however less severe in Australia than most other countries, meaning that we’re unlikely to be impacted to this extent. Looking at our scenarios (Figure One), we’d suggest Australia’s decline is potentially half that, or around the 40 percent mark. In practical terms, this means each vehicle travelling 450 fewer kms per month. Extrapolating that over the lockdown period, it amounts to a 10-15 percent decline in annual km travelled.
The recovery from this can also be looked at from a couple of angles.
The first, more pessimistic outlook would see continuing maintenance and repair delays, along with less driving as consumers remain cautious of the virus in their everyday life. This would lead to continued weaker conditions, as the Australian consumer opts for a more cautious return to ‘normal.’
However, a second, and arguably stronger argument offers a more optimistic outlook for recovery. Playing out this scenario, servicing activity would be boosted by a range of factors, including:
- Consumers ‘catching up’ with servicing or repairs they put off
- Declining confidence in public transport resulting in more use of personal vehicles
- Ongoing caution around air travel, boosting intrastate holidays and road-trips (and the associated servicing and maintenance preparations)
Despite the negative impact COVID-19 has had on workshops across Australia, we’re already seeing a level of positivity as restrictions start to ease. Anecdotal feedback from aftermarket manufacturers and retailers also suggests they are ramping up for an expected post-lockdown rush.
On balance, the second option seems more realistic, with Australians already showing an eagerness to make the best use of their time as restrictions loosen. This would lead to robust results through June as restrictions lift. The school holidays at the end of June would then bolster this, as Australians get back in their cars for a long-awaited escape from home.
Beyond this short-term boost, a shifted mindset around the use of public transport is likely to see many Australians continuing to choose the car over the train or bus, ensuring the rest of 2020 can proceed in a more ‘normal’ manner.
This column was prepared for AAA Magazine by ACA Research, our partners in the AAAA Aftermarket Dashboard which is delivered to AAAA members each quarter.