In the wake of major supply disruptions caused by the COVID-19 pandemic, automobile owners in the United States are holding on to their vehicles longer than ever before. According to a recent study by S&P Global Mobility, the average age of cars and light trucks in the US has risen to a record 12.6 years, an increase of two months from the previous year.
Impact of pandemic on vehicle age
The COVID-19 pandemic severely disrupted global supply chains, leading to a shortage of new vehicles and spare parts. As these supply chain issues ease, more vehicles are becoming available at dealerships. However, many car owners still prefer to keep their existing vehicles. This trend is highlighted in the S&P Global Mobility report, which suggests that the average age of vehicles on US roads will continue to rise in the coming years.
Aftermarket and service sector benefits
The report highlights that this trend presents significant opportunities for companies in the aftermarket and vehicle service sectors. “This continues to improve business opportunities for companies in the aftermarket and vehicle service sector in the US, as repair opportunities are expected to grow alongside vehicle age,” the report states. As vehicles age, the demand for repairs and maintenance services increases, benefiting businesses that provide these services.
Long-term vehicle age projections
S&P Global Mobility projects that over the next five years, vehicles aged six to 14 years or older will account for 70% of the vehicles in operation. This indicates a substantial market for aftermarket services and parts, as older vehicles typically require more maintenance and repairs.
Electric vehicles: a different trend
While the average age of traditional petrol and diesel vehicles is rising, the average age of battery-powered vehicles has remained steady at about 3.5 years since 2019. This is largely due to the high number of new electric vehicles (EVs) entering the market. However, the report notes that this trend may change in the short term.
Challenges for electric vehicle adoption
High interest rates, aimed at controlling inflation, have dampened consumer sentiment towards electric vehicles, which are generally more expensive than their petrol and diesel counterparts. This has led to a slowdown in demand for EVs. Todd Campau, aftermarket practice lead at S&P Global Mobility, commented on the challenges facing EV adoption: “We started to see headwinds in EV sales growth in late 2023, and though there will be some challenges on the road to EV adoption that could drive EV average age up, we still expect significant growth in share of electric vehicles in operation over the next decade.”
Consumer sentiment and market trends
The report underscores that consumer sentiment plays a crucial role in vehicle purchasing decisions. High interest rates have made financing new vehicles, particularly electric ones, less attractive. This has contributed to the increasing age of vehicles on the road, as consumers opt to maintain and repair their current vehicles rather than invest in new ones.
Future outlook
Despite the current challenges, the automotive industry is poised for significant changes in the coming years. The transition to electric vehicles is expected to accelerate, driven by environmental concerns and regulatory pressures. However, the pace of this transition will depend on various factors, including economic conditions, technological advancements, and consumer preferences.
As the average age of vehicles in the US continues to rise, the aftermarket and vehicle service sectors stand to benefit from increased demand for maintenance and repairs. Meanwhile, the electric vehicle market faces challenges due to high interest rates and shifting consumer sentiment. The future of the automotive industry will be shaped by how these trends evolve and how stakeholders adapt to the changing landscape.