Automotive Aftermarket Industry Trends 2023

There are dozens of reasons which could explain a decline in the automotive aftermarket industry in the last three years. Apparently, none of those reasons, or even all of them combined outweigh enthusiasts’ passion for cars.

The world has fallen down more than once since a global pandemic routed most industries in 2020, but the automotive aftermarket grew. Just a few months ago, gas prices hit a nationwide high of $5 a gallon, and still the industry prospered. Parts and material shortages, inflation, the egg-apocalypse – none of it matters. Automotive aftermarket businesses have seen record growth and are forecasting more in 2023 and beyond.

Besides the economy, consumers’ tastes are evolving. The new car industry is heading into the biggest technology shift since the Model T, while car manufacturers and the aftermarket are having to deal with stricter regulations for environmental compliance.

To get a better understanding of the state of the industry, we poured through reports from both SEMA and PRI. Then, to further shed some light on current and future trends, we talked to representatives from two aftermarket industry stalwarts: Phillip VanBuskirk, National Sales Manager for Aeromotive, a top manufacturer of automotive fueling systems, and Jesse Kramer, Vice President of Marketing at AWE, a leading manufacturer of high-performance automotive aftermarket components.

Keep reading to learn what’s driving industry growth, where suppliers see the most opportunity, and what’s new with enthusiasts.

A Quick Look At The Overall Economy In 2023

First, the elephant in the room — is the United States headed for a recession? Jan Hatzius, Chief Economist for Goldman Sachs, assigns a 35% probability of recession. But, in its official 2023 Outlook, Goldman Sachs continually reiterates that any projections are “foggy.”

Inflation may be stabilizing in the United States, predicted at 3.5% for 2023, but globally is still projected at 6.6%. And since there no longer appears to be an easy way for Russia to save face, the war in Ukraine is likely to continue. As for market-disrupting natural disasters and big climate events, well they’re even harder to predict than politics.

However, despite these and other big question marks looming overhead, overall outlook for this year and next is more promising than not.

Taking a look at factors closer to home, unemployment numbers are better than they’ve been in 50 years. While reported Consumer Confidence may be falling, it conflicts with the reality of Consumer Spending, which continues to rise.

According to SEMA data, most of its member companies expect sales growth in the coming year, although not at the record rates seen between 2020 and 2022. PRI echoes the positive outlook. “With motorsports broadening its appeal (especially among younger demographics) experts say the market for racing apparel, helmets, and safety gear is expected to continue expanding through at least 2026.”

Industry Challenges in 2023

Cautious optimism aside, there are still some issues that suppliers, retailers, and even enthusiasts must navigate in the months ahead.

Tangled Supply Chains

It’s hard to sell widgets when you’re fresh out of widgets.

Some experts are eager to point out that the current supply chain problem was a bomb built years ago — primed by the 2018 trade war with China, its fuse lit by the COVID-19 pandemic. The “incessant push” for cheaper products made for happy customers and high profits, explains Nick Vyas, Associate Prof. of Clinical Data Sciences at USC. But the risks “lingered above the world like clouds on an overcast day.”

According to SEMA, during the first two years of the pandemic, 90% of businesses reported both material and parts shortages. Still, the industry managed record sales during this period.

The Outlook: Logistics experts and businesses agree the soonest we could see supply chains return to normal would be 2026.

Increased Operating Costs

It should come as no surprise the combination of shortages along with overall inflation has caused an increase in prices at every stage of the business, from manufacturing to distributing, to the retail storefront.

Roughly 80% of the industry has reported price increases in the past two years, and further increases to come. However, data shows that price increases over the last two years haven’t hurt customer demand.

The Outlook: According to SEMA data, between 53% and 63% of businesses, depending on segment, intend to raise prices over 2023, and between 44% and 48% believe sales will still grow.

The good news? The industry is finding new solutions.

“Consumers are learning to plan out their projects and get long lead time products ordered earlier,” says VanBuskirk. “For manufacturers like Aeromotive, which source many components locally, it has allowed us to grow our business since we have the availability and quicker turnaround times. Consumers are starting to look for locally-made and sourced products because they can get high-quality parts and get them quicker.”

Kramer describes a similar situation at AWE, where exhaust systems are made in the USA from domestically-sourced stainless steel.

“We don’t run into [shipping delays] as much as a brand that was imported and re-labeled,” he says. “AWE is a handcrafted, premium exhaust brand that brings fitment guarantees, a lifetime warranty, and unique engineering that can’t be found elsewhere. So, in these cases, consumers are generally understanding should there be a lead time.”

“But we’re not blind to the concept of quick delivery,” he adds, “which is why AWE partners with class-leading distribution partners to ensure we have the best chances of getting AWE product to consumer vehicles ASAP.”

Current Trends & Changing Tastes In the Enthusiast Market

The automotive universe is ever evolving — and looking at 2023 and into 2024, it is all positive for the aftermarket industry.

Let’s Get Driving Again

As a result of COVID lockdowns and restrictions, many enthusiasts found themselves with plenty of free time and fewer ways to spend their disposable income. A lot of them turned to project cars, but with new goals. A noticeable shift occurred from show cars to functional builds meant for driving.

“The last couple years we have seen a large increase in ‘drag and drive’ cars,” says VanBuskirk. “Builds like these have challenged manufacturers to develop products that can not only withstand the power levels but also the endurance of long drives.”

“At Aeromotive, we developed our 7.0 gpm and 10.0 gpm brushless gear pumps to support vehicles like these. As horsepower levels increase, we see the trend towards dual fuel systems that can support street driving and be swapped over to full race mode. We also see customers using our cable drive system to mount mechanical pumps in the rear of the vehicle near large fuel cells.”

It isn’t just drag racing fans, either. Everyone from street rodders to import tuners started building cars less focused on static-showing and more on road-going.

Less Mall Crawling, More Rock Crawling

Similarly, the truck market has seen a return to building vehicles with the intention of real off-roading.

The desire for greater functionality is always good for the aftermarket, especially those with a proven track record for making high-quality performance parts. Although its origin is in tuning European cars, AWE has used that knowledge to expand into other markets.

“AWE has had quite a bit of success bringing our unique, made-in-the-USA approach to exhaust development into the Modern Muscle, Jeep, Truck and Sport Compact spaces,” says Kramer. “As a brand, one of AWE’s core values is to ‘See Through the Customer’s Eyes,’ and nowhere is that more evident than in our latest products.”

“The AWE quad-BashGuard™ Jeep 392 exhaust thinks through the inevitable issues a real off-roader will have with a traditional aftermarket exhaust. Similarly, our Dodge Challenger line addresses the needs of the Hellcat consumer who will have a massive aftermarket driveshaft and differential. We love these challenges.”

Retro Style & Power

Another area where AWE has real experience is the RADwood-era cars that have become popular with younger enthusiasts.

RADwood started as a grassroots level show in San Francisco in 2017 for cars of the 1980s and 1990s. The name is a play on The Goodwood Festival of Speed and The Goodwood Revival, both in England and both concerned with significant racecars. RADwood is quite the opposite, focusing more on the everyday cars and pop-culture of relatively recent history.

A large portion of the attendees, even those showing cars, were either too young to appreciate or simply not alive during the decades that RADwood celebrates. Regardless, the event has exploded in popularity, hosting multiple shows around the country and creating thousands of young enthusiasts who previously had no interest in cars.

An appetite for 80s and 90s cars has created new opportunities for manufacturers and retailers, reinvigorating the sales of companies that supported these cars with performance parts when new.

Thanks to huge strides in fuel injection technology, VanBuskirk says RADwood-era enthusiasts have great options for updating and replacing their inefficient or worn-out parts. “Many have also turned to swapping late-model engines along with newer EFI systems into these cars.”

As for AWE, they were RAD before it was cool. “While some of our most popular products are for Modern Muscle, Truck, and Jeep lines, AWE still supports some older vehicles,” explains Kramer. “We’re still producing AWE Performance Intercooler kits for Audi’s B5 S4!”

It’s not uncommon, even for those in the industry, to not recognize RADwood-era cars as an expanding market, but these cars are now between 24 and 43 years old. Some of them require far more than freshening-up. The restoration market for 80s and 90s cars represents an entirely new market with a new and untapped customer-base.

Looking Into The Near Future Of the Aftermarket

If COVID taught us anything, it’s to be careful about making predictions. However, based on some current industry conditions, we feel safe with these few high-level assumptions for the aftermarket.

Vehicle Sales Low, Vehicle Age High

The average transaction price for a new vehicle purchase in 2023 is currently just a few hundred short of $50,000. Despite a resurgence in production and inventory levels, these high costs – along with high interest rates and consumer pessimism (specifically towards the car market) – are keeping sales slow.

Additionally, Americans are holding onto their cars longer than ever, a trend that has remained in constant growth over the last 25 years. Research conflicts on the exact age of the average daily driver, but data seems to indicate between 12 and 15 years. That number may increase faster now that electrification by manufacturers is in full swing.

So, what does this mean for the aftermarket?

While pricing is expected to stabilize over the next year or two, according to SEMA, new and used light-vehicle sales likely won’t return to pre-pandemic levels in the United States until 2025. In the meantime, consumers holding onto cars longer is always a positive for the aftermarket.

With original equipment parts sometimes difficult to get, and usually at a higher price than the performance aftermarket, consumers (even non-enthusiasts) are more likely to look for options.

“This is a great trend for the aftermarket,” says Kramer. “We generally find true enthusiasts are willing to invest in a made-in-the-USA product like AWE, even the second owner. Since AWE products are guaranteed for life and often outlive the car or truck they’re installed on, we hear daily from second and third owners that ‘inherited’ an AWE exhaust.”

Vehicle Type Both Changes & Stays the Same

Electric vehicles are making a hard push into the mainstream, completely redefining vehicle performance and ownership. But putting aside what is or isn’t under the hood, trucks and SUVs continue to dominate sales as the passenger car segment steadily shrinks.

In fact, the light truck market has represented the largest segment of aftermarket sales for years — and SEMA data seems to suggest it’s still capable for more growth.

So, what does this mean for the aftermarket?

Not only is the dedicated off-road market growing, but as more consumers trade sedans for pickups and SUVs, the demand for cosmetic and on-road performance parts is growing as well. Wheel and tire manufacturers will continue to see growth in overlanding fitments for everything from trucks to car-based CUVs. This trend focuses less on the larger diameter tires we see in off-roading, and more on sizes closer to factory, but with construction and tread designs focused on trail-use.

As for EVs, the move may have the biggest implications on the aftermarket, but maybe not in the negative ways many in the performance aftermarket fear.

“Necessity breeds innovation, and I believe this will hold true for car enthusiasts that will keep combustion burning for generations to come.”

The point where sales of new gasoline-powered cars ends will happen sooner rather than later. But that doesn’t mean internal combustion powered cars will be off the road. Quite the opposite, in fact.

“I have no doubt that internal combustion engines will be around for many years to come. There are so many aftermarket companies that support ICE platforms,” says VanBuskirk. “With options of cleaner burning fuels such as CNG and Hydrogen, consumers that enjoy the loud noises of racing or driving combustion engines through car show parking lots will progress with technology. Necessity breeds innovation, and I believe this will hold true for car enthusiasts that will keep combustion burning for generations to come.”

If consumers are still able to buy internal combustion engines up until 2030 or 2035, depending on the state, those cars will easily be kept on the road for another 20 or 30 years. And enthusiasts? They’ll keep them for decades longer.

Business Trends

Finally, a quick look at business operations shows a few clear trends.

• Smaller manufacturers – less than $5-million per year sales – are having the most sales growth selling direct to consumers, per SEMA reports.
• The industry is seeing the most growth in suspension, steering, braking, and lighting products.
• Everyone from retailers to manufacturers are still expecting supply chain issues to continue for several years, but larger companies – over $5-million per year sales – will be more impacted.

The takeaways from all of this, even with higher costs and leaner stockrooms, is positive. The unprecedented boom of the last few years will slow, but the bust of a decade and half ago is pretty unlikely. People will always love their cars, it’s just the flavor of those cars that changes.