CHICAGO – In post-recession America, lube packagers and marketers may face a flat-lining economy, lower vehicle replacement rates, fewer miles driven and frugal consumers changing their own oil, NPD Group projects.
As we emerge from the recession, consumer behavior is changing, David Portalatin, executive director of industry analysis for NPD Automotive in Houston, told the Petroleum Packaging Council Fall Meeting here on Monday.
Consumer confidence is important; it reflects future behavior, said Portalatin, and consumers are pessimistic about the economy. But, he added, I think consumers know when things are getting better. Spending often returns slightly ahead of income.
NPD tracks sales and consumer behavior data in numerous industry segments. Its automotive aftermarket information is based on detailed sales data from 18,000 U.S. auto parts stores.
Most consumer spending categories declined from 2008 to 2009, Portalatin said, except the automotive aftermarket, which rose 4 percent. The latest NPD data, from the second quarter of 2010, show that a turnaround is continuing, but NPD sees mixed signals. The economy may be flat-lining, he said.
For the 12 months through April 2010, the auto parts channel rebounded. In unit volumes, motor oil quart sales rose 4.4 percent over the previous year, greases and other lubes were up 4.3 percent, performance chemicals climbed 5 percent, and antifreeze/coolants jumped 8 percent.
Only 11.8 million new vehicles were sold in the U.S. in the year ending April 30, 2010, compared to nearly 17 million in 2005. Twelve million may be the new normal, said Portalatin. NPD research shows vehicle populations will age in coming years. Nineteen percent of consumers tell NPD they will do more repairs themselves, and fully 30 percent say theyll do more to maintain their vehicles.
The average age of a passenger car in the United States today is 10.2 years, Portalatin continued. Today, consumers are spending on 11 to 14-year-old cars to keep them running, a trend that is driving automotive aftermarket growth.
At the same time, a recovery to prerecession levels of miles driven is in doubt. At $3 per gallon for gasoline, people drive less. Its a threshold for behavior change, he said. After the 1979 recession, it took 41 months for miles driven to return to prerecession levels. In the current recession, miles driven are not coming back.
Today, were not adding more cars, and theyre not driving more miles. And one reason people are driving less, the analyst said, is job-related. Some people are driving less because they are working less. Unemployment is suppressing driving patterns.
Signs of recovery exist, but consumers arent out of trouble yet, Portalatin continued. Spending gains today are needs-driven. Gains in the automotive aftermarket segment are spurred by pent-up demand after a year of deferral.
The recent recession, Portalatin concluded, could result in a new frugality. And the population is changing and growing. Todays 16 to 30 year olds, numbering 75 to 80 million, are the largest-ever generation of drivers to hit the road. They are needs-focused, influenced by frugality, and attracted to innovations that are functional. Pay attention to consumers and youll know whats going to happen.