2011 SEMA Market Report

SEMA News—July 2011

2011 SEMA Market Report

Positive Indicators Bode Well for Industry

By Steve Campbell

  The 2011 SEMA Market Report is now available
Like a portrait of the automotive specialty-equipment market, the 2011 SEMA Market Report provides an overview of the industry through the end of 2010. It is free to SEMA members and $149.95 to non-members.
   
The 2011 SEMA Market Report is now available on the association’s website. This annual report—free to SEMA members and $149.95 to non-members—provides an overview of the specialty-equipment industry through the end of 2010. It also includes five years’ worth of historical information that allows year-over-year comparisons of where the various segments and niches stood as the industry entered 2011.

In brief, while the terrain may not be flourishing with roses quite yet, some of the weeds have been plucked and the ground is fertile. We can provide a summary of the study’s findings here, but it behooves every business to download and review the report in its entirety with a view toward the individual company’s own target audience and marketplace.

Methodology

The report divides the industry into three product segments and nine market niches. The segments are categorized as appearance and accessory products; racing and performance products; and wheel, tire and suspension products. The nine market niches were determined through product application and usage. They include light truck, off-road, racing, compact performance, street performance, restyling, restoration, custom and other.

The information in the study was compiled from a variety of sources, including interviews with manufacturers, wholesalers and retailers; consumer surveys; and government data. Sources included Lang Marketing Resources; Ward’s Auto; Experian, gross domestic product (GDP) data; retail and food services and consumer goods production data; The Federal Reserve Bank of St. Louis; The Federal Reserve Bank of Philadelphia; the U.S. Energy Information Administration; and SEMA’s own 2011 Automotive Lifestyle Survey and 2011 Pickup Truck Study.

The General Economy

 
With half a decade of data included in the report, the segments and niches can be compared year-over-year to provide a thorough understanding of where the industry stood entering 2011.
   
 
Just one of the surprising revelations is that the compact performance niche has overtaken the light-truck niche in total sales. Download the complete report at www.SEMA.org/2011-annual-market-report.
The United States showed some positive economic indicators beginning in the second half of 2009 and increasing in 2010. The country’s GDP gained ground in each quarter of 2010, indicating slow but steady recovery from what is now being called The Great Recession. Consumers grew more confident and retail spending increased, leading to increased production of durable goods. Those indicators have led many of the country’s foremost economists to predict growth over the next few years. One of the sources, The Federal Reserve Bank of Philadelphia, projected GDP growth of about 3% and gradually receding unemployment rates through 2014.

Of specific interest to SEMA-member businesses is attendance at the SEMA Show—a significant indicator of the industry’s well-being. The 2010 SEMA Show in Las Vegas logged a 9% increase in attendance over the 2009 Show, and things are looking markedly better this year. In fact, registrations for the 2011 event are on a record pace. And SEMA’s Financial Benchmarking Program—which uses key performance indicators to help measure and compare how specialty-equipment companies are performing—showed that most distributors and retailers were seeing sales increases at the end 2010 compared to 2009.

Vehicle Markets Back on the Rise

New-vehicle sales are crucial to several SEMA-member niches, including light truck, off-road, compact performance, street performance and restyling. In many cases, vehicle sales are a direct predictor of how the affected automotive specialty-interest niches will fair. After precipitous drops in new-vehicles sales in 2008 and 2009, the market finally began to rebound in 2010. Auto industry sales grew by 10% last year, including significant improvements for the market-leading Ford F-Series and Chevrolet Silverado pickups.

The increases are promising, but the industry—and the global economy—remains in jeopardy due to continuing political instability and persistent increases in gasoline prices. As the 2011 SEMA Market Report points out, “these factors may ultimately drive more changes in product mix (moving away from larger cars and trucks to more fuel- and cost-efficient models) than reductions in vehicle sales overall.”

One of the most encouraging signs is the rebound in pickup sales during 2010. The F-Series continued to be the top-selling vehicle, but a number of economy cars also showed strong growth. The CUV market showed potential for increased growth, and the market report again points to the sluggish economy and fuel prices as the backdrop for these trends. Within the CUV market, the Hyundai Sonata and Chevy Equinox each posted gains of more than 50%.

Specialty-Equipment Sales Follow Suit

The market report also shows specialty-equipment sales on the rise after two years of double-digit declines, though the aftermarket’s recovery wasn’t quite as robust as that of the OEMs. Sales of automotive specialty equipment grew 2.4%, which is an indicator that the declines may be relegated to the past and the industry will move into positive territory once more.

One of the benefits of the market report is its presentation of raw data in the form of charts. Among them are category breakouts that show product sales changes over the five-year span from 2004–2010, not only for new vehicles, but also for individual product categories, such as interior and exterior truck accessories; performance tires and wheels; audio and electronics products; and performance hard parts, such as brakes, exhaust and drivetrain products.

The charts show that electronics products posted sales gains across the board in 2010, with cell phone and iPod accessories as well as video and navigation systems producing consistent results even during the downturn. The report’s charts show wheels and tires claiming modest gains, while appearance products are one segment where sales continued to fall in 2010.

“Accessory/appearance products represented more than half the specialty-equipment market sales through most of the last decade, but the economic decline produced steep drops in the category,” the study points out. “A slight uptick in 2010 stemmed the losses, but the appearance segment now represents only about 40% of sales.”

The report also points out that performance and suspension products continue to advance steadily. The Racing & Performance section is the largest one at the SEMA Show each year, so its strength is understandable. These shifts in segment sales mean that all three—accessory/appearance, racing/performance and wheel/tire/suspension—are now on about even footing within the industry.

On the other hand, despite a somewhat reinvigorated new-vehicle market, the light-truck niche fell off for the third straight year and was the only niche to suffer a decline in 2010.

Compact Performance Sustains Growth

 
The report itemizes the industry in three product segments and nine market niches, detailing each through text combined with easily understood charts and tables. 
   
The sales decline in the light-truck niche has given rise to a new leader within the specialty-equipment market, and it’s something of a surprise to many. The compact performance market grew 9% in 2010 and, thereby, became the largest of the niches in terms of total product volume. The most likely reason for the swap in positions is the lingering upsurge in fuel prices and many consumers’ movement toward smaller, more fuel-efficient vehicles.

The advances in the compact-performance niche may also be a nod to younger buyers, who have grown up in the era of when smaller vehicles have come to the fore. “These younger (under 30 years old) drivers are likely to appreciate the cost benefits of better gas mileage and lower car prices in what may be their daily driver,” according to the report, which also points out that compact-performance appearance accessory sales bucked the general trend and have grown consistently.

These younger consumers probably also contributed to another undeniably growing trend over the past five years: the importance of the Internet as both a research tool and a purchase source. The top three retail sales channels for 2010 were retail store websites, manufacturers’ websites and auction websites, and while mail-order catalogs and magazine ads were rated high as information sources, those same web channels were among the top research tools, too.

Other Niches Steady Up

The decline in the light-truck market hasn’t carried over into the off-road niche, which has remained steadfast throughout four years of the study. While the off-road appearance segment did suffer, increases in sales of wheels, tires and suspension products have kept the niche on an even keel. And the racing niche—perhaps fueled by the enthusiasm of its participants—actually posted minor but steady gains each year.

The sales curves of the restoration and restyling niches showed nearly identical profiles in the 2010 report, with both leveling off and even showing slight increases after posting two years of declines. In contrast, street performance and street-rod and custom sales have maintained steady growth throughout the last decade. (It is interesting to note that the street-rod niche—comprised primarily of older enthusiasts—remains a bastion of catalogs rather than the Internet for both research and product purchases.)

As SEMA’s Senior Manager for Market Research Gavin Knapp says in his introduction to the 2010 SEMA Market Report, the association views the coming year with optimism and anticipates a strong SEMA Show this November.

Be sure to download the full report at www.SEMA.org/2011-annual-market-report, and also take the time to review the association’s weekly SEMA eNews electronic newsletter, which provides consistent market evaluations and updates. Subscribe here.

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