Despite feeling positive sentiment in February, consumers are now feeling less optimistic about spending money customizing their vehicles. In March, the SEMA Performance Parts and Accessories Demand Index (PADI) lost 39 points, or 49%, going from 81 to 42 last month. Currently, 11% of adult American drivers (or approximately 11-plus million households) are now committing to plans for specialty-equipment purchases over the next three months.
The charts below show both the index values (black line, values on the left of graph) as well as the percent of consumers indicating that they plan to purchase specialty equipment in the coming three months (blue-dashed line, values on the right of graph).
Although the drop looks daunting, specialty-equipment sales typically follow yearly cyclical trends. The mainstream consumers surveyed here are increasingly concerned about the economy and its future outlook, leading them to hold off discretionary purchases at the moment.
Several factors contribute to fluctuations in demand for specialty-equipment parts and accessories by mainstream consumers. Economic optimism also declined in March, dropping two points, or 4.5%, to reach 42.5, as noted by Technometrica’s TIPP Economic Optimism Index. This monthly economic survey is sent to consumers in order to gauge their attitudes toward economic prosperity, and continues to show a steady decline following drops in 2007. As we can see from the jumps in all three subsegments of the PADI, consumers are more cautious to spend money on their vehicles.
Wheels, tires and suspension components were the most popular aftermarket products consumers were likely to purchase (8%, or about eight million households), followed by specialty accessories and appearance products (6%, or about six million households) and racing and performance products (4%, or about four million households). In terms of index values, these percentages translate to 39, 68, and 40, respectively, as noted by the charts below.
Over the last three months, on average, pickups (22%) and midsize cars (19%) were the most common target vehicles for enhancement or modification, followed by fullsize (13%) and compact cars (14%). On average, independent parts stores (23%) and car dealerships (21%) were the two most popular purchase destinations among those planning to enhance their vehicles, followed by chain auto parts stores (15%) and the Internet (9%). When aftermarket buyers were asked what form their vehicle would take after customization, the most common answer was general personalization (56%), followed distantly by street performance (13%), restoration (7%) and off-road (7%).
Although similar to economic indexes, the index SEMA is not designed to report past activity, but rather the expectations of future purchases.
The indices track consumers’ plans to purchase performance parts and/or accessories within the next three months after each respective survey. This will help provide a rough forecast for demand of specialty equipment in the near future. The SEMA PADI, and each of the three sub-indices, is a weighted composite index computed relative to its own baseline value, calculated by taking an average of January through March 2007 raw percentages. This average is then set to 100, and each month’s index is computed relative to the change from its baseline. The indices and their movements are projectable to the national market for specialty-equipment products, which consists of more than 114 million U.S. households.
SEMA has contracted with TechnoMetrica to gather the data used in building and maintaining the SEMA PADI. Each month TechnoMetrica uses a Random Digit Dial (RDD) telephone survey to collect the survey data in order to provide a nationally representative sample of U.S. consumers. Typically, the responses total between 850 and 1,000 in any given month. The margin of error is normally within the plus or minus 3% to 4% range.
Although the PADI is not a precise measure of absolute future purchasing activity, it is a tool for understanding and predicting industry sales. There are two ways of interpreting the PADI. First, its direction—whether the index is rising or falling. Second, the values themselves provide a guide as to the degree of change in consumer expectations for purchasing industry products. For more SEMA market research, visit www.sema.org/research.