By SEMA News Editors
New research by SEMA sheds light on future and emerging trends impacting the automotive aftermarket, whose annual $337 billion economic impact is a key driver of the American economy.
- The annual report delivers critical insights to SEMA's 7,500 member businesses who develop, manufacture, and market parts and accessories that improve safety, performance, and comfort for the nation's automotive enthusiasts.
View the complete report here. Highlights and analysis of the report follow, but first, be sure to join us for our webinar on Wednesday, February 19, where we will discuss the latest economic and automotive trends, as well as share forecasts for the rest of the year and beyond. RSVP here.
Industry and Economic Outlook
What's Trending
- As we move further from the volatile pandemic era of sales growth spikes and downshifts, we should expect to see a more normal growth rate around 3%-4%, driven by:
- Increased consumer spending on their vehicles.
- A jump in sales and revenue expectations as interest rates improve and inflation cools.
- Investments to diversify supply chains that pay dividends by preserving market stability.
- Challenges emerge from stagnant vehicle costs and interest rates, coupled with consumers fiscally stressed by cost increases for auto insurance and repairs.
- Motor-vehicle insurance jumped 14% for the 12 months preceding October 2024.
- Costs of motor-vehicle repair increase by 7.3% over the same period.
- Tariffs are an X factor and could dramatically increase costs and exert pressure on the automotive aftermarket industry.
SEMA Says: "A whole lot of our consumers took on vehicle projects and modifications during COVID, so you used up some of the demand that might have come a year or two later," said Gavin Knapp, director of SEMA Market Research. "Obviously, continuing inflation and high prices have also affected people, and there will be questions going forward about how long that will continue with possible tariffs and things like that. The expectation is we'll stay at current growth levels in 2025 and then return to our industry's usual 4%–5% growth rate next year and going forward."
Vehicle Trends in the United States
What's Trending
- Vehicle prices have stabilized, albeit at elevated levels, meaning continuously climbing inventory could drive down prices.
- In October 2024, the average transaction price for a new vehicle was $48,117.
- Demand for electric vehicles will stall, with manufacturers adjusting accordingly.
- More cars will be equipped with advanced driver assistance systems (ADAS) and sensors, impacting how vehicle owners interact with their vehicles (including modifications and accessorizing).
SEMA Says: "As of last year, vehicle inventories had been climbing for a while, but there hasn't been much demand," notes Matt Byun, SEMA's market manager. "If you keep getting cars on the lot, eventually you're going to have to start selling them. But the surprise is OEMs aren't lowering their costs. Instead, they're scaling back their production a bit."
Potential Tariff Impacts
What's Trending
- Tariffs are a looming specter, with the potential to increase costs for OEMs, part manufacturers and consumers.
- Most of the exposure is likely to small- and midsized parts manufacturers, who rely on international supply chains for some of their components and materials.
- Prices for parts affected by tariffs would be more extreme because of supply chains built around imports from Mexico and Canada, both of whom are highly integrated into the United States auto industry.
- Between 2020-2023, prices for parts imported to the United States increased 5.9%, due to higher prices for electrical and electronic equipment.
- Tariffs disproportionately impact businesses that pay upfront for goods and services, with small- and medium-sized companies potentially experiencing cash-flow issues, delayed payments, and reduced capacity and inventory.
SEMA Says: "It's important to understand how President Donald Trump has historically used tariffs, which he sees as negotiating tools to create leverage against other nations on issues unrelated to trade, like immigration and defense spending," said Karen Bailey-Chapman, SEMA's senior vice president for public and government affairs. "Tariffs with big numbers, like 25% or higher, are often introduced by President Trump at the negotiating table, or even publicly, but he also has shown a willingness to withdraw or suspend them when a deal is reached. As a result, what you see in the headlines does not always materialize."
Consumer Demographics
What's Trending
- America is getting older but drivers are increasingly younger.
- There are more licensed drivers under the age of 25 today than there were two decades ago.
- Younger drivers are tapping into the used-car market more frequently, due to rises in the cost of new vehicles.
- Young people drive the automotive accessories market and tend to live more enthusiast-oriented lifestyles.
- More than 60% of specialty-equipment sales in 2023 came from accessorizers under the age of 45.
SEMA Says: "If you look at the nation's demographics, we are getting much, much older, and the 65-plus demographic is getting much larger," Knapp said. "How that plays for our market is interesting. It keeps more cars on the road because there are more drivers over time. But that older demographic is also a lower-spending segment for our market. They have money but are less likely to wrench on their car."
Alternative Powertrains and EVs
What's Trending
- Automaker investments in electric vehicle (EV) powertrains persist, but consumer demands are spurring cuts in EV production.
- EVs continue to be viewed as luxury products, with the high upfront costs outweighing incentives in consumers' minds.
SEMA Says: "The EV hype has been a bit overblown, and some of the electrification market's growth has shifted into hybrids," Knapp explains. "As Toyota Motor Corp. Chairman Akio Toyoda has said, for everything it takes to build one pure EV, you can make 10 hybrids, but it's still an open question whether hybrids are an interim step or a long-term play."
ADAS and Autonomous Vehicles
What's Trending
- While fully self-driving vehicles remain a long way off, ADAS features are becoming increasingly prevalent in Americans' vehicles.
- While very few vehicles had automatic emergency-breaking capabilities in 2015, well over 90% of new vehicles from model-year '23 featured such a system.
- Automatic emergency braking, which was non-existent before 2015, can now be found in more than 67 million vehicles on the road.
SEMA Says: "ADAS is really affecting the vehicle market; there is a broad mass of cars and trucks already on the road that have these features onboard," says Byun. "For example, as of May 2018, all new OEM passenger cars and light trucks were required to have backup cameras. In model-year '22, more than 90% had collision warning systems."
