In July, the SEMA Performance Parts and Accessories Demand Index (PADI) fell by seven points, or 6%, dropping from 42 in June to 35 last month. An index score of 35 translates to 9.5% of consumers planning to make a specialty-equipment product purchase sometime within the next three months.

Although economic concerns, high gas prices and the current credit crunch are causing consumers to scale back their purchase plans, about one out of every 10 adult American drivers (or approximately 10 million households) still indicated that they had plans to purchase specialty equipment.

Although planned spending is slowing down, consumers still want to personalize the cars and trucks they drive. The types of products consumers want differ from past months.

Around 6% of consumers said that they were likely to purchase wheels, tires and suspension components during the summer months, representing close to a 1% drop from June. Regarding racing and performance products, 5.7% of consumers surveyed said that they were likely to make a purchase. The percentage of consumers who plan to purchase accessory and appearance products dropped to 4.3% in July.

Each percentage is down from last year; however, the decline in those who want to buy racing and performance products is less dramatic than that of the latter two categories, possibly a sign that consumers are still looking to enhance the performance and fuel economy of their vehicles.

Looking closer at specific age groups, 18–24-year-old consumers said that they were more likely to purchase specialty equipment in the coming months.
 
Over the past three months, on average, midsize cars (20%) were the most common target vehicles for enhancement or modification, followed by pickups (18%), fullsize cars (16%) and compact cars (13%).

New pickup sales are down 24% for the first seven months of 2008 compared to last year, but the total number of pickups already on the roads is still among the highest category of vehicles registered, giving rise to their popularity for customization. R.L. Polk registration data shows that 12% of all vehicles on the road today are, in fact, a fullsize pickup.

Over the last three months, on average, car dealerships (28%) were the most popular purchase destinations among those planning to enhance their vehicles, followed by the Internet (19%), chain auto parts stores (12%) and independent parts stores (11%).

When specialty-equipment buyers were asked what form their vehicle would take after customization, this month the most common answer was “general personalization” (37%), followed by "street performance" (18%), “restoration” (12%), “off-road” (8%), “hot rod” (3%) and “compact performance” (2%).

Every month, SEMA commissions TechnoMetrica Market Intelligence to survey a random sample of consumers in order to provide the above data, and this month’s report is based on 896 nationwide interviews with adult American drivers. The margin of error is plus or minus 3.3%.

Forecasting how specialty-equipment sales will fare in the coming months gives the industry an upper hand in planning their own inventories and strategies.

For more original SEMA market research, including a full version of the above summary and archived PADI reports, visit www.sema.org/research.

While rising gas prices have taken their toll on the pickup market, dropping sales considerably, decreasing revenue on further sales and also decreasing the value of trucks already in the consumer market, the pickup market has not been entirely destroyed. Pickup sales are still the third-largest automotive segment in North America, according to MSNBC.com.

Yes, it's true that sales have fallen. Estimates for 2008 sales are at 1.4 million units, down from previous annual levels at 2 million. That 1.4 million is still roughly 11% of all vehicle sales in the United States. Even though the vehicle value has dropped, pickups still enjoy hefty profit margins over the now faster-selling small cars.

The only difference currently is that people buying pickups are those who actually need them. According to MSNBC, the recent drop in truck sales should be attributed as much to the demographic of truck buyers as to gas prices. A quarter of truck buyers never used them to tow, haul or go off-road, says Dan Carney, author of the article. These drivers were the first to leave the market once gas prices shot up as they realized they could not afford driving a truck for purely aesthetic reasons.

This realization has led truck manufacturers, such as Ford, to rethink their truck design and marketing strategy. Manufacturers realize that they overdesigned their vehicles for towing and hauling abilities that were underused at the expense of fuel efficiency. New-generation vehicles will be smaller and less pricey, what automakers hope consumers are looking for in the present market.

SEMA members have the opportunity to prepare for this wave of smaller trucks. In addition, current truck sales are far from dead and SEMA members have the opportunity to continue providing specialty equipment for those vehicles.

For more original SEMA market research, including a full version of the above summary and archived PADI reports, visit www.sema.org/research.

As the search for alternative fuels continues, researchers have examined hydrogen fuel cells, ethanol made from crops and electric vehicles. The latest alternative involves harvesting aquatic algae as a form of biodiesel. 

Algae, which is comprised of nearly 50% oil, is a perfect candidate for being turned into fuel, according to Aftermarket Business. Many prominent oil companies, such as Chevron, have already begun research into the harvesting and sustainability of an algae-based industry. One start-up firm, PetroSun, has already begun operation of an oil-producing algae plant in Texas, which is expected to produce 4 million gallons of algae oil per year.

There are many benefits to using algae oil over other fuel types. Unlike modern fuels, the algae absorbs the same amount of carbon dioxide that is released when the oil is burned, preventing additional greenhouse gases from entering the atmosphere. The algae-produced oil is also cost-efficient and is more affordable than current prices for oil. Finally, unlike electric vehicles or hydrogen fuel cells, which require another source of energy to produce their fuels, algae gets its energy directly from the sun.

Algae fuel presents SEMA members with many opportunities. Providing a cheap alternative to current fuels could boost the automotive market and possibly reverse the downsizing trend in the economy. The rise in vehicle sales will likely grow sales for specialty equipment.

The cheap price of fuel could also decrease prices for parts and materials used to manufacture and produce specialty equipment, decreasing total costs and increasing profit margins.

For more original SEMA market research, including a full version of the above summary and archived PADI reports, visit www.sema.org/research.

Nearly every automaker was punished by low light-vehicle sales in July due to high gas prices and a slowing economy. Despite low sales, certain fuel-friendly niches grew in sales, such as the small-car market, which boasted rapidly rising sales.

According to Business Week, Ford’s July sales were down 14%, General Motors sales were down 26%, Toyota was down 14% and Honda was down 2% in relation to the same month last year. In order to cope with this drop in sales, manufacturers are turning increasingly towards fuel-efficient vehicles and small cars to revamp the industry.

Small cars have shown the most potential for the industry. While Ford’s SUV sales were down 37% and pickups/vans were down 22%, its Focus model was up 16%, according to Business Week. A similar situation occurred at GM, where its small cars were up 17% and midsize cars were up 34%, even with their truck sales spiraling downward by 41%.

In fact, the biggest problem for the automakers has been meeting consumer demand in markets that have the greatest potential. Since small cars provide the smallest margins for manufacturers, they have generally been of little interest to a market focused on the sales of trucks and SUVs. Once gas prices increased and consumer demand rose for those vehicles, manufacturers found themselves lacking plants and facilities to saturate the market.

Take, for example, the Toyota Prius, which has been out of stock at dealerships consistently throughout the past few months. As a testament to the value of these vehicles, dealers have begun selling used Priuses at higher prices than new ones, even buying back the vehicles from owners they sold them to in previous years or months. 

According to Automotive News, this incredible situation has arisen due to consumers being unable to compare used vehicles to the price of new vehicles, which have been grievously out of stock. Without new vehicles for comparison, dealers have been able to charge higher prices, selling the same vehicles twice with profits both times.

SEMA’s members have the opportunity to cite this rapid trend towards smaller vehicles and prepare themselves for the rapid influx of such vehicles once manufacturers catch up due to consumer demand.

"Now THAT'S resale value ...", Automotive News. August 4, 2008,

The apparent demand for fuel-efficient vehicles can be tracked using a new source. CarMax reported a dramatic change in search rankings for fuel-efficient vehicles compared to other vehicles on their CarMax.com website. According to AutoChannel.com, which reported the CarMax findings, vehicles with a higher MPG rating were searched for more frequently than other vehicles. Such findings reflect consumer attitudes towards rising gas prices.

For example, the Mazda3, with an estimated 24/32 MPG, rose 23 places to become the 16th most-searched vehicle in June. The Toyota Corolla jumped five places due to its 28/37 MPG rating, going from 9th to 4th over the same period. One of the largest jumps was the Volkswagen Beetle, sporting an estimated 21/28 MPG, leaping from 71st to 40th place from March to July.

Vehicle research trends obtained from companies such as CarMax can be extrapolated to the entire auto industry, suggesting future sales of fuel-efficient vehicles. According to Ann Yauger, director of the CarMax website, "With gas prices continuing to rise, fuel efficiency has increased in importance for many shoppers."

For SEMA’s members, opportunities arise as more of these small vehicles enter the market, not just from new-car sales, but from sales of used vehicles as well.

For more specialty-market research and insight, visit www.sema.org/research.

The restoration niche has been enjoying a steady growth in retail sales since 1994, with accessories and appearance products largely responsible for 2007 sales of $1.5 billion.

In 2007, the accessory and appearance segment constituted 43.7% of the restoration market. The suspension and handling category followed with a 31.5% share, and performance products rounded out the market with a 24.8% share.

While performance products and suspension/handling products have alternated between second and third place, the accessory and appearance category has been the leader since 1994.

The restoration niche has received a boost in recent years from the publication of record prices brought by vintage vehicles. Additional enthusiasm can be attributed to an increased interest among Americans in collectibles in general, as well as the involvement of celebrities in vehicle restoration and collecting.

Much of the driving force behind the restoration market comes from baby boomers. Today, the baby-boomer population is one of the largest in the United States, representing approximately 28% of the total population. It is expected that baby boomers will grow nostalgic as they age. If this proves true in regards to vehicles, then the restoration niche should continue to experience a healthy growth.

Other groups are also joining the ranks of vehicle restoration enthusiasts. There are numbers of Gen X and Gen Y consumers who are gaining interest in restoration. These new enthusiasts will not necessarily restore the same vehicles as their predecessors. Older Japanese-made cars are gradually joining the ranks of prized restored vehicles.

For more original SEMA market research, click here.

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