Hot-Rod Market Trends

SEMA News—June 2016

BUSINESS

By Chad Simon

Hot-Rod Market Trends

Classic Styling Meets Modern Performance

  Ringbrothers Mustang
Classic musclecars, such as this ’65 widebody Mustang Fastback by Ringbrothers, changed the definition of what a hot rod should be.
   

Industry stalwarts unanimously agree that the hot-rod market is as healthy as it’s ever been. The economy is stronger than it was at this time last year, and consumers have more discretionary income to spend on their toys, partially due to low fuel prices. Although hot rodding—in the most traditional sense—is predominately embraced by aging enthusiasts, the options are diverse, and getting broader.

“Last year’s Battle of the Builders competition at the SEMA Show represents how healthy the market is,” said Rick Love, Hot Rod Industry Alliance (HRIA) past chairman and executive vice president of Vintage Air. “There were excellent examples of all the different vehicle genres to pick from. Everybody in the hot-rod industry is busy; they have more work than they can do and would like to hire more qualified people.”

The hot-rod segment wasn’t always this all-inclusive, however. The traditional definition of a hot rod is a pre-’48 American car modified for speed. During the segment’s ’50s–’60s rebirth, this definition morphed to include other vehicles, including trucks and musclecars.

“A guy with an ’07 Camaro that he’s done some work to may consider it a hot rod, while to a guy with a ’66 Chevelle, that’s his hot rod,” Love said. “My definition is not what the market definition is anymore.”

By the Numbers

'33 Ford Roadster
Bobby Alloway’s ’33 Ford Roadster won the 2015 SEMA Show’s Battle of the Builders competition.
 
   

Comprising the restoration or customization of classic cars, hot rodding is an integral component of the $36 billion specialty-equipment industry. According to SEMA market research, retail sales of restoration parts have reached $1.44 billion—a 6% increase over the previous year. Street-rod and custom-parts sales are also trending upward by 8% over the previous year at $1.36 billion.

Accessory and appearance products captured the majority of the restoration market share at 39.2%, followed by wheels, tires and suspension (34.6%) and performance products (26.2%). Street-rod and custom enthusiasts primarily modified their vehicles for performance (37.6%), followed by wheels, tires and suspension (34.1%) and accessory and appearance products (28.3%).

“Consistently each year, Hot Rod Alley is one of the most popular sections of the SEMA Show,” said Tom Gattuso, SEMA director of trade shows. “Last year was no exception, as it was the number-one visited section, according to our post-Show buyer’s survey. It’s great to see that there was more innovation presented at the Show, indicated by a 37% growth in New Products Showcase entries from the hot-rod section. We can’t wait to see what’s in store for our 50th event.”

Emerging Trends

  '32 Ford Coupe
This ’32 Ford coupe is an example of a traditional hot rod.
   

People are gravitating toward more useful builds, according to Brett Voelkel, president of RideTech.

“We deal with a high-end customer base,” he said. “The same people who spent millions of dollars on cars previously are now backing up and saying, ‘I want to build something I like to drive that I can have fun with.’ Our roots are in street rods, and then we got into doing musclecars, which are now our biggest market.”

John McLeod, HRIA chairman and owner of Classic Instruments, believes that classic trucks are another emerging trend, including ’67–’72 Chevy pickups and early Ford F-100s as well as old-school nostalgia, such as a traditional ’32 roadster.

Classic trucks are gaining more attention because they are an economical way for a lot of people to enter the market, according to Love. The ’73–’87 Chevy pickups have become popular because they’re less expensive than their ’67–’72 counterparts. Reproduction parts are becoming increasingly available for ’61–’78 Ford pickups, so there’s also strong growth there.

“It’s the old chicken-and-egg scenario,” Love explained. “What leads to growth? Is it that manufacturers have a demand for those parts, or is it that once they target a market and make reproduction parts available, all of a sudden you can buy an ’80 Chevy pickup and know there are parts available? As a vehicle becomes more popular, manufacturers notice it and start producing more parts, which leads to growth.”

Popular Modifications

'32 Ford Roadster
Old-school nostalgia, such as this ’32 Ford Roadster, is considered an emerging trend.
 
   

Industry sources confirm that enthusiasts continue to modify to enhance their hot rod’s performance, comfort and appearance. They love the classic-car look but want it to perform like a modern car.

“Over the past 30 years, expectations for what people can put into their hot rods have evolved,” said Tray Smith, vice president of H&H Classic Parts. “My grandfather liked the saying that ‘they want to have their cake and to eat it, too,’ which applies here. They want a ’64 Impala, but they want it to ride like the new car that they drive every day, and they want all the creature comforts.”

According to Voelkel, the old musclecars handled atrociously, so just about any modification is an improvement.

“These guys drive new Chevy pickups to work, and they want their hot rods to perform at least as well, so they’ll add horsepower, suspension, good brakes and air conditioning for comfort,” he said.

Drivetrain upgrades are typically the top priority among ’60s and ’70s musclecar enthusiasts, according to Mike Ring of Ringbrothers—a two-time finalist in SEMA’s Battle of the Builders competition.

“Back then, guys used to think their musclecars were fast,” he said. “They didn’t stop or handle well, so 100 mph felt like 250 mph. They weren’t that fast compared to what’s being built now, and they’re so smooth today. You can race a new Cadillac ATS and beat any old musclecar. A lot of guys restore them, climb in and think, ‘Man, I wouldn’t let my kid in this thing,’ and for older guys like me, they’re not that much fun to drive when they’re stock.”

Evolution of the Market

In today’s smartphone age, customers have become better educated and more tech savvy, Voelkel said. Manufacturers that build cheap parts are exposed quicker and don’t do as well as those that build quality parts and provide exemplary customer service. Consumers don’t have to rely on flashy images and printed ads to determine whether a product is worth purchasing. Instead, they can visit online forums and ask opinions, do research, watch videos and compare prices.

Love believes that the evolution of technology has made it easier for builders to work on cars.

“Years ago, 90% of the time you were dealing with a guy who had some good skills, and if you were going to build cars back then, those skills were necessary because there weren’t a lot of bolt-on parts available,” he said. “Improved product quality and engineering development have allowed more people with less fabrication skills to be able to build or modify their vehicles.”

Top Challenges

  '56 Ford F-100
Classic trucks, such as this ’56 Ford F-100, have crossed over into the hot-rod segment.
   

Replenishing an aging industry by introducing youth to hot rodding is paramount to its survival, and that can’t happen when high schools are cutting industrial arts and shop classes.

“If kids are never exposed to how to turn a wrench, how can they possibly be interested in this industry?” Voelkel lamented.

Studies have shown a decline in the number of young people getting their driver’s licenses, according to Smith.

“When I was growing up, the vehicle was my escape,” he said. “Now, if kids want to see what their friends are doing, all they have to do is get on Facebook. It’s tough to get them to understand that driving is a fun outlet. We have to reach college-age kids to get them interested in jobs in our industry.”

As HRIA select committee chairman, McLeod is focusing on SEMA’s “Futures in Hot Rodding” program, which strives to bridge young talent and potential employers.

“SEMA is taking a real interest in the youth, and my belief is that we need to spend a lot more time there,” he said. “Education Days in Louisville are open to the public for the first time ever, so anyone who wants to learn from the manufacturers can attend. We also have the Pinewood Drags challenge to get the kids involved and spark an early interest.”

The industry is constantly evolving, and keeping a finger on the pulse can be a difficult task. A good way to project future market trends is to follow what Chip Foose, Troy Trepanier, Bobby Alloway and other top builders are doing. For manufacturers, attending car shows and finding out what’s happening in real time can help them to forecast trends.

“We learn as much from the customer by going to a show as they learn from us,” Voelkel said. “Unlike a large company, where the people who run it may be several layers removed from the grassroots aspect, we’re right on top of it.”

According to Jim Ring of Ringbrothers, it’s a challenge to find enough skilled employees, because Ringbrothers operates a full-time collision and manufacturing shop in addition to its car-building shop.

“We’re diverse in what we do; we didn’t put all our eggs into building cars,” he said. “I almost feel sorry for the guy who’s starting a new hot-rod shop. It’s got to be almost impossible. First of all, you have to work your tail off to prove yourself in the marketplace and then try to find guys who are willing to pay you what it takes to build these cars.”

One practice that’s hurting the industry is the builder who takes on a job and doesn’t complete it because he realizes halfway through that there’s no way he can complete the job for what he thought he could, said Mike Ring. Instead of finishing it or being upfront with the customer, he quits working on it and ruins the experience for the customer.

Another challenge is battling government overreach, and SEMA’s “Recognizing the Protection of Motorsports Act (RPM)” is a perfect example.

“The EPA and other government entities see no reason for this thing we do,” Love said. “They see no need for a car more than 20 years old to be on the road. This whole thing easily could be legislated out of existence, so it’s important that we stay vigilant to ensure that doesn’t happen.”

Weathering the Economy

'37 Chevrolet
Enthusiasts appreciate the classic-car look, but want their hot rods, such as this ’37 Chevy, to perform like a modern car.
 
   

The Great Recession of 2008 proved to be survival of the fittest for many companies in this industry.

“There were companies both big and small that did not recover,” Smith said. “It was a matter of ensuring that you had enough capital reserve and your debt-to-income ratio was low enough. Some of these companies had borrowed millions of dollars and suddenly didn’t have the money to pay it back.”

Despite the carnage left in the wake of the 2008 recession, many in the hot-rod community are confident that the market would be able to withstand another economic downturn.

“In my experience, the hot-rod market is affected last and least and recovers first and best,” Voelkel said. “There’s always the inevitable weeding out of companies that aren’t as financially strong as others, but people are going to find a way to pursue their passions.”

According to McLeod, the companies that made it through 2008 are smarter and better prepared in the event the economy takes another plunge.

“We’re still in the fun business, and as long as we’re smart about how we do business, people will always want to have fun,” he said. “The level may change, but this industry will always be there. If there’s such a thing as recession-proof markets, I believe that the automotive aftermarket is one of them.”

Tinkering with hot rods is a hobby that strengthens the bond between like-minded friends and family members, and people aren’t likely to give up their hobbies so easily.

“It’s like fishing,” Mike Ring said. “You don’t take away a man’s hobby. He’ll cut back in other ways. The market won’t be as strong, but it’ll still be around, because it’s a good way to stay in the garage with your boy.”

The general consensus is positive for the hot-rod industry over the next five years. Although there is bound to be the inevitable slowdown in the business cycle, Love predicted that the market as a whole will remain healthy.

“Trucks in particular are going to continue to provide growth,” he said, “and it’s up to us to keep manufacturing the parts to make that happen.”

SEMA Resources
For more information on SEMA’s Hot Rod Industry Alliance, visit www.sema.org/hria. For access to SEMA’s comprehensive market research into this niche as well as the overall aftermarket, including the association’s annual full market report, contact SEMA Director of Market Research Gavin Knapp at 909-978-6712.

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