Auto Parts Businesses Benefit From Older Cars' Dominance

Nov 24, 2016 09:11 AM EST | Mark Yap

Auto parts businesses are expected to benefit more as older cars continue to dominate the market today. This, in turn, would mean more potential income for auto parts businesses; older cars tend to undergo repairs and parts replacement as they age, as well as parts upgrade, to keep up with more recent car models.

Fewer cars are also getting scrapped; about 11 million cars were scrapped in 2015, as compared to 2012 --- where around 14 million cars were scrapped.

MarketWatch has posted statistics on their website, in which registrations for light vehicles currently in use (i.e. SUVs and light pickup trucks) are shown to be on the rise as well. It has increased by 2.4% or more than 6.2 million from the previous year, as it reached a record of more than 264 million registrations.

According to Automotive News, used car businesses are also "in" right now. But while the potential market is considered large, it is still quite untapped by brand new car dealers; sales of used cars are more profitable, as compared to selling brand new cars.

In addition, majority of American car owners have a tendency to hold on to their cars much longer, as opposed to replacing them with a brand new model whenever possible. Considering economic factors, this is actually the most practical thing to do; buying a brand new car is far more expensive, as opposed to undergoing parts replacement --- even in the long run. Others also choose to maintain their older cars due to nostalgic value and familiarity, just like sticking to something already tried and tested.

Others even have this firm belief that older cars are better in terms of overall quality, especially those manufactured in countries that are in the car manufacturing industry for quite some time now (the United States, Germany, or Japan), as opposed to those being outsourced to countries that are more environmentally friendly (India and Brazil).

These factors and mentality would certainly benefit auto parts businesses in the long run.

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