Column: The threat of electric vehicles for the aftermarket: hype or reality?


Here are three predictions from 2010: One, from IBM, that all cars in the United States will be some form of hybrid by 2020. Two, from various automakers, small cars will rule. SUVs and trucks will be dead. Third, electric vehicles will account for 6% of the US market by 2016, Bloomberg said.

All false. By miles.

In 2021, the share of electric vehicles in the United States and Canada (both hybrid and battery-only) in total new car registrations stood at 4% and 5% respectively. The share of the total fleet was less than 2%.

Likewise, the fate of small cars took the opposite direction. SUV/truck sales have exploded in recent years — to the point that automakers like Ford have largely abandoned their automotive strategy.

We’re in the midst of a new electrification frenzy – and expert prediction. As I write these lines, the adoption of electric vehicles continues to climb at the rate of 50-60% each quarter, counteracting the free fall in global car sales. Shares of electric vehicle registrations in cities such as Vancouver and Montreal hit the mid to high double digits in the second quarter. Indeed, current data indicates that electric vehicles have finally reached their escape velocity. When analysts say that this time around the electric transition will happen faster than expected, I tend to agree, despite the uneven forecasts of the past.

The secondary market is preparing for this change. The leader in automotive distribution NAPA recently announced that it would deploy its NexDrive banner, intended for the maintenance of hybrid and electric vehicles, in several of its Canadian branches. Another Canadian retail giant, Uni-Select, is partnering with EvoCharge to resell electric vehicle charging equipment through its parts network.

These proactive measures are welcome. Amid all the back-and-forth around right-to-repair law, these strategies show that the aftermarket is well-prepared for cutting-edge technologies and deserves a place at the table of progress.

But it’s also important to separate hype from reality. Currently, discussions around the impact of electrification on the secondary market oscillate between wild optimism and certified disaster. There’s the opportunity faction — those hanging their hats on explosive volume growth, the robust used-car market for alternative vehicles, the higher cost of repairing electric vehicles, and so on. On the other side, the naysayers predict an 80% reduction in powertrain parts, negligible maintenance expenditures and OEM technical dominance.

However, past experience – as noted above – and actual data point to more nuanced results.

The aftermarket opportunity for electric vehicles also assumes strong demand for used electrics. But the case for used electric vehicles, as things stand, is not great.

Let’s look at the opportunities. Over the past 10 years (2011-2021), Canada has added about 600,000 electrified vehicles (including hybrids), according to Statistics Canada. About 80% of these vehicles were registered within the last five years, which means they are still under warranty and will require little maintenance for the next five years. There are around 100,000 odd vehicles out there that could potentially require repairs, maintenance and refurbishment – an opportunity, yes, but a tiny one.

The aftermarket opportunity for electric vehicles also assumes strong demand for used electrics. But the case for used electric vehicles, as things stand, is not great. Fully refurbished models come at a higher price, while those with diminishing battery power add both inconvenience and cost to users. It will take some time for used electrical appliances to become attractive to buyers. Without this volume, repair dollars will remain elusive.

Then there is the question of how much, how fast. Sure, electric vehicles are growing faster than expected, but don’t hold your breath for a Norwegian-style transformation (electricity accounted for 65% of sales there in 2021) in North America. Electric vehicles are still too expensive, government incentives still too patchy and our love for petrol still too strong for European calculation.

I think we would be lucky to achieve 30-35% EV sales penetration by 2030, less than 10% fleet share. And if gasoline prices drop 20-30% (a very likely scenario) over the next two years, we could see a repeat of the “small car” bet (a less likely scenario) of the last decade. Which means that the real volume opportunity will only start to emerge at the start of the next one.

If there’s little short-term gain, then the pain can’t be that bad. The gasoline and diesel market will certainly shrink, but not enough to have a significant impact over the next seven to eight years. The aftermarket should be more worried about the drop in part failures than the loss of sales caused by the disappearance of ICE vehicles.

Post-recession cars have seen huge gains in initial quality and longevity. The latter is actually a good predictor of secondary market opportunities. Older cars on the road translate directly to increased parts sales and repair needs. Increasing complexity also means higher earnings per job. Aftermarket competitors would be better off focusing on how they can capitalize on these opportunities rather than shedding too much strategic and operational sweat on the electrical threat.

Make no mistake: electrification is coming. But it’s not dark yet.

Kumar Saha is the Toronto-based Vice President (US)/General Manager (Canada) of global automotive intelligence company Eucon. He has advised the North American automotive industry for over a decade and is a frequent speaker and media commentator.

*Editor’s Note: This article has been updated since it was published in the July/August issue from Jobber News to include the latest data.


Comments are closed.