The world is about to ring in 2021, which means it’s high time to forecast the possible car industry trends this period. This way, auto entrepreneurs are better prepared to face challenges and spot golden opportunities.
1. Higher Used-car Sales
Car manufacturers will continue to sell vehicles, but experts believe they should expect less on their volume and profit. According to Fitch, the sales will be 8% lower than that of 2019.
However, there are silver linings. First, the credit rating agency forecasts that sales will be higher than in 2020, which was badly hurt by the pandemic. Second, it may go back to its pre-pandemic levels in 2022.
Nevertheless, the demand for used cars may overtake the demand for new ones. In the third quarter of 2020 alone, the sales for preowned vehicles rose by 11% or over 3.5 million units compared to the previous year.
Meanwhile, in a survey by Grant Thornton Automotive Insight and Cox Automotive, at least 64% of the dealers believed that used-car transactions would increase in 2021.
What does this mean for entrepreneurs? Car repair specialists may look forward to good business. Many used-car vehicles are already out of warranty, and therefore, new owners are less likely to bring them to dealerships for maintenance.
Now is the best time for these shops to invest in good-quality supplies. Companies like JMC Equipment can provide most at a discounted rate. Business owners may also apply for financing. In this manner, they can lower their capital investments and allow their profits to pay for the repayments.
2. Popularity of Car Leasing
Despite the possible slowdown of new-car sales, Americans still need a vehicle. They’re likely to set their sights on car leasing.
According to Research and Market, this sector could achieve a compound annual growth rate of 1% from 2020 to 2024. At the end of the forecast period, its value could be worth nearly $150 million.
Vehicle leasing will be well-known not only to retailers or consumers but also to B2B markets. This may be especially true during the first few months of 2021. The remnants of the effect of the pandemic may force companies to use private vehicles to ferry their executives instead of allowing them to commute.
Interestingly, the growth of car leasing will also buoy that of used cars. More companies are loaning these pre-loved vehicles equipped with modern features. In turn, consumers can take advantage of lower lease prices while driving late-model or heavily featured vehicles.
What does this mean for entrepreneurs? The increased demand for vehicle leasing could be a boon for auto shops, especially those that offer repair. One, they can partner with these leasing companies, particularly independent or small ones. Their fleet, too, requires maintenance. Car repair shops may offer a subscription-based plan for better value.
Second, the leasing industry’s growth will signal the increased supply of used vehicles within the next 6 months to a year. Leasing companies need to let go of the old ones to bring in new inventory. Proper repair and maintenance will help retain or decrease the risk of a lower market value for the vehicle.
3. More Durable and Well-Designed Vehicles
While many vehicles get sold once they reach their fifth year, their average lifespan is actually 8 years. The IHS Markit even has a longer forecast of over 11 years.
Moreover, by 2023, over 80 million vehicles, including light trucks plying the road, will be 16 years old. That’s about 240% more cars than 16-year-old vehicles in 2002.
Why are vehicles getting older? Much of it has to do with research and development. Manufacturers can now develop more robust and even fuel-efficient engines. However, the longevity of the vehicle could mean a higher risk of experiencing bumps and dents. Aging will also show up in the fabric and tech systems.
What does this mean for entrepreneurs? It’s a good time to reward loyalty. Auto repair shops can incentivize consumers who bring their vehicles for maintenance or repair within the first five years. But for these shops to be worthy of the commitment, they also need to be more knowledgeable on newer engines and tech systems.
Overall, 2021 may still be a good year for auto shops as more markets grow. However, they may also need to update their skills and equipment to deal with the changes in car designs and age.