AUTOMOBILES ARE AN ESSENTIAL ASSET FOR ALL ITALIANS. BUYING AND MAINTENANCE ON THE RISE
The auto repair and aftermarket world
36.5 billion Euro spent on new cars in 2016 alone. The Aftermarket too closes the year with a positive sign and looks at 2017 as the year that will mark the birth of the Workshop 4.0
Greater purchasing trend and greater maintenance. The automobile is still considered an essential asset by many Italians who are willing to spend their money in acquiring new cars or taking greater care of them. Sure, a far cry compared to pre-crisis levels when, thanks to generous Government incentives, sales were higher and the demand wasn’t weighed down by lower incomes and concerns for the future. Something’s happening, though, in the automotive market.
A clear indication comes from the aftermarket sector, where increased spare parts sales along with accessories and tires testify to a sudden resurgence of the whole sector. As far as automobiles are concerned, the last two years have seen a double-digit growth, due in part, according to a Centro Studi Promotor analysis, to a slow return of consumer confidence and the thawing of private savings – 3,943.5 billion Euro in Italy, according to the latest bulletin released by the Bank of Italy – used in purchasing new vehicles. Against a fleet that has aged considerably over the last few years – the average age of a car in Italy is of 10 years and 4 months – generated a high demand for new vehicles driving the market and providing the spark to the recovery. Purchasing data, in 2016, according to Fleet&Mobility research centre and based on Unrae data, 36.5 billion euro were spent in Italy on new cars, a 20.1% increase compared to 2015 (30.3 billion).
Last year’s turnover with 1 million and 824 thousand new registrations (Centro studi Promotor), is the third best ever after 2007 and 2008 when registrations largely exceeded the 2 million mark and spending fluctuated between 45 and 50 billion. As the crisis hit the markets, though, a phase of contraction began which is only now beginning to reverse. Looking at the average value of cars, it is noteworthy that back in 2009 it was just over 16 thousand euro, while today the average net price has gone up to 20 thousand euro, a figure considered net of rebates and without the Extras charged by manufacturers. The reason for this increase is due, but not limited, to the choices of Italians motorists increasingly geared towards SUVs and crossovers, with both segments growing by 26% over the previous year, while small cars and commercial vehicles took a back seat.
Three elements played a decisive role in the sudden upswing of the car market, according to Gian Primo Quagliano, President of Econometrica and the Centro studi Promotor. "The first was the decline in prices of petrol and diesel, which allowed motorists to save 7 billion euro in 2015 and 4.9 billion during January-October 2016. The second is the low level of interest rates, which facilitated access to credit. And third, a new, increasingly widespread buying method already common among corporate fleets. I mean long-term rentals that provide access to cars without investing large sums, but simply with a commitment to pay an installment that covers both the use of the car and the cost of many goods and services needed to use it". A further aspect to consider in order to understand the actual condition of the automotive market, besides data on registrations and turnover, relates to maintenance costs. In this case, compared to an overall decline of expenditures, over the past few years, we observed an increase in some of them, namely for maintenance and repair as well as tire purchase and replacements. Translated into figures we’re looking at about 31 billion euro in 2015, an increase of 1.6% compared to 2014. Looking at the big picture, according to the latest survey by Aci (Automobile club of Italy), the money spent in 2015 for car maintenance amounted to 147 billion euro.
Compared to the previous year, where costs amounted to 155 billion, there was a reduction of 5% partly due to the decline in the price of fuel (-15.7%) – petrol and diesel are set to rise in the coming months because of Opec's decision to curtail oil production – and a 6.5% decrease in third-party insurance policies and taxation (-1.2%). These three voices resulted in a combined saving of more than 7.5 billion euro for most families. On the other hand, costs related to maintenance, tolls, car parks and depots rose considerably. As far as vehicle maintenance is concerned, what determined a greater expenditure was the growth of prices for repair works, which, according to the Autopromotec Observatory, was 1.2%. Additionally workshop interventions accounted for a further 2.8% increase.
This is the direct result of an improved economic outlook that prompted many Italians to increase spending on car maintenance, after years of keeping a low profile. And that links to a 0.7% increase of vehicles on the road in 2015 compared to the previous year. The combined effect of these factors resulted in a 31 billion euro expenditure in vehicle maintenance expense. This figure confirms the vigor of the service sector, which returned to grow after the contraction experienced during the 2012-2013 biennium. Proof of this is the positive trend recorded in the first semester of 2016, for individual product families. In fact, according to data from ANFIA’s latest Aftermarket Barometer, on five categories considered – electrical and electronic components, engine components, undercar, bodywork, interiors and consumables – the first four reported positive results in comparison with the same period last year, with a slight decrease for the last.
However, besides these aspects which paint a picture of the current situation, it is equally important to understand how maintenance activities will evolve in the near future. All the more so in the light of the considerable technological innovations soon to hit the automotive market, which will produce a radically different scenario also in the auto repair world, still struggling with increasingly complex and cutting-edge tools and services. The cars of tomorrow will be increasingly sophisticated with hi-tech electronic systems, software and more reliable and safer engines. The aftermarket industry and the vehicle repair world will have to keep up with these changes or be left behind. And to do that there is a need to maintain a high quality of the products on offer, not to mention hefty investments in technology and professionalism.