Last year, global consumers purchased 68 million new cars, marking a significant year-on-year growth that brings the industry closer to pre-pandemic levels, where 73 million cars were sold in 2019. The expectation for 2024 is that sales will reach around 70 million.
This more modest growth forecast for this year can be attributed to the fact that much of the pent-up demand from the low production years of 2020-2022 has largely been met, combined with ongoing economic challenges facing consumers in various regions.
For instance, the Asia-Pacific (APAC) region, with its low car penetration, has high growth potential.
Last year, new car sales in the region grew by +9%, according to Statista, but expectations for this year have been reduced to just +2%, mainly due to a weak performance forecast in China.
Thus, Europe appears to offer the greatest growth opportunities in 2024, followed by North America. However, even in these two markets, the growth rate for new car sales is relatively slow.
Second-Hand Car Sales and Automotive Aftermarket – Opportunities in 2024
Globally, used car sales are expected to reach 36.2 million units this year, a slight increase from 35.9 million in 2023.
In both Europe and North America, the average age of cars in operation has risen significantly. Ten years ago, cars in Europe averaged 7.4 years old, and in the USA, 11.4 years.
Now, the average age stands at 12 years for both regions, according to the latest data from the International Organization of Motor Vehicle Manufacturers (OICA).
With over 750 million passenger cars in operation across these continents, there is an anticipated increase in demand for aftermarket products as the maintenance needs of these older vehicles grow.
However, the potential for aftermarket sales is tempered by the fact that once vehicles reach 5 or 6 years old, owners tend to spend less on maintenance and prefer budget-friendly parts over premium options.
In contrast, in the Asia-Pacific and Middle Eastern regions, cars are generally younger, with an average age of around 4 to 5 years.
As the middle class continues to grow in these regions, coupled with relatively low car ownership rates, there is potential for a rise in new car sales as consumers seek to improve their living standards and display their newfound wealth.
Furthermore, the younger age of cars in these regions presents a unique opportunity in the second-hand car market. This market offers higher-quality, newer vehicles that could attract strong sales.
Additionally, the growing middle class may boost aftermarket sales, as consumers who may not have been able to afford new cars could look to enhance their second-hand purchases with premium parts, tires, and automotive chemicals.
Automotive Aftermarket Sales Showing Continued Growth
The global automotive aftermarket industry continues its upward trajectory, with sales revenue increasing by +4% last year to reach $71 billion, building on a +3% growth in 2022 compared to 2021.
Tires, which account for three out of every four dollars spent on aftermarket products, saw a +4% increase in sales compared to 2022, while car chemicals (15% of aftermarket revenue) rose by +6%, and spare parts grew by +10%.
This growth is partially driven by an increase in premium purchases across various segments, but it is not the only contributing factor.
In recent years, there has been a polarization between value-driven and volume-driven growth, as the average price of items surged due to global inflation and rising manufacturing and delivery costs.
However, the gap between these two types of growth is now narrowing, as prices begin to stabilize, albeit at high levels.
Car Tire Trends: Growth Shifting to Emerging Economies
In terms of regional share, Europe and the US remain the largest markets for automotive aftermarket revenue.
Tire sales in these regions continue to grow, though at a slower rate. In 2023, Europe saw a +5% increase in tire sales, while the US experienced +2% growth.
The fastest-growing markets for car tires are China, and the Middle East and Africa (MEA). China achieved a remarkable +25% growth year on year, with the potential for further growth this year, as the market has not yet rebounded to its pre-pandemic 2019 levels.
The MEA region also continues to show strong year-on-year growth, making it a high-potential market.
Developing Asia posted a +6% growth in tire sales, slightly surpassing Europe, while Developed Asia and Latin America (LATAM) experienced slight declines.
The latter two regions face headwinds due to the high growth rates of 2022, which set challenging baseline comparisons.
Bigger Brands Losing Market Share to Budget Brands
Globally, the unit share of car tires sold by smaller brands has increased from 29% to 33%. This shift is likely driven by consumers opting for lower-priced brands, especially as household budgets were strained last year.
Given the significant price difference between premium, medium, and budget-brand tires, budget options remain an economical choice for consumers.
Notably, the average price of budget tires dropped slightly last year, while the prices of medium and premium tires increased.This shift in preference toward budget brands is not limited to the lower price segments.
Even in higher-end tire categories, budget brands are offering a growing selection of products at competitive prices. For example, tires with rims larger than 18 inches typically cost $137 for a budget brand compared to $237 for a premium brand.
Regional Variations in Growth of Budget Brand Tires
While global tire sales for budget brands grew by +6% last year, premium and medium brands saw around +3% growth. Regional variations, however, highlight different trends.
In Europe, medium brands experienced the strongest growth, followed by budget brands, while premium brands showed much weaker performance.
This aligns with the trend of European drivers holding onto their cars longer and being less willing to spend on premium parts once their vehicles are 5 or 6 years old.
In LATAM, budget brands grew by a staggering +19%, while premium and medium brands both saw declines.
This polarization in sales is also evident in the MEA and APAC regions, where both premium and budget brands grew, while medium brands saw weaker sales.
In the US, however, there is a clear trend toward premiumization. This is partly due to the improving economy and the import restrictions on cheaper Chinese tire brands resulting from geopolitical tensions between the US and China.
Engine Oil Trends
Global revenue from engine oil sales for both cars and motorcycles grew by +6% last year, with notable growth in China (+25%), Western Europe (+12%), and Developing Asia (+10%).
However, revenue from engine oils declined in Eastern Europe and the Middle East and Africa.
The decline in the Middle East and Africa can be attributed to high baseline figures from the previous year, currency volatility, and some countries in the region shifting focus toward electric mobility.
Cheaper mobility options, such as ride-hailing, are particularly popular in regions like Southeast Asia and India, which further impact the demand for engine oils.The trend toward budget options extends into the engine oil market as well.
Smaller brands have gained a significant share of both revenue and volume, increasing from 42% in 2022 to 48% now. While engine oil sales have risen, most of the growth is driven by these smaller, entry-level brands.
Globally, entry-level engine oil brands saw a +16% increase in sales value, compared to +9% for standard brands, while premium brands saw a slight decline of -2%.
This affordability trend is apparent across all regions, with entry-level brands performing better than their standard or premium counterparts.
In the APAC region, only budget brands showed positive growth for engine oils, particularly in developing markets, where they dominated the market.
We anticipate this trend to continue in 2024, as consumers opt for affordable maintenance products, particularly in markets like Europe and the USA, where drivers tend to keep their cars longer.
The opportunity for market-leading brands will arise when consumers purchase new cars or face significant issues with their current products.
Automotive Innovation Outlook
In the automotive sector, innovation is driven by three key factors: consumer demand, legislation/regulation, and manufacturer initiatives.
Over the past few years, innovation in the automotive industry has been focused on six primary themes:
- Safety
- Convenience
- Performance
- Design
- Sustainability
- Business models
One of the most significant technological influences on innovation is artificial intelligence (AI). Immersive technologies are enhancing consumer experiences and changing how people interact with their cars.
The Internet of Things (IoT) is also being integrated into vehicle technology, transforming design, manufacturing, operations, and maintenance. Cloud computing is allowing automakers to monitor vehicle performance remotely and predict maintenance needs.
Electric vehicles (EVs) continue to see growth in both consumer and commercial markets. In 2021, EVs accounted for 12% of global sales, rising to 21% in 2023, and are expected to reach 25% in 2024.
The major markets for EV sales are China (which accounted for over 50% of global sales last year), Europe, and the US, with other countries lagging behind.
From a consumer perspective, EVs are increasingly seen as aspirational or status-symbol products, with a greater emphasis on the level of technology integrated into these vehicles rather than their eco-friendly attributes.
This trend is prompting traditional tech brands to become more influential in the automotive industry.The future of mobility will be connected, autonomous, shared, and electric.
However, the transition to this future will be gradual due to challenges such as market readiness, slow adoption rates, and the high production costs of these technologies, which contribute to higher prices.
To succeed with their innovation strategies, manufacturers must remain closely attuned to their target audiences and align their offerings with evolving lifestyles, needs, aspirations, and challenges.