Commentary: California’s aftermarket in 2023

In the last couple years, occasionally someone will ask me about the impact of the truck and bus regulations put in place by California’s Air Resource Board (CARB). I am certainly not an expert on reading and understanding regulations and I am okay with that.

In short, these regulations are a stair-step of rules governing what vehicles will be allowed to operate in California — with the goal of eliminating the older, worst-polluting vehicles by not allowing them to register as legal vehicles. These rules are aggressive compared with the rest of the country.

I do not want to address whether the regulations make sense or not. That is up to voters in California. Rather, I would like to examine the impact on the aftermarket for medium- and heavy-duty vehicles.

For this analysis, we decided to look at the aftermarket in California for 2023, the year when diesel-powered vehicles (and for this analysis we are looking at Class 6-8 trucks and school buses) older than model year 2010 will not be allowed on the road. There are a number of exceptions as their impact, I believe, is minimal and some wouldn’t apply to this analysis — like exemptions for RVs.

At MacKay & Company, we estimate the operating population for on-highway vehicles for Class 6-8 trucks, school buses and trailers in total, by state and by metropolitan statistical area. (We also have operating populations for transit buses, motor coaches, light duty and off-highway vehicles and for other countries, but for this we are just interested in Class 6-8 trucks and school buses.)

With no regulation impact, we estimate the Class 6-8 truck and school bus operating population in California in 2023 will be roughly 512,000 vehicles or 14 percent of the total U.S. operating population. These 512,000 vehicles will produce an aftermarket parts opportunity of just over $3 billion at retail.

If the vehicles older than 2010 are eliminated (193,000 vehicles), that aftermarket opportunity drops to $2.1 billion, or a decrease of about $900 million, nearly a 30 percent decline. But this assumes that none of those older vehicles are replaced, which is not likely — people don’t register and insure vehicles to park them — they are registered to put into use.

So, if those vehicles are replaced, the question is how many?

Given the vehicles would have to be replaced with newer, more expensive and more productive trucks, we don’t think it would be a one-to-one replacement. For this analysis, we estimate 60 percent of the trucks would be replaced, but these replacements also would be newer and because of that, the aftermarket potential for these vehicles would be reduced. When we add this potential back to the aftermarket demand for the vehicles still in the operating universe, the total aftermarket total is $2.9 billion or $142 million (4.6 percent) less than it was with no change. The one product area that benefits (increases) from this change is emission-related components.

So the overall impact by 2023 is not huge, but there definitely is an impact. And what about those 193,000 vehicles that can’t be registered in California? Some will be scrapped, some will be cut up and sent to Mexico (and maybe put back together) and the majority will supplement the inventory of used trucks in other, primarily western, states.

John Blodgett has worked for MacKay & Company for more than 20 years and is currently vice president of sales and marketing, responsible for client contact for single- and multi-client projects. He can be reached at john.blodgett@mackayco.com.

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