Typically, I spend the first quarter of the year attending a variety of conferences and trade shows such as HDAD, HDAW, TMC and NTEA. Not this year. While MacKay & Company and HDMA completed our annual conference virtually (which went well), it just didn’t offer the added benefit of bumping into folks in hallways, trade floors or maybe at the bar to discuss all things aftermarket, in particular the outlook.
So, consider this column your random bumping into me at a virtual bar — no mask required.
From a reporting perspective on the aftermarket, the last eight to nine months have actually been fairly positive as the biggest negative impact to the aftermarket and economy occurred in the second quarter of 2020. It appears the worst months of this recession will be the first few months of 2021, which is very unusual, and will resemble the impact of an earthquake or a Katrina — on a national and global level.
We certainly have a ways to go to get everyone (who wants) back to work, and obviously many states still don’t have restaurants, malls and schools open full time with full capacity. The vaccine rollout is helping to get life’s normalcy back in the foreseeable future. Eventually, you got to hope folks will follow the science.
I live in Illinois and am writing this column from Florida. It’s hard to believe both states are in the same country, and I don’t mean the differences in weather. The difference is that retail activity, restaurants, malls, etc., are open in Florida at what appear to be full capacity. Yesterday afternoon I got caught behind a parade of school buses by a school that was letting out, something that doesn’t happen in Illinois.
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We track a number of things at MacKay & Company to measure the performance and attempt to predict the outlook for the aftermarket. All of these measurements have been trending positively, including fleet utilization, fleet miles, trucking freight prices, trucking employment, component manufacturers aftermarket parts sales, truck dealers and independent parts distributors parts and service labor sales.
Based on this and insights from our economist and measurements of the TEA (Truckable Economic Activity), we believe there will be significant growth in the parts aftermarket in 2021, greater than 10 percent compared to 2020. Yet even with this growth, we will be back at approximately 2019 levels. We also think this growth will not be even over the year. The first and second quarters will be hampered by impacts of the pandemic, but hopefully the third and fourth quarters will make up for that.
And there are concerns outside of the pandemic.
Raw material shortages and supply chain issues are real. A few weeks ago, I was on a flight out of LAX that flew over the Long Beach/Los Angeles port area. As I looked at the area where I used to practice flying over the ocean there when getting my pilot’s license, I was amazed to see the number of container and other ships waiting to get into the port. I stopped counting when I reached more than 40.
I also used to live in Huntington Beach, just down the coast from Long Beach. There is a webcam that allows you to see the Huntington Beach pier and ocean. I occasionally look at this to remind myself what the sun looks like. If you look at it now, you can see some of those ships parked in front of Surf City.
There are likely some items on those ships that will cause some heartburn for our industry until they are delivered. There is a lot of money on the table so these issues will get resolved, but not without that heartburn.
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 [email protected].
