The burst of positivity found in the aftermarket last quarter was not the early stages of a market turnaround but instead a brief uptick within a now extended period of economic malaise, reported responders to the Trucks, Parts, Service quarterly MarketPulse survey earlier this month.
May’s report revealing aftermarket business conditions improved in Q1 created some optimism within the channel that the parts and service business was going to lead a market turnaround. Dealers weren’t as successful or hopeful after the first quarter, but after more than a year of continued downward market sentiment, the slight uptick in the aftermarket was seen as a possibly encouraging sign.
Unfortunately, this month’s survey shows a market turnaround has not commenced. The global economy isn't doing so hot either.
Dealer responders reported business conditions were effectively unchanged quarter-over-quarter (ranking Q2 as a 5.45 on average on our 1-10 scale where 1 is the worst quarter ever and 10 is the best), while aftermarket sentiment once again reached the lowest recorded point in the history of our survey (down to a 5.45 average in Q2 from 6.04 in Q1).
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For the most part, the market hasn’t crashed. It remains steady — albeit uninspiring and down — year over year. But last month’s slight burst of optimism is gone. Consensus among responders to our July survey is business conditions will remain flat through the end of the year.
In the dealer sector, a majority (58%) of survey responders rated the second quarter as a 6 or 7 on our 1-10 scale, but another 14% rating the quarter as a 1 or 2 brought down the dealer market average. Looking ahead, those same responders don’t expect Q3 to be any different than the three months just concluded. Another 58% again predict the quarter to be a 6 or 7, but some pessimism from other dealers brings the channel average to 5.5.
Dealers also reported Q2 was mostly down when compared to the same period in 2023, with 36% saying their business was down by at least 5% year-over-year and another 36% saying their profits were off by 1-5%. Dealers are, however, slightly more optimistic in their year-over-year predictions for the final months of the year, with only 64% expecting the market to be down and 21% actually expecting year-over-year profit improvements.
The aftermarket saw more variability among responders but its Q2 analysis and projections for the months ahead mostly aligned with dealers.
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Though no aftermarket responders ranked Q1 as a 1 or 2 on our 1-10 scale, all other numbers were represented among our survey participants. More than half of responders rated last quarter as a 4 or 5, but another 19% pegged the period as an 8 or above. There was even one responder who said Q2 was the best in their company’s history.
Compared to 2023, aftermarket profits in Q2 were mostly down. An identical number (72% overall) of aftermarket responders to dealers said their companies’ profits were down 1-5% or greater than 5% in the second quarter, and only 14% reported year-over-year growth. Aftermarket responders also predict little market change for Q3 — the quarter earns a 5.5 average on our 1-10 scale — and just 14% of responders expect profits to be up year-over-year in the year’s final two quarters.
But perhaps the most alarming data uncovered from our July survey is a slow but growing thought toward business contraction. One in 12 responders to our survey “we plan to reduce our workforce” in the coming six months. That’s considerably higher than any prior survey.
Responders in both channels shared their exasperation about the market.
“[The] economy is terrible and customers are fighting low rates and high interest rates, fuel, insurance and driver pay,” wrote a dealer responder. “Most customers are struggling to be profitable and some are considering or filing bankruptcy.”
“Very strange times in this industry,” added an aftermarket responder. “The political environment has made a huge impact on the buying decisions of every one of our customers.”
“The market is acting in odd ways,” said another aftermarket responder. “The election and mega-dealers are having a big impact.”
TPS will conduct its 2024 third quarter MarketPulse survey in October and publish a brief synopsis of the data after it concludes.
Want to read more insights from our first quarter survey? Or participate in future surveys? We’d love to hear from you.
All truck and trailer dealers and independent aftermarket businesses are encouraged to participate in the TPS MarketPulse survey, and only businesses who choose to participate will receive complete survey results each quarter. For more information, and to register, please email [email protected].
