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Paul McCarthy: This Is a Historic Moment for Consumer Choice
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By Counterman
In our cover story for
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AMN/CM: What is the greatest threat facing the automotive aftermarket? What is the greatest opportunity?
PM: I have combined these questions, because if you look through a longer-term lens, the aftermarket’s greatest threat and opportunity are the same: technology.
EVs have generated concern in the aftermarket, but that needs to be kept in perspective. Remember the aftermarket’s history: With every new technology there were projections that there will be nothing or not enough to repair – but every time we still see problems and failures with these new parts and technologies. Think of fuel injection, electronic ignition or TPMS. Auto engineers are not perfect, and the real world is a difficult operating environment. In fact, NADA data indicates that EVs are coming back to the dealer more often than ICE vehicles – and needing more repairs per visit than ICE. New technologies have historically been good for aftermarket revenue – and we are looking at a flood of new technologies unlike any we have ever seen.
With so much focus on electrification, we aren’t talking enough about the revolution happening now: ADAS. We released a study at Vision that projected ADAS will exceed a billion-dollar market for replacement parts by 2030. Let me say that again: a billion-dollar market for replacement parts. That’s all opportunity and upside for the aftermarket.
And, the story of increasing vehicle content is not only ADAS or EVs. The increase in new-vehicle prices demonstrates the lifecycle opportunity. New-vehicle prices hit an eye-watering $30,000 a decade ago; now, the average is $50,000. And while some of that is near-term supply issues, increasing vehicle content has driven this long-term trend. Every one of these new technologies can break or need calibration or maintenance. We believe this huge increase in vehicle content bodes well for the future of aftermarket tickets.
The aftermarket is now living the famed “Innovator’s Dilemma” everyday: the challenge of managing two businesses. One, maximizing the returns from our existing business, which has a very long, fat tail. In parallel, we are growing new, innovative businesses prepared to take advantage of the aftermarket opportunities of electrified, automated and connected vehicles. In our view, the aftermarket is well-positioned in both the old and new industries.
The aftermarket should not be afraid of the future. If we engage the classic aftermarket entrepreneurial spirit, we believe technology and content bring more opportunity than risk.
AMN/CM: How can the independent aftermarket parts and service segments best prepare to repair the car of tomorrow as ADAS, EVs and other technologies become more prominent?
PM: In addition to the points above, we have a lot of work and training to do – together, up and down the value chain – to make sure that shops are prepared, and consumers know that the aftermarket is ready and able to supply the parts, tools and technologies to fix these vehicles. And we can.
AMN/CM: How is the Right to Repair issue impacting your members’ business?
PM: All this opportunity is contingent on one thing: Right to Repair legislation that allows market competition. Right to Repair, and the Federal REPAIR Act, are necessary to realize our future.
Consumers need this. If Congress takes action to ensure choice in vehicle repair and maintenance, consumers will save enormous amounts of time and money.
We appreciate the cross-industry partnership on this bill – a unified effort is essential to success. We have momentum. You’ve heard about the many bipartisan bill co-sponsors, the executive order, the FTC report and the hearings all in favor and support of consumers right to choose where and with what parts their vehicle is repaired. This new Congress is our moment; it may be our best chance of getting a bill passed. If we don’t succeed, by 2035 $63 billion in consumer service choices will be thwarted by repair restrictions – and that number will quickly grow. Our industry must – and will – be heard to protect consumers and free markets.
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By Counterman
In our 2022 Distribution Preview in
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Here’s our Q&A with Paul McCarthy, president and CEO of the Automotive Aftermarket Suppliers Association (AASA).
AMN/CM: What are your thoughts about the business environment for the automotive aftermarket in 2022?
PM: Positive. From the demand side, our most recent supplier barometer showed suppliers and our industry to be very positive about the next six months. Demand is of course at record levels, and orders were also strong, showing positivity on this market performance continuing. The current market is a battle for availability, something to be classified in the category of “good problems.”
For the second half of the year, there is cautious optimism, but a few questions. Will inflation take a toll on the ability of consumers to spend? Can the economy and demand continue at this level? There is clearly positivity, but there remains a bit of continuation of what has been the watchword for the last two years: uncertainty.
That said, even when things slow from the current incredibly strong growth, we can’t lose sight of the silver lining: We seem to be leaving the pandemic with a more auto-centric lifestyle than we went into it – and that bodes well for the future of the aftermarket. We’ve seen this shift in consumers’ desire for more space; in booming used-car prices; in Americans rediscovering their love of the automobile in the pandemic DIY boom; and in house prices and settlement patterns in exurbs, smaller cities and the Western states. Coming out of COVID, where most Americans want to live now requires that car, or even a third or fourth car. It requires the aftermarket. Longer-term, we’re optimistic about our industry.
The other “business environment” issue that needs to be mentioned is the supply chain challenge. This is the biggest supply chain disruption we have faced since World War II. Unlike previous supply chain crises, it is not like if we solve for problem “X,” we have fixed the problem. Every part of the supply chain has faced difficulties. This is systemic disruption. There are the port and trucking issues that have captured headlines, as well as shortages, price spikes or allocations in almost everything that goes into our products, from semiconductors to steel to resins to subcomponents to packaging. If that weren’t enough, we are also facing inflation and historic order levels and what may be the biggest challenge, worker shortages. We have almost a million open manufacturing positions in just the U.S., with the same difficulties staffing our distribution facilities, transportation and offices.
Frankly, it has been amazing how well all of us have fulfilled customer demand given these challenges. Despite little to no improvement in inbound goods and manufacturing inputs, our most recent AASA Supplier Barometer showed that fill rates have significantly improved since early in the year. This is thanks, in part, to supplier ingenuity and problem-solving. It is also due to improvements in communication up and down the value chain. Collaboration is showing real results. Though the end is not in sight, improvement is happening.
AMN/CM: As advanced driver-assistance systems (ADAS) and other emerging technologies become more prevalent on new vehicles, it will require the brightest minds to service and repair them. How can we better position this challenge as an opportunity for the parts and service segments of the aftermarket?
PM: Glad you mention ADAS. There has been so much focus on electrification that we’ve not paid enough attention to ADAS, the revolution that is just around the corner. As soon as 2024, two-thirds of new vehicles will have some level 1-3 driving automation technology. By 2030, ADAS will be on almost half of the vehicle fleet, a vastly greater penetration than electrification.
ADAS brings a lot of expensive parts. Each of these technologies can break or need calibration or maintenance. This huge increase in vehicle technology bodes well for future aftermarket “tickets.” At this point, this work largely goes to the dealer. And, as volume grows, the aftermarket needs to do what we’ve done with vehicle reprogramming – provide easy solutions, including calibration, trusted parts and training – to simply make this part of the repair offering, easily.
We will have a session at the AASA Vision Conference the first week of April where we will share our latest research and thought leadership on the growth rates and aftermarket opportunities for ADAS in the second half of this decade.
ADAS’s growth also highlights the need for Right to Repair, including access to vehicle data, diagnostics and product-integration information and software APIs to ensure a continued competitive market and consumer choice on where – and with what parts – vehicles can be repaired.
AMN/CM: What phrase describes your “words to live by?”
PM: Cheating – two from Stephen Covey: “Begin with the end in mind” and “Think win-win.”
AMN/CM: What is your best icebreaker at a networking reception?
PM: How’s the family? (Always nice to hear the answers about people who people love.)
AMN/CM: What is your dream car, or favorite vehicle you’ve owned?
PM: Right now, the additional cars I wish I had parked in my driveway migrate between an Icon Derelict based on a ‘53 Studebaker Starliner Coupe, another Miata (convertible, cheap, easy to work on and fun to drive, so always a good bonus car), or maybe a Bronco … all fun to think about …
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By Counterman
In this latest episode of “AMN Drivetime” with Babcox Media CEO Bill Babcox, we hear from Paul McCarthy, president and CEO of the Automotive Suppliers Association (AASA).
A well-known figure on the aftermarket stage, we get to know a little more about Paul’s career path, from helping his grandfather work on cars as a kid to now leading one of the aftermarket’s leading trade associations, and the interesting career choices in between.
In the interview, Bill and Paul discuss a range of topics from Paul’s natural affable speaking presence to his thoughts on EVs, Right to Repair, Biden-administration policies affecting the aftermarket and more.
When asked what the secret is to being such a natural and authentic public speaker, McCarthy’s response only illustrates what a passionate and humble industry servant he is. McCarthy shares that it’s easy to talk about something you care about.
“My great blessing is that I get to work on behalf of the industry. I get to work on behalf of all of you, and this is an industry I’m passionate about. It’s a role I take very seriously,” he said. “The downside of course, is that I have thousands of bosses. The upside is that I have real purpose in my work and your listeners are that purpose. And it’s very motivating for us to try as a team here at AASA to champion the aftermarket industry, to support the aftermarket supplier community. So, I know I’m very blessed to get to serve in this role.”
In this episode, Bill and Paul dive into:
How Paul got his start in the automotive industry (00:48) What was Paul’s very unique first real, paying job? We’ll give you a hint … can you say, “a hoy matey!” (02:45) The secret to being a natural and authentic public speaker (04:08) The value of strong relationships in the aftermarket and the mentors he’s worked with (05:44) What’s on the horizon for AASA in 2022 and beyond (08:49) Paul’s thoughts on the current administration and what policies will impact AASA members (13:25) The “million-dollar question:
Paul’s take on EV’s and the aftermarket’s level of preparedness for them (16:00) Thoughts on Right to Repair (19:14) Impressions from the return to AAPEX in 2020 (22:34) One hobby Paul has that surprises his team members (24:52) “AMN Drivetime” is sponsored by Litens.
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