Tuesday, December 10, 2019

December 2019: "The Year In Review...Up Or Down?"

For many of us, we  seem to look forward to the end of the current year with high anticipation for the new year ahead. A chance to look back and to look ahead seems to bring back memories and at the same time...new visions of the year ahead.

This is truly the case here at ACG "Smart Parts" as we end each year with our December issue focused on looking back on the current year that was 2019 and then our January issue focused on the new year ahead and what we may expect in 2020.

This month's issue will be highlighted and focused on industry analysts' presenting their facts, figures and trends that shaped 2019 and the results we experienced throughout the year. In my opinion, the "ups and downs" and trends that we experienced in 2019 could possibly be signs to come in the new year ahead.

Our first resource comes from the U.S. Bureau of Economic Analysis, (www.bea.gov) as I wanted to first research and find out how we, as a country fare with other countries in the global market. With all the recent trade talks and negotiations, I was curious to see some trends and results that may indicate or show where we are compared to other countries.

On a global standpoint, 2019 had the United States as the "nominal" leader, (currency) in the world on Gross Domestic Product, (GDP). Even though the United States experienced a total GDP growth, through November, of 2.35%, compared to China at 6.14%, the "nominal" growth of over $21 Billion far exceeded any other country.

More impressive to me than the growth of $21 Billion, was total share of that "nominal" amount which was 24.8% of the total "nominal" growth currency or dollars in the whole world. Following the United States in this category were China, Japan, Germany and India coming in at number five.

The U.S Bureau of Economic Analysis also reported on Foreign Direct Investments in the United States as follows;

"Expenditures by foreign direct investors to acquire, establish, or expand on U.S. businesses totaled $296.4 Billion Dollars in 2018, up 8.7% over $272.8 Billion Dollars in 2017"... 

Further predictions into 2019 by years end are estimated to top $300 Billion Dollars by many industry analysts, which means that the trend continues to shift investments from overseas back into the Good Old USA....

So, What Does This All Mean Back Here In The Good Old USA?....

The answer to this question leads us to our second resource in this year end quest of our 2019 "Year In Review...Up Or Down?" Our second resource drills down and focuses on information, facts and trends that relate directly to our automotive parts industry in general, both dealership and aftermarket parts market areas.

According to IBISworld, auto parts revenues are "up" over $73 Billion Dollars in 2019, which represents a 0.3% increase over 2018 even though the number of parts retail businesses went "down" by approximately 1,400 in the U.S. while employment went "up" by approximately 140,000!!

Our first example of the "ups and downs" of what has happened this past year! Even though we see a drop in the number of businesses, we can actually see an overall increase in employment through this obvious consolidation, increased efficiency and expansion in overall business operations.

In addition, consumer confidence levels have reached all time highs over the past few years which means that the average consumer has more disposable income. Wages and earnings have also gone "up" in 2019 by .03%, which may also explain why consumer confidence levels continue to grow or remain at high levels.

Our last resource comes from Patrick Manzi, Senior Economist at the National Automotive Dealers Association, (NADA) with his NADA Data Mid-Year Report.

Even though this information and data is from his mid-year report, much of the information is "prorated" to year end trends and predictions until their final report for 2019 is released early next year.

There are currently 16,741 franchised automotive dealers across the country today that achieved combined Light Duty Vehicle Sales in excess of 8.41 Billion Units with sales that topped $518 Billion Dollars, which is "up" from $503 Billion in 2018.

Even though Light Duty New Vehicle Sales, (in units) went "down" and expected to drop at years end by 2%, the increase in sales dollars is directly attributed to the average selling price per new vehicle sold climbing to $36,402.00, which is "up" from the average of $35,249.00 per new unit sold in 2018 and $31,849.00 per new unit sold back in 2013, steadily climbing each your.

Light Duty Trucks once again led the way in sales with 70.3% of all Light Duty Vehicle Sales coming from truck sales. GM has taken over once again at number one with a 16.8% of the market share with Ford coming second at 14.3% of the market share. Toyota fell to number three with 13.7% and FCA, (Fiat/Chrysler) coming in fourth at 12.9%

Even though overall sales have and continue to go "down" by at least 2%, parts and service sales continue to rise and go "up" in 2019 as there were 162 Million Repairs Orders written, including body shop repair orders with total repair order sales over $62 Billion, "up" from $58.4 Billion in 2018.

This steady rise and climb in parts and service sales isn't just a fluke as parts and service sales have continued to rise each year dating back to 2013 when combined parts and service sales were at $42.3 Billion Dollars, which represents a 27.5% increase over the last six years, trending "up" each year. This trend upwards is expected to continue climbing in the years ahead.

Dealership jobs also increased as total dealership employment is "up" to over 1.1 Million Employees. Dealership jobs offered compensation significantly higher than other retail sectors as dealers continue to boast one of the highest average salaries of all industries.

Since 2010, parts and service sales in the average dealership have gone "up" an average of 5.4% per year on an annual basis. In addition to that, parts and service sales as a percentage of total dealership sales is "up" from 12.2% in 2018 to 12.8% in 2019.

Dealers net profits remained at 2.3% of total sales in 2019 as they were in 2018. Dealer net profits have steadily gone "down" since 2013 when dealers net profits were at 2.8% of total sales. Some of the reasons for the decline in net profits include higher wages for qualified employees and decreased profit margins.

Total parts and service sales per repair order is also "up" in 2019 to an average of $311.00 in customer pay and $343.00 in warranty parts and service sales per repair order. Once again, steady climbs each and every year since 2013 as customer pay mechanical and effective labor rates are also "up" to an average of $123.00 per flat rate hour.

Currently there are over 275,000 technicians employed in our automotive dealerships today, mechanical and body shop which brings the average per dealership to just over 16 service and/or body technicians per dealership.. This is definitely one category that we need to see go "up" each year as shop productivity is the "engine" that makes it all happen in the fixed operations.

Average parts inventories are "up" to $441,675.00 in the average automotive dealership, which could be a good thing or a bad thing pending average annual gross and true turns. If the average annual gross and true turns in the average automotive dealership is "down", this would represent a "not so good" thing.

Unfortunately, this information on annual gross and true turns was not available for this issue, but what I do know is that parts obsolescence has been on the "up" swing over the past several years. Dealer parts obsolescence along with overstock quantities have made it much tougher for dealers to achieve expected annual gross and true turns in many dealerships today.

Overall, I believe all the indications are obvious and pointing in the right direction after looking back on 2019. All the key indicators that would give us a peak into 2020 and to whether it will be an "up or down" year are quite evident. Personally?....I always prefer to be "up" beat and positive when looking forward.

Happy Holidays Everyone From ACG "Smart Parts!"

If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ www.smartpartstraining.com, or...just pick up the phone and call me at (786) 521 - 1720...After all, not knowing is not worth not "fixing" it...