Antonio Martin López Díaz
Expert Contributor

To Be or Not to Be ... Auto Parts and COVID-19

By Antonio Martin López Díaz | Fri, 07/17/2020 - 09:17

There is no doubt that the world has changed, and I am very much afraid that it will never be the same. After the COVID-19 pandemic, humanity will have to learn a new way of living and that includes, of course, a new way of doing business.

The sector of automotive spare parts, or the aftermarket, in which I have been immersed for 30 years, is no exception. It is quickly adapting to new conditions, but there is still a long way to go. Mobility is vital.

In the intense times we have had to live through, not having an efficient mechanism to meet the transportation needs of the world’s 6 billion people would be inconceivable. We are talking about the transfer of people, food, raw materials, finished products, medicines and supplies for the health sector, etc., not to mention the displacement of emergency services such as ambulances, firefighters and the police. Right there is where our activity becomes relevant, and the crisis has demonstrated this more than ever. Those of us who manufacture and distribute automotive parts are a vital cog in the machinery that literally moves the world.

At ARIDRA, the association that has grouped Mexico’s manufacturers, importers and distributors of automobile spare parts and accessories for 77 years and the institution that I have the honor to preside over, we are aware of our responsibility to society, and for this reason we have not lost a step. From the first moment in which the sanitary emergency was declared, we sought by all means to have our sector designated an essential activity, which was literally achieved from the first day of the contingency.

Despite the fact that in our country the circulation of vehicles decreased by 60 percent in the first three months of the quarantine, the manufacturers and distributors of spare parts remained at the foot of the canyon. Our sales dropped to levels of 50 and 60 percent, however our spirits never waned, and together with the auto shops, we kept the country moving.

What does the future hold? It has always been difficult to predict, but we have an idea of ​​what awaits us. The gradual return to the "new normality" will force people to go outside, public and private transport will increase, economic activity will recover gradually. Vehicles run, wear out and require maintenance. That will help us recover.

On the other hand, the tremendous boost to electronic commerce related to auto parts as a result of this situation is undeniable. This modality is here to stay and will surely greatly modify the business models and purchasing habits that until recently prevailed in the sale of automotive parts.

A third factor influencing recovery is the return of vehicle inspections in the second half of the year, which we know stimulates up to an eightfold increase in the consumption of the involved parts such as spark plugs, filters, sensors, hoses, cables and others. Although verification is not mandatory across the country, it is in Mexico City, State of Mexico and Jalisco, where the greatest number of vehicles transit.

Another element that will affect our recovery is the unfortunate drop in sales of new cars in the domestic market, which obviously we are not happy about. Many will think that this is good for the spare parts business, because when new vehicles are not sold, those that already exist will have to be repaired. However, at ARIDRA, we think that this is a mirage. New vehicles that are not sold today will not arrive in our stores and workshops in five years, when their factory warranty expires as usual. That is when we will resent this tremendous drop in sales of new vehicles.

Obviously, we also have challenges to overcome: collection, the preservation of human capital at our businesses as much as possible, the design and implementation of efficient and innovative logistics that make distribution channels more dynamic are among them.

To conclude, I will simply point out that at ARIDRA, we expect the sector to close 2020 with average sales between 75 and 80 percent of the level we had at the start of the health emergency. If we succeed, we will consider ourselves well-served.

Being or not being in the aftermarket is our dilemma: Either we change with the world, or we disappear. That is so simple.