More Labor Strikes, Supply Shortages and the Downstream Impacts

Can vehicle shortages actually benefit repair shops? Discover how the ongoing UAW strike impacting Ford, General Motors, and Stellantis is reshaping the auto care industry. This episode of Traction Control explores the unexpected silver linings of vehicle shortages, particularly the spike in demand for high-wear parts and maintenance services. We also tackle the effects of severe weather in the South and soaring prices for new and used cars, while shedding light on the expanding electric vehicle market fueled by government incentives and regulatory pushes across the globe. Don't miss insights on how the auto care industry can adapt to these changes by offering both ICE and EV-specific parts and services.

Are semiconductor shortages here to stay? Find out how these persistent supply chain disruptions are affecting both new vehicle production and the aftermarket. This episode unravels the complexities of the chip crisis and provides actionable strategies for businesses, from stocking up on critical components to pivoting towards service-based solutions. We also delve into broader economic factors like inflation and the looming East Coast port strike, advising businesses on how to stay resilient. 

To learn more about the Auto Care Association visit autocare.org.

To learn more about our show and suggest future topics and guests, visit autocare.org/podcast

Transcript

UAW Strike Impact on Auto Care

Stacey Miller 0:13

Welcome to Auto Care On Air , a candid podcast for a curious industry . I'm Stacey Miller , vice President of Communications at the Auto Care Association , and this is Traction Control , where we chat about recent news from the global to the local level and what it may mean to the industry , featuring guests on the front lines . Let's roll .

Stacey Miller 0:34

Welcome back to another edition of Traction Control . We are following a lot of news happening globally , and there are quite a few things on the top of our mind today that we want to share with the industry what's happening and what it could mean to your business . So the top story on everyone's radar today is the UAW , the United Auto Workers Strike , which is continuing to grip the US automotive industry . Workers are striking at key production plans of the big three automakers , so that's Ford , general Motors and Stellantis , and with each day that passes by , production delays are growing , unfortunately , and the pressure on supply chains is intensifying . Just these black swan events for the supply chain just continue , and we're going to talk a little bit more about that . So what does this mean for the automotive aftermarket or the auto care industry ? Obviously , vehicle shortages are top of mind , and the strikes are already reducing the availability of new vehicles on the road . That's not a bad thing for the auto care industry and , in response , drivers are likely to hold on to their older vehicles longer , so that's more opportunities for repair and maintenance in the industry . So do prepare for an uptick in business , especially when it comes to parts like brakes , tires , batteries and other high wear items . Let's not forget there's also some severe weather events that are happening , sadly , in the South , and so there are opportunities there for folks who are preparing their vehicles , who may be road tripping out of those areas . Help keep them on the road safer longer and to weather that storm , so to speak .

Stacey Miller 2:15

As that strike drags on , prices are going to continue to go up as well . Right , we saw this during COVID . We saw this when there were other impacts to ports and canals . So rising costs for vehicles could trickle down to aftermarket parts , especially those sourced directly from the automakers . An increase in prices for both new and used vehicles , which could again push drivers to spend more on maintaining and upgrading their current cars . And then , obviously , the biggest thing it means for our industry are the longer these strikes last , the more it's going to impact our supply chain of key components like semiconductors and specialty parts . So we know that many aftermarket businesses rely on these same supply chains . So it's critical to keep a close watch on your inventory and stay ahead of those potential shortages . Right , overstock those parts . So , while this strike is presenting challenges , it also presents opportunities for those who are prepared . So if you're in the US automotive aftermarket . Now is the time to communicate with your suppliers , prepare for that increased demand and reassure your customers that you can meet their repair and maintenance needs despite those disruptions .

Stacey Miller 3:34

Next up , we have some significant updates on the electric vehicle market , which continues to expand despite some setbacks . So there are some recent developments in the US , europe and China that are making waves as governments are kind of doubling down on their plans to phase out internal combustion engine vehicles . Now earlier on you heard us report on traction control and we interviewed the president of the IER , tom Pyle . There was a study that came out that said that nearly 50% of EV owners are planning to return back to ICE vehicles , and we're starting to learn that the infrastructure demands , the range , anxiety and the cost are all becoming barriers to purchasing those electric vehicles . So there are some new government incentives and regulations to try to help keep the adoption of electric vehicles on course . So over the past week or so , the US government announced further tax incentives for EV buyers and the EU introduced stricter emissions targets for the automakers as well . China , which we know as the world's largest EV market , is also rolling out subsidies to boost EV sales and charging infrastructure . Now , in response to these regulatory pushes . Nearly every major automaker is announcing new EV models from compact cars , there's some luxury electric SUVs that are being introduced and some legacy automakers are ramping up production capacity for EVs in an effort to stay competitive in a rapidly shifting market . So it's a really big game of flip or flop where one day they're all in , the next day we're going to scale back production and there's some new incentives , so they're still pushing . So we're keeping our eye on this .

Stacey Miller 5:25

What does it mean for the auto care industry as consumers , as some of them are transitioning to EVs ? Traditional parts and services for internal combustion vehicles . We're going to need to monitor that . Oil changes , exhaust system repairs , engine maintenance those are all really characteristic of those ICE vehicles . We're still going to need those . Will they decline a ton ? We're going to keep our eye on that . We know that EVs have their own set of needs , from battery replacements and software upgrades , suspension work and tire replacements and it's a lot for businesses to manage from the manufacturing side , from the installation side and from the part side . So the trick for auto care industry businesses is really going to be adapting , watching the changes , offering EV specific parts and services where necessary , but don't put all your eggs in one basket . As we continue to monitor what the penetration is going to be of these over the next couple of years , we're going to be updating our forecasts at Apex 2020-24 and releasing a new report with those forecasts . So stay tuned for that , and if you're visiting us at Apex 2024 , you're going to be the first ones to get access to that report .

Stacey Miller 6:48

Now , as EV adoption continues to be pushed , what is one of the most lucrative areas for the aftermarket and perhaps battery maintenance and refurbishment ?

Stacey Miller 7:01

Right , we know that those batteries are large , they're very expensive and that's going to be a key component to keep those batteries fresh on the road , accessible and with a long range over time .

Stacey Miller 7:15

Right , lots of studies that are talking about the range anxiety that goes on with them , how the hot weather affects them , how the cold weather affects them , and again , we're experiencing more extreme weather events that could impact that . So how can we optimize the batteries in these ? How can we help with maintenance bringing them to the customer , for example , and making them sustainable ? Because that's also a key concern with EVs is how are we making the management of those batteries , the creation and the disposal of them , more sustainable for the environment and also in costs because they are quite expensive . So that shift to EVs it continues to be this wild card for us . It's shifting in a bunch of different ways and to stay relevant we have to make sure that we're continuing to monitor that . Position your business as a go-to for both traditional and EV specific services and let's keep our eye on that hybrid and hydrogen as well .

Mark Bogdanski 8:16

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Navigating Automotive Industry Challenges

Stacey Miller 9:02

Now let's talk about an issue that doesn't seem to go away , and it is semiconductor shortages . The automotive industry has been dealing with chip shortages for the past few years . It's nothing new and it looks like we are entering another wave of shortages , driven by a combination of supply chain disruptions and rising demand for advanced electronics in vehicles . So just this week , several automakers warned that their production schedules might be disrupted again due to a lack of chips . This issue affects not just new vehicle production but also the aftermarket . I mean , the first time this happened , I remember stories of cars that were sitting on lots and they looked brand and shiny and new and ready to be sold , but lo and behold , they were missing chips to be sold . But lo and behold , they were missing chips . So why is this happening ? No-transcript . It's packed with electronics that rely on those semiconductors . So your infotainment system , your ADOS features , those all require chips and semiconductors , and the chips are also crucial for products like the diagnostic tools and the performance upgrades that we have to our car . So there may be some potential delays in sourcing replacement parts that rely on semiconductors , right , think about ECUs , electronic control units , sensors or other key components . So again , how do we prepare . How do we respond to this ongoing shortage ? Stock up on critical components when you can , as soon as you can , if your business relies on parts that contain those semiconductors , work with your suppliers now to ensure you have enough inventory to meet demand . And if parts become scarce or prices are spiking due to the chip shortage which , if you follow history , what's happened the past couple of years , we could say that they will in the past couple of years , we could say that they will . If you're able to work on labor or service-based solutions diagnostic repairs , software upgrades and you can focus on those in your business , that can help mitigate the impact . So those semiconductor shortages may continue to be a headache for the auto care industry , but they also present an opportunity to offer some alternative solutions when parts are hard to come by .

Stacey Miller 11:30

Finally , we can't ignore the global economic picture . Inflation remains a key issue and it's affecting everything from raw materials and energy costs to consumer spending habits . I certainly am spending less on things , as I continue to keep my eye on inflation and the election and with that , driving up the costs of goods and services . Vehicle prices are still high . Consumers are becoming more price sensitive , especially in an uncertain election season that's coming up , so this can be a bit of a double edged sword for the auto care industry . So , on one hand , consumers may delay purchasing a new vehicle and instead invest in maintaining or upgrading their current one , which is great . That increases demand for parts and services Again great news for our recession resilient aftermarket . However , on the other hand , they may be looking for more affordable options , meaning businesses in the aftermarket . However , on the other hand , they may be looking for more affordable options , meaning businesses in the aftermarket may need to find ways to offer cost effective solutions without sacrificing quality .

Stacey Miller 12:33

Now , inflation also . It affects our operating costs . So the cost of doing business from labor to materials , we understand is going up . So to maintain profitability , it's important to evaluate your pricing strategies , your operational efficiencies . Many businesses are already doing this , but if you haven't taken a closer look at this , for the long term , this is going to be something that we advise our companies to do . So inflation is going to continue to play a key role in how drivers spend their money on vehicles and vehicle maintenance . So if you can offer flexible , budget-friendly solutions while managing your own rising costs , you're going to be best positioned to weather this storm .

Stacey Miller 13:19

Now the last story that we're monitoring that we want to advise you on is the East Coast port strike that is looming for the first time since 1977 . So thousands of dock workers at every major East and Gulf Coast port are threatening to strike early next week , which would close some trade gateways that handle about half of all goods shipped in containers in and out of the US . So negotiations have been stalled for months . Apparently Both sides are trying to bargain . We don't know if they're willing to bargain , but we're monitoring this situation really closely . And that union represents about 45,000 dock workers and 36 US ports . So the contract expires at midnight on September 30th and we're going to provide an update on that as that news breaks .

Stacey Miller 14:17

So we're going to be following that very closely because obviously that is a lot of goods and services that could cause significant disruptions . One analysis estimated that that could cost the US economy as much as 5 billion a day and we know that many of our vehicles and our parts are coming in through those ports . Those ports are extremely important . So how to prepare I mean mitigating the potential impact of a strike by bringing products in earlier or shifting products to the West Coast is something that we've heard the National Retail Federation do . But keep your eye on those disruptions . Talk to your suppliers and we'll keep you abreast of the news as it breaks

Auto Care Association Updates and Initiatives

Stacey Miller 15:02

. So thank you for joining us again for another episode of Traction Control . Make sure you're following Auto Care Association on social media , where we'll also keep you as updated as possible on the news as it breaks .

Stacey Miller 15:15

Thanks for tuning in to another episode of Auto Care On Air . Make sure to subscribe to our podcast so that you never miss an episode , and don't forget to leave us a rating and review that helps others discover our content . Auto Care On Air is a production of the Auto Care Association , dedicated to advancing the auto care industry and supporting professionals like you . To learn more about the association and its initiatives , visit autocareorg .