Auto Care Association represents 235,000 independent repair shops in the US. Headquartered in Bethesda, Maryland, the association has presence in 535,000 locations in the form of parts stores, distribution, retail or shops. It provides 4.6 million jobs to the economy, and is number three in GDP, only behind health care and construction. The association is working on several projects including on the advocacy side to ensure it is represented in Washington and Wall Street to show its business worth $381 billion It is working on the big data initiative. “We perform 80 percent of the vehicle repairs in the US, in the independent aftermarket. The meaning of independence for us is that we have a viable marketplace. The ‘independence’ that drives us is the fact that we are creative, can keep up with technology and, in many cases, develop technology above and beyond the OEMs,”Bill Hanvey, President and CEO of the Auto Care Association, told T Murrali of AutoParts Asia in an exclusive interview. The edited excerpts:
Q: More than half of the global aftermarket is from the US and it continues to diversify and grow. What are the learnings for the Auto Care Association in this growth trajectory?
A: We as an association do recognise that there are tremendous growth opportunities around the globe – India being one with China and Latin America that we are focusing on. One of the biggest opportunities we see is the need for product standardisation in the way the product is presented on the internet and in catalogues so that suppliers and distributors have a very consistent means to be able to communicate their data through pictures, videos, fitment instructions, etc. So the question is how can we as an industry standardise the way in which the format is presented? The Auto Care Association has set up standards to enable exchange of information with guidelines that allow customers not only to look at the part but also get the necessary data on it.
Q: Most of the American players are part of the Auto Care Association, barring a few. Why do they keep away?
A: We are working on it; it’s a big focus for us. We have a strategic plan; one of the five main parts of this plan is membership growth and retention. We concentrate on those who are not members by trying to see how we can make their business more efficient and give them more exposure to the market place. We have also found that there are many technology companies out there that want to get into the aftermarket space. These types of companies do need the association more than ever because they want to learn all about the marketplace. So we certainly have a very big focus on companies that are not members.
Q: How do you see the growth of the US aftermarket vis-à-vis the global aftermarket industry?
A: We do a joint forecast with our partners at AASA; the forecast for 2017 was three percent growth compared to 2015 and 2016 when it was 1.7 percent.
Q: What are the initiatives taken by Auto Care Association to support this growth trend?
A: In the US and North American vehicle population there is $60 billion in unperformed maintenance. So we are directly reaching out to consumers through our ‘Be car care aware’ campaign to educate them as to how critical it is to maintain their vehicles; the better the maintenance, the longer the vehicle lasts. We are starting out on product-specific initiatives now, telling them to replace parts, like spark plugs, at recommended intervals. We have started with spark plugs and will move on to different product categories such as filtration, brakes, cabin air filter and so on.
Q: What is your outlook for the growth of the aftermarket in the next five years?
A: I see it continuing at three percent annual growth. It is an opportunity for the shops to charge their value in terms of the diagnostic work they do to increase their bottom-lines. They should charge appropriately for the technology in a vehicle, to ensure that shops are valued for what they provide.
Q: Do you see correlation between increase in miles driven and drop in aftermarket sales?
A: Theoretically, we see more growth in the aftermarket with increase in the miles driven, but ride sharing today is eating into the market.
Q: Growth in car parc per se is hovering around 0.5 to one percent but miles driven are more, which helps associations and aftermarket players in a big way. Going forward, do you see miles driven supporting the aftermarket while not supporting the OEs?
A: I think miles driven will increase, though usage of particular vehicles may decline. There might be less cars but they will be driving more miles. What is interesting though is that the fastest growing vehicle segment is of those vehicles that are 15 years or older. That is the fastest growing vehicle population in the US. This is something that caters right to the DIY market. So I think there will be more cars but with less miles driven on certain cars. In certain sections of that vehicle community there will be more miles driven, by less number of cars.
Q: Auto Care Association’s tagline states: ‘Independence drives us.’ What sort of freedom drives you?
A: We are the only association that truly represents the entire independent aftermarket, from Tier-1 manufacturers that actually make the parts, to distributors who inventory and sell the parts, down to the retail street-corner shop. We represent 235,000 independent repair shops, and as an association we represent 535,000 locations whether it be parts stores, distribution, retail or shops. That’s where the ‘independence’ is. Independence means that we don’t rely on the OE to perform those parts. We perform 80 percent of the vehicle repairs in the US, in the independent aftermarket. The meaning of independence for us is that we have a viable marketplace, we provide 4.6 million jobs to the economy, and we are number three in GDP (only behind health care and construction). The ‘independence’ that drives us is the fact that we are creative, can keep up with technology and, in many cases, develop technology above and beyond the OEMs.
Q: You have a government affairs department where you meet with Federal and State Legislators to discuss policies that create a favourable environment for your members’ business. Could you list out some of the recent policies spelt out by the present government that support your association and the aftermarket?
A: The current administration is very focused on reducing regulations that might be frivolous. We are very supportive of regulations that make sense; regulation for the sake of regulation is burdensome to the whole industry. We are very pleased with the administration’s approach towards some of the regulations directed to enable small businesses to succeed and our industry to grow. We support NAFTA, which is very important for our business.
Q: Any recent policy that supports your intent?
A: The approach to Corporate Average Fuel Economy (CAFÉ) standards is a big thing for us in terms of being able to approach our industry and let the auto makers and manufacturers develop the technology on their timelines. They are in a competitive environment, so let them develop the technology that will get us there; do not artificially put down a mandate that doesn’t make sense.
Q: Last year you had over 700 meetings with them, which is about 40 percent more than the previous year. Why did that happen? Is this administration a difficult nut to crack?
A: We are approaching it not only from the Federal government standpoint – whether it’s the Congress, Senate or the White House – but we are also very involved at the agency level, whether it be NHTSA (National Highway Transportation Safety Authority), DOT (Department of Transportation) or the Department of Commerce. We are working very closely with a lot of the agencies to promote our agenda, especially on telematics. We have just had a Legislative sum-up where we brought in nearly a hundred of our members to meet with their respective Congressmen or Senators in Washington DC to promote our agenda; it was very successful.
Q: Some time ago you mentioned that Auto Care Association wanted to standardise systems to access data to ensure that cyber security measures are in place. What’s the update on this?
A: The update is that we have a working model of the secure vehicle interface that allows access to the vehicle’s data at a point in the vehicle. It guarantees cyber security with a standardised format in which the data is presented. This is obviously a big benefit for the shops and distributors doing diagnostic works to access standardised data; we are getting ready to introduce it.
Q: What is the next step?
A: It is to get the automakers and the standards-setting organisations like SAE and ISO to adopt and recommend this principle.
Q: How has been the reception so far?
A: We have good representation in both SAE and ISO. As any other standards operating body, they move more slowly than we would like but we are pushing them.
Q: Tell us about your assignments with other countries. Are you looking at collaborating with other markets?
A: We recently met representatives of an association from India; we have just designed an MOU with ARIDRA from Mexico; we have met with FIGIEFA (International Federation of Automotive Aftermarket Distributors), which is the European Association that includes many of the top distributors in Europe; we met with them in Brussels, to develop a common paper that outlines our position on cyber security and secure vehicle interface, with vehicle access to data. We are reaching out to all associations around the globe to come up with a common position on Telematics.
There are also other ways for us to collaborate; AIA (Automotive Industries Association) in Canada have a ‘Women in Auto Care’ event – we are working with them to develop training programmes for people who are new to the aftermarket business; working on the next generation of leadership; making sure the women in Auto Care have their own community to be able to talk about their issues and developing a mentoring programme for them as well. There are so many opportunities for us as associations to collaborate together – through education, product standards, our common view on telematics, and technological solutions.
Q: You are also in touch with CLEPA (European Association of Automotive Suppliers)?
A: Not so much with CLEPA but more with FIFIEFA as they represent the supplier community that is more relevant to AASA.
Q: Can you speak about your industry education programme?
A: If you were at APEX you would have noticed that we have more than 200 educational sessions taking place; one session had more than 300 people. We have hired an Education Manager at the Auto Care Association to look at the industry as a whole and develop educational programmes beneficial to our members whether it’s webinar about NAFTA, telematics, or different regulations that are taking place. We are going to be very focused on providing education to the industry, not just at APEX but throughout the year, branded as Auto Care.
Q: Auto Care Association’s Chief Technology Officer made a presentation some time ago on how the association is approaching OEMs to share telematics data. What is its progress?
A: We are still speaking with the OEMs but it’s going slow. While we are still promoting the vehicle owner’s choice as to where their data is sent, the OEMs may not necessarily agree with that particular format. So we are looking for a common ground; we are always going to keep the door open. Negotiations are going more slowly than what we had hoped for, so we are taking different paths to educate consumers and industry about their rights.
Q: What is Auto Care Association’s stand on it? Do you want data to be transferred to your association members or are you encouraging the end user to decide whether his data is to be shared or not?
A: Our position unequivocally is that we believe it is the vehicle owner’s right to dictate where the vehicle’s data is to be sent. We feel that not only should the data be sent to the OEM but the consumer should have the right to allow any particular garage to access the data in order to repair his vehicle.
Q: Your ‘Independence drives us’ tagline is at stake?
A: Yes, very true. That is what we are fighting for; it’s a consumers’ rights programme.
Q: How will you approach them?
A: We are approaching it from three standpoints. From the advocacy side, what can we do to educate law makers, the DoT and NHTSA? From the technical standpoint, we have just formed an Emerging Technologies Committee who are going to work on real-life solutions to some of the issues we talked about. The third point is education; educating the consumer and the industry about telematics and the opportunity it presents.
Q: Can you tell us something about Auto Care’s VIP (Vehicle Information Portal)?
A: Our industry has now become very reliant on data. We have to ensure that we can aggregate and disseminate data to help our members become more efficient. We built an entire platform for the VIP. We have built the house where we can contain data, whether it’s industry statistics, product standards, category management, point-of-sale data, etc. We aggregate and use it, and then provide it back to our members so that they can utilise it to become more efficient. This is what separates Auto Care Association from all other associations.
Q: What is your role in supporting the members with market intelligence? How do you do it?
A: We do it a lot through partnerships with other leading research authorities, be it McKinsey or BBNT or IHS Markit. We supplement their efforts with our own team of four people dedicated to market intelligence; this is a very positive benefit to all our members. For example, our Fact Book that is produced annually is the go-to source for any type of industry or product information; we have done market research on Mexico and China. Going forward, we will be doing research on Latin America. We have an e-commerce, e-tailing initiative underway, which is an extensive upgrade to our e-tailing report prepared three years ago.
Q: How do you prepare for the new disruption – the connected vehicles and electro-mobility that people are talking about?
A: We prepare by having a seat at the table; by participating in government agencies that are sponsoring highly automated vehicle legislation. We participate by having Tier-1 suppliers that are developing the technology as members; we also visit workshops. Our emerging technology committee finds out what these new technologies are, analyses and works on them, and then creates an education campaign based on that.
Q: What are your short-term and long-term plans?
A: The short-term plan, which I believe we have achieved, was to get our team of Auto Care personnel set and ready to go with 18 new people; we have structured the association staff around the strategic pillars. The long-term goal is on the advocacy side to ensure we are represented in Washington and the State level, and to promote our entire industry in Washington and Wall Street to show what a viable business we are – 381 billion dollars, 4.6 million jobs. We are an economic engine to make sure that people take the auto care industry seriously. The third big initiative is data; what data out there can we pull together and provide our membership to be successful.