California’s Aftermarket in 2023

By John Blodgett, MacKay & Company

In the last couple years, occasionally someone will ask me about the impact of the truck and bus regulations put in place by California’s Air Resource Board (CARB). I am certainly not an expert on reading and understanding regulations and I am okay with that.

In short, these regulations are a stair-step of rules governing what vehicles will be allowed to operate in California — with the goal of eliminating the older, worst-polluting vehicles by not allowing them to register as legal vehicles. These rules are aggressive compared with the rest of the country.

I do not want to address whether the regulations make sense or not. That is up to voters in California. Rather, I would like to examine the impact on the aftermarket for medium- and heavy-duty vehicles.

For this analysis, we decided to look at the aftermarket in California for 2023, the year when diesel-powered vehicles (and for this analysis we are looking at Class 6-8 trucks and school buses) older than model year 2010 will not be allowed on the road. There are a number of exceptions as their impact, I believe, is minimal and some wouldn’t apply to this analysis — like exemptions for RVs.

At MacKay & Company, we estimate the operating population for on-highway vehicles for Class 6-8 trucks, school buses and trailers in total, by state and by metropolitan statistical area. (We also have operating populations for transit buses, motor coaches, light duty and off-highway vehicles and for other countries, but for this we are just interested in Class 6-8 trucks and school buses.)

With no regulation impact, we estimate the Class 6-8 truck and school bus operating population in California in 2023 will be roughly 512,000 vehicles or 14 percent of the total U.S. operating population. These 512,000 vehicles will produce an aftermarket parts opportunity of just over $3 billion at retail.

If the vehicles older than 2010 are eliminated (193,000 vehicles), that aftermarket opportunity drops to $2.1 billion, or a decrease of about $900 million, nearly a 30 percent decline. But this assumes that none of those older vehicles are replaced, which is not likely — people don’t register and insure vehicles to park them — they are registered to put into use.

So, if those vehicles are replaced, the question is how many?

Given the vehicles would have to be replaced with newer, more expensive and more productive trucks, we don’t think it would be a one-to-one replacement. For this analysis, we estimate 60 percent of the trucks would be replaced, but these replacements also would be newer and because of that, the aftermarket potential for these vehicles would be reduced. When we add this potential back to the aftermarket demand for the vehicles still in the operating universe, the total aftermarket total is $2.9 billion or $142 million (4.6 percent) less than it was with no change. The one product area that benefits (increases) from this change is emission-related components.

So the overall impact by 2023 is not huge, but there definitely is an impact. And what about those 193,000 vehicles that can’t be registered in California? Some will be scrapped, some will be cut up and sent to Mexico (and maybe put back together) and the majority will supplement the inventory of used trucks in other, primarily western, states.

John Blodgett has worked for MacKay & Company for more than 20 years and is currently vice president of sales and marketing, responsible for client contact for single- and multi-client projects. He can be reached at john.blodgett@mackayco.com.

Commentary: Bring on 2021

By John Blodgett, MacKay & Company

It’s just another normal day in 2020 while I write this month’s column. I am working from home today, which for most people is the new normal. This year I have been in the office every day (except for most weekends, holidays, vacations and “I can’t take it” days). I used to be on the road most weeks (pre-COVID), whether it was for a day or two or a couple of weeks. I have pretty much always done that for 30-plus years — until this year.

To everyone who is used to going to the same office every day, all week, I have a new respect for you and an appreciation for the “Groundhog Day” movie.

Our office is close to where I live, and we have an old school office with plenty of space. Most folks have offices with walls, so anybody who wanted to, after June 1, could come to the office. We did determine that we really don’t need an office — or maybe not such a big office — but luckily, last December we signed a new five-year lease because timing is everything.

I am working at home today because my water heater failed last night. I called to set up a time to get it replaced and the guy said they would call before they came. I said, “Good, because it will take me 25 minutes to get home,” to which he said, “Glad you told me. We just assume everybody is already home these days.”

But it is a good day to work at home as there is an NFL game on — just another Wednesday in 2020. So now I have two masked men in my house. I did not call the cops as I believe they are just replacing the water heater. I think that’s what they told me, but I have this problem that whenever I put a mask on, I have trouble hearing. I do have a nice cloth mask (rated at N14 — nowhere near N95). I left it on today in my car because it kept me warm, like a scarf.

I can’t wait for 2021.

I joke, but the good news is there appears to be a light at the end of the tunnel with multiple vaccines on the way. In addition, most of MacKay & Company’s aftermarket activity measurements have been more positive than we forecasted, and while our forecasts are not always on the mark, we don’t mind as much when things are better than forecast. We will still end the year (aftermarket parts sales) down compared with 2019, but not as bad as we initially anticipated in April.

Outside of our measurements, anecdotally, there certainly seems to be more trucking activity. Last week I had three deliveries scheduled for my house. None of them arrived when scheduled (two did arrive this week) and I did get a fourth delivery, but it was delivered to the wrong address, so I don’t think that counts. On my street, we are not typically seeing a Class 6-8 truck dropping packages off, but these trucks are delivering to the last milers who are, lately, always on our street. I think the problem in getting these packages as scheduled is due to both capacity and COVID-related issues for the carriers.

This year I have had other COVID-related conversations about the country having enough refrigerated trailers for bodies and now for vaccines. I am more than ready for 2021 post-vaccine and normal conversations about the aftermarket.

John Blodgett has worked for MacKay & Company for more than 20 years and is currently vice president of sales and marketing, responsible for client contact for single- and multi-client projects. He can be reached at john.blodgett@mackayco.com.