By Alka Sinha, FRANdata

Following the severe disruptions caused by the COVID-19 pandemic, the automotive industry experienced a robust recovery in 2023, marked by the easing of supply chain bottlenecks and sustained consumer demand.

This resurgence led to the highest new vehicle sales since 2019.

However, the strong rebound in 2023 was short lived as the automotive sector began to experience a cooling off period in 2024. One key factor behind this slowdown is the waning consumer demand following a post-pandemic surge, compounded by a mixed global economic landscape. Elevated interest rates, uncertainty surrounding policy decisions, and political developments across the globe have further dampened growth prospects.

Additionally, the used car market has become increasingly attractive as prices have started to decline, due to improved stock levels. Over the past five years, the average price of used vehicles has surged by 34 percent, rising from $21,480 to $28,815. However, in the first half of 2024, the prices for used vehicles dropped by 5 percent compared to the same period in 2023. This price decrease represents normalization from the record highs seen in 2023, which were driven by limited supply and heightened demand.

Despite a drop in inventory in the first half of 2024 compared to the previous year, the secondary market remains highly competitive. Trade-in values have surged by 48 percent since 2019, underscoring the consistently high value of vehicles amid ongoing supply constraints. This scarcity continues to drive demand and sustain elevated vehicle prices in the used car market.

Automotive Aftermarket Continues to Be Resilient as the Average Age of Vehicles Increase

Driven by a strong used car market, the US Automotive Service Market size is estimated at USD 188.13 billion in 2024, and is expected to reach USD 251.52 billion by 2029, growing at a CAGR of 5.98 percent during the forecast period (2024-2029), according to Mordor Intelligence.

Business opportunities for companies in the U.S. aftermarket and vehicle service sector are steadily improving as the aging vehicle fleet drives increased demand for repairs. In 2024, the average age of cars and light trucks reached a new high of 12.6 years, according to S&P Global Mobility. Impact of COVID and subsequent supply chain disruptions have reduced the share of vehicles under six years old, placing vehicles aged 6-14 — and older — at the forefront of growth. These vehicles are projected to account for 70 percent or more of vehicles in operation (VIO) over the next five years, fueling aftermarket demand.

Additional growth drivers include:

  • Stricter CO2 emissions regulations, increasing demand for fuel-efficient automotive components.
  • Technological advancements such as digital platforms and 3D printing, revolutionizing the industry.
  • Post-pandemic consumer trends, with increased spending on aftermarket accessories, non-essential repairs, and tires, driven by rising fuel prices and environmental concerns.

These factors together position the aftermarket sector for sustained growth over the coming years.

Automotive Service Franchise Performance Marked by Consistent Unit and Revenue Growth Since the Pandemic

The franchise automotive service industry has seen significant growth, driven by increasing demand and market expansion. From 2021 to 2023, the average number of franchise units grew at a compound annual growth rate (CAGR) of approximately 1.2 percent, to approximately 18,000, with continuity rates remaining stable at 94 percent, reflecting the sector’s strong and consistent performance. In 2024, major brands continued to dominate and expand into high-demand markets, a trend expected to persist into 2025.

Source: FRANdata Research

The growth in the number of units has been bolstered by strong revenue gains experienced by franchisees in the industry. According to FRANdata Research, average unit revenue increased by 10 percent CAGR between 2020 and 2023.

Source: FRANdata Research

Additionally, the number of franchised brands in the automotive industry has steadily risen post-pandemic. This consistent growth underscores the sector’s resilience and expanding opportunities for franchisors.

Source: FRANdata Research

Trends to watch:

  • Increased investment in customer-centric marketing: Many franchise brands, such as Midas, Ziebart, Big O Tires, and Driven Brands, are shifting towards a more customer-focused approach to differentiate themselves in the highly competitive aftermarket industry. By enhancing customer experience and focusing on personalized services, these brands aim to build stronger customer loyalty. Platform companies in particular stand to benefit, as they can create multiple customer touchpoints across the value chain — ranging from car washes and oil changes to repairs and maintenance services. This integrated service model not only boosts customer engagement but also enhances convenience, providing a competitive edge.
  • More investment in technology: Franchise brands are increasingly investing in advanced technologies to keep pace with the evolving automotive industry. This includes expanding their capacity to service hybrid and electric vehicles (EVs) and vehicles equipped with cutting-edge features like accident-avoidance technology. These systems require more specialized training, advanced diagnostic tools, and a highly skilled workforce. By staying at the forefront of these technological developments, brands are positioning themselves to capture market share as the demand for high-tech vehicle servicing rises.
  • Used cars fueling demand for maintenance services: The rising average age of vehicles, which reached 12.6 years in 2024, continues to drive demand for maintenance services such as oil changes, tire replacements, and other routine care. As vehicles age, the need for aftermarket services becomes more frequent, providing sustained growth opportunities for franchise brands in the automotive service sector. This trend, driven by the high number of older vehicles on the road, is expected to remain a key factor in the aftermarket’s expansion.
  • Electric vehicles create new opportunities for repair and maintenance: Although the adoption of electric vehicles (EVs) slowed in 2024 due to declining residual values, price reductions, and rapid technological advancements, this presents new opportunities for the aftermarket industry. As consumers become more cautious about EV purchases, the average age of EVs is expected to increase, leading to growing demand for repair and maintenance services. Franchise brands specializing in EV services will be well-positioned to capitalize on this trend, especially as the market for maintaining aging EVs continues to develop.
  • Supply chain hurdles persist: Despite robust growth in the franchise automotive sector, supply chain disruptions continue to pose significant challenges. Many franchise brands rely heavily on international suppliers for timely delivery of parts and products. Geopolitical uncertainties, transportation bottlenecks, and labor shortages have created persistent delays and increased costs. Navigating these hurdles will require brands to diversify supply chains, seek alternative sourcing strategies, and improve logistics to maintain operational efficiency and meet growing consumer demand.

 

Alka Sinha is the senior research analyst at FRANdata. For more information about IFA supplier member FRANdata, please visit franchise.org/suppliers/frandata.

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