As unemployment increases, the stock market stumbles and the American economy faces difficult times, SEMA members have the opportunity to appreciate the relatively stable specialty-equipment market.
According to SEMA market research, since 1990, the industry has reported consistent positive growth—with the only exception being 1991—despite two previous recessions in the economy.
The National Bureau of Economic Research, a private entity that identifies when the U.S. economy officially enters a recession, recognizes it as a “significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production and wholesale-retail sales.”
Last December, they announced that the United States was officially in a recession since December 2007. The previous two U.S. recessions or business-cycle peaks-to-troughs (each lasting only eight months) were in 1990/1991 and 2001. Specialty-equipment sales dipped 3.9% during the 1990/1991 recession but actually grew 3.8% during the 2001 recession.
To put things into perspective, the longest recessionary period since 1933 was 16 months long, from business cycle high to low point, meaning that we could come out of this current recession in mid-2009 if the past is any indication of where present activity is heading.
Economic analysis firm, The Institute for Trend Research, took a look at 2008 and made several forecasts for 2009. In their December 2008 EcoTrends report, they predicted that total U.S. industrial production in 2008 would decline 0.8% from 2007 while 2009, will experience a 4.1% year-over-year decline and is expected to last until first half of 2010. Retail sales (excluding autos) are expected to decline 1.7% in 2009 compared to 2008, which the company forecasted at 0.9% below 2007.
The onset of this decline, the report notes, began in 2006 and is not a result of recent economic events. Factoring the expected drop in new-vehicle sales in 2009 further depresses the overall drop in retail sales expected to come, but this may have less of an impact on the overall specialty-equipment industry than one may think.
Specialty-equipment sales tend to follow overall light-vehicles sales. Many of the largest growth periods for the sales of new cars and light trucks accompanied growth spurts for the specialty-equipment industry. But that does not mean that the opposite is true—declining vehicle sales have not typically lead to declines in specialty-equipment sales.
From 2001 to 2003, for example, vehicle sales dropped by an average of 1.5% each year while specialty-equipment sales rose, on average, by around 5% each year. One possible reason for this phenomenon: enthusiasts purchase used vehicles instead of new, but they continue pursuing their hobby of customizing their vehicles. In addition, the new-vehicle landscape today differs significantly from that of even 10 years ago.
Automotive magazine subscribers and forum visitors shape the “enthusiast” crowd of consumers who help push the specialty-equipment industry forward. During August–September of 2008, subscribers to 21 magazines and several forums were sent the Automotive Lifestyles Survey. A total of 3,037 enthusiasts responded. Around 22% of these enthusiasts purchased their vehicle within the last 12 months from when the survey was administered, and only 30% of these recent vehicle buyers purchased a new vehicle.
Further results showed that recent vehicle-buying enthusiasts plan to dedicate a sizable chunk (around $2,500, on average) of their $94,000-per-year (on average) household incomes toward specialty equipment for their cars and trucks. Some of the planned expenditures include brake upgrades, exhaust kits, air intakes and custom wheels.
For more original market research, visit www.sema.org/research.