SEMA News - June 2009
RESEARCH

By Megan McKernan

Indicators Show a Group That Bucks the Trends

Retail sales for the street-rod and custom niche experienced a 20% increase from 2004 to 2008. Courtesy Kevin Lee, Rod & Custom

Despite the reports of a down economy and economic woes, the hot-rod market is alive and well. Just ask the SEMA members who manufacture and install the parts or who build the hot rods. Enthusiasts are still adding to their collections, working on their project vehicles and purchasing upgrades for their hot rods.

The Hot-Rod Market

SEMA’s market research department continually gathers data on the nine different market niches that make up the automotive specialty-equipment industry. Three of these niches have a place in the hot-rod market: restoration, street performance, and street rod and custom. Each of these is segmented into accessories, performance, and wheels, tires and suspension.

Retail sales for the street-rod and custom niche experienced a 20% increase from 2004 to 2008. The percentage of change for 2008 over 2007 was much smaller than it had been year over year in the previous 10 years. Nevertheless, it represented a nearly 2% increase. The street-performance niche experienced a negligible decrease of less than 1% between 2007 and 2008, but retail sales remain 14% better than they were in 2004 and 24% greater than they were in 2000. The restoration niche experienced a 2.4% decrease in 2008 compared to 2007. However, as is the case with the other two niches, retail sales have increased since 2004, with a net change of 17%. The retail sales figures are evidence of overall growth in the hot-rod market over the last several years (see Chart 1 below).

Chart 1: According to the survey, over 40% of the hot rod enthusiasts purchased either a carburetor, intake manifold or exhaust headers

Health of the Market

This year’s Hotrod & Restoration Trade Show in Indianapolis was a great example of the health of the hot-rod market. The aisles were crowded with people, and the exhibitors and attendees were in good spirits. Matt Agosta, president of Steele Rubber Products, was “…very encouraged by the strong turnout of attendees. With a lot of negative media attention about the national economy, the hot-rod industry appeared to be strong.” John McLeod, owner of Classic Instruments, said of the Hotrod & Restoration Show, “It was the best one yet, hands down.”

Many manufacturers in attendance reported that their sales so far this year were flat or up in some cases, which is contrary to widespread reports that all markets are down. When asked about the current market, McLeod indicated that sales were relatively flat, with some products up and others down.

“Sticking by the best quality and best customer service and having the best employees is paying off for Classic Instruments,” McLeod said.

We also had the opportunity to ask jobbers and retailers some questions about the current state of their businesses. Sixty-five percent of those who answered our survey said that business was either flat or up so far this year.

There were 4,400 total registered attendees for the 2009 Hotrod & Restoration Trade Show, up 12% from 2008. One of the noticeable differences this year was the presence of paint and upholstery businesspeople, both at the attendee and exhibitor levels. Planet Color, for example, was a first-time exhibitor.

Many shops have diversified to cater to segments of the market that they had not previously included. As an example, shops that had worked strictly on street rods have decided to work on musclecars as well.

The hot-rod market has been, and will continue to be, a mainstay of the American culture. Courtesy Kevin Lee, Rod & Custom

“This year’s show was a great example of this trend,” said Travis Weeks, group publisher for Hotrod & Restoration magazine. “Many of the attendees represented hot-rod shops that have diversified their offerings, not only to include other vehicle types, but also to include other services such as paint and upholstery.”

Street rods, hot rods, musclecars and old drag cars are sold each year at auto auctions. In a down economy, one might expect that such auctions would be experiencing decreases in the number of attendees as well as the number of vehicles sold. However, there is evidence to the contrary. The Mecum Auction Company, which has been specializing in the sale of collector cars and musclecars for more than 20 years, had two successful events in recent months. The Kissimmee Auction, held January 22–24, 2009, in Kissimmee, Florida, broke last year’s sales and attendance records for the same event. In total, 750 cars representing a 58% rate were sold over a three-day period. Total gross sales for the auction reached $16.5 million, a 9% increase over the previous year. A ’64 Ford Galaxie hardtop with a 427ci engine sold for $205,000, and a ’53 Buick Skylark convertible sold for $135,000. In December of 2008, Mecum held an auction in Kansas City, Missouri. This event was also successful and boasted a 50% vehicle sold rate. Total gross sales, including the buyers’ premiums, reached more than $4 million for the weekend. The top-selling vehicle at this event (including the buyer’s premium) was a ’55 Chevrolet Bel Air resto mod that sold for $96,300.

“Mecum felt the downturn in the economy back in October,” said Dana Mecum, president of Mecum Auction. “However, business has been great from that point on. The goal of an auction is to connect buyers with sellers, and this is definitely a buyer’s market.”

Hot rodding has always been a hobby with a rich history of making old cars look cool, go fast and run loud. Recently, the hobby has also given enthusiasts an outlet to escape the doom and gloom that seems to be reported on a daily basis. Hot rodders may delay purchases of parts or the addition of another vehicle, but they will not give up the hobby. For many, hot rodding is not just about the car itself, but the people met at car shows and the culture surrounding the hobby. Jeanette Ladina, president of Flaming River Industries, emphasized the importance of a comment made during the grand-opening breakfast at the Hotrod & Restoration show: “The enthusiast will remain loyal to his/her hobby.”

Hot-Rod Enthusiasts

Each summer, SEMA’s market research department sends out its Automotive Lifestyles Survey to thousands of enthusiasts. The survey respondents have automotive interests ranging from hot rods and sport compacts to pickups. We looked at the following subset from the survey data in order to talk about hot-rod enthusiasts. This subset is qualified by the following:

• 100% indicated that they strongly agree with the statement “I am an automotive enthusiast.”
• They subscribe to at least one of these magazines: Hot Rod, Popular Hot Rodding, Rod & Custom, Super Chevy.
• They own a pre-’73 vehicle and presumably answered the survey questions with regard to that vehicle.
• They are “strongly interested” in musclecars and are “strongly interested” in hot rods.

Table 2: Sixty-five percent of hot-rod enthusiasts spent more than $1,000 on accessories and performance parts in a 12-month period.

Ninety-one percent of the hot-rod enthusiasts surveyed had purchased custom parts and accessories for their vehicles within the last year. Just under half (46%) of hot-rod enthusiasts owned a pre-’73 Chevy vehicle, followed by Ford with 28%. The majority of these vehicles, 54%, were ’65 through ’72 model-year vehicles. Ninety-seven percent of the respondents obtained their vehicles used, with only 11% overall indicating that they purchased the vehicle within the last 12 months (August 2007 to August 2008). Carburetors were the top products purchased by the hot-rod enthusiasts, with 43%, while exhaust kits were the top product planned for purchase, with 25% (see Table 1).

Thirty-four percent of hot-rod enthusiasts spent $5,000 or more on custom parts and accessories between August 2007 and August 2008 (see Table 2 above).

SEMA members have noted a continued interest in musclecars. “The trend of customization has grown into later models from the ’60s and ’70s, even the ’90s, not just the traditional hot rods,” said Agosta.

According to Experian, there are 802,578 Chrysler, Ford and General Motors vehicles, model years ’67–’72, registered in the United States. This statistic indicates to the hot-rod market that there are more than 800,000 cars and trucks waiting to be restored, customized, upgraded or even just maintained. Of those, there are 22,859 ’68 Camaros; 28,552 ’69 Camaros; and 28,814 ’67 Mustangs.

The hot-rod market has always and continues to be an integral piece of the overall automotive specialty-equipment industry. Vehicle customization was born out of the ideas and passions of early hot rodders. Enthusiasts will continue to participate in this market by attending car shows, purchasing accessories and performance products or purchasing a hot rod to add to or begin their collections. Hot rods are a part of the American culture.

According to the “2006 SEMA Hot Rod Industry Report,” “The most important thing needed to preserve hot rodding for future generations is the interest of the future generations themselves.” With so many pre-’73 vehicles registered in the United States and countless more waiting to be recovered from an old barn or shed, the hot-rod market has a bright future.

Chart 1: The hot-rod market niches have all experienced growth since 2004.