Recently, Guolian Securities released an in-depth research report, reviewing the characteristics of the U.S. automotive aftermarket and the development paths of industry-leading companies, analyzing the similarities and differences in the automotive aftermarket between China and the U.S., and recommending China's leading integrated online and offline automotive service platform Tu Hu-W (09690.HK).

Guolian Securities analysis believes that the automotive aftermarket track shows characteristics of steady growth and anti-cyclicality. Looking at the U.S. aftermarket data, the average vehicle age grows steadily and irreversibly, maintaining enough resilience even in years of declining new car sales or economic downturns, demonstrating strong anti-cyclical properties and sufficient growth space. Although there are certain differences between the Chinese and U.S. automotive aftermarket, the commonalities are significant, and the growth prospects of market leaders are solid.

Data shows that from 1970 to 2023, the average vehicle age of cars in the U.S. steadily increased from 5.6 years to 13.6 years; the average vehicle age of light trucks increased from 7.3 years to 11.8 years. The total mileage of U.S. vehicles steadily grew from 0.25 trillion miles in 1945 to 3.21 trillion miles in 2022, with a CAGR of 3.37%, indicating steady growth of the automotive aftermarket.

From 2014 to 2023, the CAGR of the U.S. light vehicle aftermarket was 3.94%, with the decline during the 2009 financial crisis and the 2020 epidemic much smaller compared to the automotive sales market, showcasing a strong anti-cyclical nature. Specifically, during periods of economic slowdown when new car purchasing intentions decline, the average vehicle age accelerates. The average vehicle age of U.S. cars increased by 0.5 years, 1 year, and 1 year during 1974-1976, 1980-1985, and 2008-2013 respectively, leading to increased demand for automotive services. Since 1970, the average vehicle age in the U.S. has been continuously increasing. The current average vehicle age of passenger vehicles in China corresponds to the U.S. in the 1970s, indicating significant room for increasing the average vehicle age. From the perspective of market space release, it is on the eve of an outbreak in the automotive aftermarket.

In addition, Guolian Securities research found that during periods of economic slowdown in the U.S., consumers' willingness to buy new cars decreases, but maintenance and repair expenses for cars do not decrease significantly. During the 2009 financial crisis, U.S. light vehicle sales declined by 15.36% year-on-year; the light vehicle aftermarket size only decreased by 1.44%. During the 2020 epidemic, U.S. light vehicle sales dropped by 16.21% year-on-year; the light vehicle aftermarket size only decreased by 5.3%. In terms of stock prices, major U.S. automotive aftermarket companies' stock prices remained relatively strong during the 2008 financial crisis. From March 2007 to March 2009, the Dow Jones Industrial Index fell by 39.42%; while prices of AZO, ORLY, and AAP stocks rose by 26.91%, 5.77%, and 7.96% respectively. The anti-cyclicality of the automotive service market is evident.

Looking at the market landscape, after undergoing large-scale mergers, the concentration of the U.S. auto parts industry continues to rise, with the top four auto parts companies' store percentage increasing from 7.3% in 1995 to 49.3% in 2023. Although there are certain differences between the Chinese automotive aftermarket and the U.S. in terms of consumer culture and penetration of new energy, there are strong commonalities in terms of the steady growth of vehicle age, anti-cyclicality, and leading competitive advantages. While the competitive landscape of the automotive aftermarket is decentralized, the market size is broad enough, and the growth prospects of key companies are strong. Guolian recommends the leading domestic automotive aftermarket company, Tu Hu.