Automotive Aftermarket Investment Banking Group
Stephen C. Lynch, CFA, CPA, William J. O’Flaherty, David L. Corbett, CFA, Kyle B. Tipping, CFA

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Automotive Aftermarket Market Update

Recent & Forecasted Industry Growth

Based on recent data published by S&P Global Mobility and the Auto Care Association, the automotive aftermarket for light duty vehicles in the U.S. extended its multi-year pattern of growth and expanded by a total of 5.7% in 2024. With total industry-wide sales currently at $413.7 billion, the light-duty aftermarket industry is expected to grow an additional 5.1% in 2025 with a similar trajectory through 2028.

Light Duty Vehicle Update

The automotive aftermarket industry continues to benefit from the consistent increase in the number of light duty vehicles on the road in the U.S. as well as the overall increase in the age of those vehicles. It’s estimated that the number of light duty vehicles in the U.S. at the beginning of 2025 rose 1% compared to the prior year to nearly 289 million vehicles. Additionally, the average age of light vehicles has also climbed to a record 12.8 years, up from 12.6 years the previous year.

As drivers hold onto their vehicles longer, the age of the overall vehicle fleet is becoming increasingly favorable for the aftermarket sector. While the percentage of vehicles aged 4–11 years, considered by many to be the ‘sweet spot’ for the automotive aftermarket, has declined slightly between 2024 and 2025, the sheer number of vehicles in this age range remains significant at more than 119 million vehicles. These mid-age vehicles are often outside of factory warranty coverage and generally require more frequent repairs and maintenance than newer vehicles, making them a core revenue driver for automotive service providers, parts retailers, and suppliers to the industry.

(1)   Source: Auto Care Association/MEMA Aftermarket Suppliers Joint Channel Forecast Model
(2)  Source: S&P Global Mobility, average age based on U.S. light vehicles in operation as of Jan. 1 for each year shown

 

 

Vehicles between 4-11 years old have seen robust compound annual growth of ~4.5% over the past five years. Simultaneously, vehicles over 16 years old now represent the largest portion of the vehicle population, accounting for 29.3% of the U.S car parc or nearly 85 million vehicles. This shift highlights the broad trend in vehicle longevity, which has been driven by improvements in overall vehicle quality, consumer behavior, and high new vehicle prices that make replacement less appealing.

New vehicle affordability continues to be a key challenge for consumers. With average transaction prices for new cars remaining elevated (see page 8), more Americans are opting to maintain their existing vehicles rather than purchase new ones. This decision, reinforced by economic uncertainty and inflationary pressures, has had a direct and positive impact on the automotive aftermarket.

Meanwhile, vehicle miles traveled (VMT) has steadily increased (see page 6) and is supported by relatively low fuel prices, return to office requirements, and the ongoing demand for personal mobility. This increased vehicle usage places additional wear and tear on the vehicle fleet, particularly aging vehicles, and leads to greater demand for maintenance and repairs.

Overall, recent industry data related to light duty vehicles in operation in the U.S. paints a strong and resilient picture for the industry. The growing and aging U.S. light duty vehicle fleet is not just a statistic; it represents significant opportunity for the automotive aftermarket. As the fleet continues to not only grow in terms of number of vehicles on the road but also age, the industry can likely expect steady growth and strong demand over the next several years.

(1)  Source: S&P Global Mobility, average age based on U.S. light vehicles in operation as of Jan. 1 for each year shown

 

Trends We’re Watching

Vehicles Miles Traveled, Same-Store Sales Growth; Net Store Unit Growth 

American automobile travel accelerated throughout 2024 and into the beginning of 2025.  Overall vehicle miles traveled (VMT) increased 1.0% during the 12-month period ended April 30, 2025 compared to the prior 12-month period. Furthermore, each month except for February 2025 recorded higher VMT than the comparable month from the prior year.

Publicly traded multi-site operators mostly posted positive results on a same-store sales basis, with Valvoline, Mister Car Wash, and O’Reilly Auto Parts leading the way. Monro was the exception to this trend as it faced challenges with consumers opting for lower-tier products and harsh weather conditions in its primary operating territory during Q1 2025.

Publicly traded multi-site operators generally continued to pursue unit count growth in the beginning of 2025. However, Driven Brands and Advance Auto Parts each saw large contractions in unit counts. Driven Brands sold all 383 of their Take 5 car washes to Whistle Express for $385mm. Advance Auto Parts followed the sale of its 320 Worldpac branches by closing ~500 stores in
early 2025 as part of its facility optimization process.

(1)   Source: Federal Reserve Bank of St. Louis
(2)  Source: Company Filings

 

Wage Rates; Motor Vehicle Parts & Tire Costs

Wage rates across the Automotive Aftermarket continued to extend COVID-era trends and generally increase into early 2025. With an average year-over-year increase of 5.2% through March 2025, hourly wages at tire dealers have experienced the most growth out of the three categories presented below and have out paced the 3.9% increase in nationwide hourly wage rates across all industries and positions during this same period.

Wages at general automotive maintenance and repair facilities increased 3.5% on a year-over-year basis, but lagged the increase in broad, nationwide hourly wages noted above. However, rather than increasing like the other two categories, wages at auto parts stores, which have recently been modulating, decreased 2.0% year-over-year.

As measured by the Producer Price Index (PPI), prices for motor vehicle parts and tires and other related materials remained at elevated, yet stable, levels through May However, this data likely does not yet capture the full impact of the recent tariffs the Trump administration has instituted that are likely to be significant across the supply chain supporting the Automotive Aftermarket.

As tariffs applying to different products and/or countries were announced through multiple Executive Orders with many tariffs being subsequently paused or rolled-back, importers into the United States are finding it difficult to quantify the impact these tariffs will have on the landed cost of their products.

What is clear, however, is that a moderate amount of risk and uncertainty surrounding input costs and inflation levels will remain in the near-term until the Trump administration’s trade agenda further stabilizes.

(1)   Source: Autocare Association
(2)  Source: U.S. Bureau of Labor Statistics

Vehicle Affordability & Replacement Factors

According to data reported by Cox Automotive, the average transaction price (ATP) for new vehicles in May 2025 was $48,799, which is largely flat compared to the prior year. Further, average incentive packages on new vehicles increased to 6.8% of ATP in May 2025 compared to 6.7% in May 2024.

During this same time period, used vehicle inventories have declined slightly while prices for these vehicles have remained stable year-over-year.

Interest rates for auto loans have decreased from multi-year highs, which peaked during the summer of 2024 at 8.7% when measured across loans on new vehicles with a 48-month term. By decreasing almost 100 bps from these highs to 7.7%, this recent decline in interest rates has provided much-needed relief for consumers considering purchasing a vehicle.

Despite some of this recent good news in terms of vehicle prices and interest rates, recent tariffs announced by the Trump administration will place significant upward pricing pressure on new vehicle prices. Indirectly, these tariffs will likely also impact used vehicle prices as consumers weigh various vehicle replacement options.

 

 

(1)   Source: Cox Automotive
(2)  Source: Board of Governors of the Federal Reserve System (US)

 

Car Wash Fundamentals

The car wash industry continued to display strong, consistent growth through the end of 2024 and into early 2025. Same-store, year-over-year sales for washes open at least one year has remained above 7.0% for the last 11 quarters and increased to 12.4% during the first quarter of 2025. This recent increase was driven by continued membership growth with positive same-store sales growth for single-wash retail customers that was supported by weather and strong holiday marketing activity in 2024.

Conversion rates of single-wash customers to monthly memberships across all sites remains in the high single-digits, but based on data produced by Rinsed, there is a large deviation across the industry. Although likely not a surprise, sites with large membership bases (3,000+ members) convert almost five times as many customers to paid memberships than sites with lower memberships (1,000 members or less).  While this distinction has been pervasive over time, car wash operators as a whole have generally improved their conversion rates over the last several quarters as they continue to refine their operations and as more customers become aware of modern membership-based car wash programs, particularly express exterior-only tunnels. Improvement of conversion rates is necessary to continue driving top-line performance as voluntary and credit card-driven churn (membership terminations) has consistently remained around 7.0%

Altogether, average car wash memberships per site continue to reach new highs across the industry. For sites tracked by Rinsed during the second quarter of 2024, the median number of monthly members per site was 2,875 while car washes in the top decile had 6,697 members or more on average. Halfway through 2024, both of these figures reflect strong growth as they grew 8.5% and 8.6%, respectively, year-over-year.

(1)   Source: Rinsed Car Wash Industry Report, which includes data aggregated from over 2,000 car washes
(2)  Source: Locations open for 12 months or longer
(3)  Source: Locations open for 30 months or longer

Publicly Traded Company Performance

Equity Performance

After beginning 2025 on a weaker note, public equity markets roared back during the second quarter of 2025. Critically, investors gained confidence following the Trump administration’s willingness to postpone tariffs and engage in international trade discussions. After hitting a YTD low of 4,983 on April 8, the S&P500 index increased nearly 25% to close at a record high of 6,205 on June 30. In the 12-month period ended June 30, 2025, the S&P500 generated a 13.9% return

The Matrix Automotive Aftermarket Index also experienced significant turbulence at the beginning of 2025. The announcement that the implementation of tariffs would be delayed led to strong gains in the second quarter. In the 12-month period ended June 30, 2025, the Matrix Automotive Aftermarket Index generated a 9.9% return.

Parts suppliers (+26.0%) produced strong performance over the last year, outperforming the S&P500 by 12.1%. By contrast, multi-unit service providers (-6.1%) continue to struggle, with all constituent companies other than Driven Brands declining more than 10% over the past year.

Looking ahead, the Automotive Aftermarket looks to continue the strong equity performance it experienced during the second quarter of 2025.

(1)  Source: S&P Capital IQ, figures shown on a total return basis
(2) As of 6/30/2025

 

Public Company Valuations

On an enterprise value (EV) to EBITDA basis (EV/EBITDA), the overall Automotive Aftermarket sector tracked by Matrix has declined moderately over the last two years. Much of this decline occurred during 2023 and was due in large part to a return to historical norms following the elevated valuations experienced during the pandemic. Multiples have largely stabilized over the last 12 months but remain below the levels seen immediately following the pandemic.

In contrast to equity markets performance, valuations on an EV/EBITDA basis have largely stabilized in 2024 and the first half of 2025. Multi-unit service providers continue to be valued at a higher multiple than other sectors in the industry, largely due to the stabilization of Driven Brands following the announcement and subsequent closing of the sale of its Take 5 car wash portfolio and the resulting paydown of existing debt. The resulting valuations for parts suppliers also experienced a noticeable increase, primarily driven by the continued strong performance of Advance Auto despite its closure of more than 500 stores.

Looking ahead, the Automotive Aftermarket index will face significant challenges in returning to the multiples experienced during the pandemic. However, the investment necessary to maintain an aging vehicle fleet will provide support to the earnings and valuations of these businesses.

(1)  Source: S&P Capital IQ

 

Public Company Comparable Data^1,2

(1)   Source: S&P Capital IQ
(2)  Note: unless noted otherwise, data as of 6/30/2025

(1)  Source: S&P Capital IQ
(2) Note: unless noted otherwise, data as of 3/31/2025

(1)   Excludes multi-unit service providers with less than five locations
(2)  Source(s): S&P Capital IQ, Pitchbook, Company Press Releases, Internal Matrix Tracking
(3)  Date transaction was announced; closing expected to occur during the second half of 2025

What We’re Reading

New Report: 5.1% Growth Expected for Auto Care Industry in 2025, Reaching $664 Billion in 2028
June 13, 2025 – The auto care industry grew robustly in 2024, in line with expectations. Despite continued challenges throughout the economy including inflation, along with uncertainties as new trade and government policies emerged, the aftermarket demonstrated resilience, with total United States light duty aftermarket sales growing by 5.7% in 2024 to $413.7 billion – in line with the previous year’s projections of 5.9%. Continued steady growth is expected for the light duty aftermarket in 2025 at 5.1%…

Future of Automotive Aftermarket
April 24, 2025 – Despite global slowdowns in new car sales, there seems to be no slowing down the automotive aftermarket which is expected to cross 2bn vehicles on the road (includes passenger cars and commercial vehicles) and become a trillion dollar industry by 2035, a finding of a new study on Future of Automotive Aftermarket released by Markets and Markets. It’s evolving rapidly, driven by a surge in vehicle parc, average vehicle age, miles driven per year, and, of course, the increasing demand for sustainability practices…

Trump Softens Blow of Automotive Tariffs
April 29, 2025 – President Trump moved to soften the impact of his automotive tariffs, preventing duties on foreign-made cars from stacking on top of other tariffs he has imposed and easing some levies on foreign parts used to manufacture cars in the U.S. The administration also modified its tariffs on foreign auto parts—slated to be 25% and effective May 3—allowing automakers to be reimbursed for those tariffs up to an amount equal to 3.75% of the value of a U.S.-made car for one year. The reimbursement would fall to 2.5% of the car’s value in a second year, and then be phased out altogether…

Consumer Survey: 2024 Driver Behaviors and Perspectives
December 19, 2024 – Attitudes about alternative transportation were likewise split, with older and rural consumers holding less positive attitudes towards rideshare, electric, and autonomous vehicles. Meanwhile, younger and urban consumers were the most positive about each option. In fact, consumers aged 18 – 34 were the only age group in which a majority (53%) held positive views about electric vehicles and these consumers said they were willing to spend more time charging their vehicle than any other age group…

 

 

 

Disclaimer

The contents of this publication are presented for informational purposes only by Matrix Capital Markets Group, Inc. and MCMG Capital Advisors, Inc. (“Matrix”), and nothing contained herein is an offer to sell or a solicitation to purchase any of the securities discussed. While Matrix believes the information presented in this publication is accurate, this publication is provided “AS IS” and without warranty of any kind, either expressed or implied, including, but not limited to, the implied warranty of merchantability, fitness for a particular purpose, or non‐infringement. Matrix assumes no responsibility for errors or omissions in this presentation or other documents which may be contained in, referenced, or linked to this publication. Any recipient of this publication is expressly responsible to seek out its own professional advice with respect to the information contained herein.