Menu

Auto Parts Industry’s Stocks on the Rise as More Drivers Take to the Roads

autoparts

A new Department of Transportation report reveals that several auto parts companies’ stocks are on the rise this winter, due to a culmination of factors including falling gas prices and an overall increase in the number of miles driven by American drivers.

According to Investors Business Daily, auto parts companies like O’Reilly Automotive, Advance Auto Parts and others are seeing an overall 5% stock growth this month, with shares even reaching a record high on Friday, Dec. 19.

This record stock growth can be partially attributed to motorists driving their cars for more miles. According to the Department of Transportation’s data for October, the most recent month on record, the number of miles traveled by U.S. vehicles grew by 2.1% over last year in its eight consecutive month of gains.

The reason so many drivers are taking to the roads for longer distances? Unprecedented decreases in the price of gas that have been taking place since June. Gas prices are at four-year lows; U.S. drivers paid about $2.77 per gallon on average in November, according to AAA data.

With this greater mileage comes greater amounts of wear and tear on drivers’ vehicles, prompting demand for replacement auto parts, Investors Business Daily reports.

“As more drivers and in-turn more cars are put onto the roads there will clearly be an increase in the auto parts industry,” says Marc Tabloit, Shipping Department, Mac Auto Parts. “The more wear and tear you put on a car, the more often you are going to have to replace parts. This means having to buy those parts, which is always good for our industry.”

When quantified, the benefits that auto parts makers stand to earn from falling gas prices are significant. According to Investors Business Daily, low-income households will have as much as $40 billion in extra disposable income that they’d otherwise be using to pay for gas — and much of that income will likely be used to fund long-delayed car repairs and part replacements.

Lower gas prices will also encourage low-income drivers to opt for repair shops’ services rather than repairing their vehicles themselves, giving car mechanics a much-needed boost in business as well.

As the holiday travel season picks up and Americans hit the road for even more miles, auto parts companies will have plenty of business to keep stock values afloat.



Investors Chronicle