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CNBC -- The auto industry recovery has been widely celebrated, from Detroit to the White House. It also has created a lesser known but perhaps more durable success story in the market for the products and services that keep all of those cars running.
The automotive aftermarket grew 3.6 percent in 2014 to annual revenue of $328 billion, according to the industry group Autocare Association.
Private equity investors have been attracted by this size and growth, with the latest reports focusing on private-equity firms expressing an interest in buying auto-parts and services company Pep Boys. Also this month, Ohio-based private-equity firm Linsalata Capital Partners acquired a majority interest in RWA Holding and its subsidiary, Ring & Pinion Service, which makes automotive aftermarket components under the Yukon and USA Standard brands.
Both the new car market and the aftermarket have benefited from macroeconomic trends: record low interest rates, increasing employment, growing consumer confidence, and car-maker and dealer incentives. Further, record low oil prices have helped shift demand to higher price-point, gas-guzzling SUVs.
But any investor in any segment of the autos sector needs to ask: What happens when rates go up? The Federal Reserve has hinted multiple times that it will raise short-term interest rates beginning as early as this summer.
Rate increases will have wide-ranging implications for consumers: loans for everything from homes to new and used cars will grow more expensive; employment growth may be tempered; and headline-grabbing equity indexes like the Dow Jones Industrial Average and the S&P 500 could be in for a wild ride.
Read more here: http://www.cnbc.com/id/102699413
