The United States of America, home to the second largest passenger vehicle market in the entire world, has over 260 million registered passenger vehicles. This number, along with the average age of vehicles, has been increasing steadily since 1960. Now, imagine how many times a car needs servicing along its lifetime. Multiply that by the total number of cars in U.S. Done? Now, multiply the value with the average cost for light repairs, $387. This brings us to the topic of the Auto Repair Market.
Automobile repair workshops are independently owned businesses across the globe. The market, not only in the US but globally, is becoming one of the most trending and profitable businesses. Starting from the maintenance of different body parts to the replacement of car batteries, engine parts, tire services and even coating or painting. Most auto parts stores also provide service operations in the U.S. The Center for Economic Vitality at Western Washington University reports that the transmission repair industry makes up about 6% of the total auto repair industry.
Number of car companies and businesses that offer this
Statistically, the global car repair market is estimated to worth US $444.3 billion by the end of 2017 and has a compound annual growth rate of 5.6% over the coming decade. It has approximately 16,000 establishments across the United States. In accordance to the research report by IBISWorld’s “Auto Mechanics in the US” market research report, the auto repair industry has an annual sale of $63 billion dollars.
Approximately, 175,000 businesses in the United States are titled as mechanical automotive repair shops, with more than two-thirds of them being small, family-owned businesses. Most consumers like to perform their services by shops they had visited before. Some notable repair companies in the US are NAPA AutoCare Center, Brake Masters, STS Tire and Auto Centers and so on.
Deeper look inside the industry
Nearly, 670,000 people are employed in the auto repair industry. According to the “Repair Market Industry Profile,” by Ed Sunkin, the average repair facility has 4.6 bays, employs 2.9 technicians, has 4.3 full-time workers and charges $48.24 as the labor rate. It is seen that the typical owner of an average shop is at least 46 years old with a high-school degree, and started to work in the repair industry at a very early age.
With so many shops around providing the same service, makes it difficult to choose between quality. As a result, to establish credibility for the auto repair shops, over 400,000 auto technicians and more than 1000 repair shops are certified by the National Institute for Automotive Service Excellence (ASE). ASE has a recognition program know as Blue Seal of Excellence which recognizes the capability of the technicians. In order to meet this criteria, the shop must have a minimum 75% of ASE certified technicians. The small business owners believe that the program fits well as it demonstrates repair skills and provides verification for customers. Even if there are thousands of certified technicians, the repair shops struggle with finding reliable technicians (about 46.5%) due to the huge demand.
Ever wondered why the repair shops have transparent glasses everywhere? At one time, the repair shops used to just fix the car and give the customers a bill, without any proof of repair. Things have changed now. Almost all shops now use viewing windows and webcams to establish trust and keep the customers involved during the repair. They also implement using online materials on their website to get a higher customer awareness about vehicle sustenance and periodic maintenance.
Why and how it is increasing in popularity
The Oil & lubricants expense is dominating in the US followed by body painting & repairing. As the economy in U.S is increasing, consumers tend to use more auto repair services rather than do-it-yourself repair. According to a survey, the average life of a typical car on the road is 11.5 years old. Although people are constantly buying new cars, the demand of the repair market does not seem to subdue. This is because older cars are simply lasting much longer than it used to. The average age of a car in U.S. has jumped to 17% in the last ten years. This is where the auto repair market gets the spotlight, as older cars need to be serviced more often. About 75% of consumers in U.S. use auto repair services.
As indicated by a 2015 article by USA Today, “There are about 14 million vehicles on the road that are at least 25 years old. That’s an increase of 8 million since 2002. Those are vehicles made before 1990. While the number of cars that are 16 to 24 years old is 44 million.”
According to NPD Group, older car owners are expected to spend more than $1000 on car maintenance. Here’s a snapshot of the various services they purchase:
On the other hand, newer car owners are more likely to purchase appearance products, like- Tire Dressing, Tire Foam, or Polish.
Either it’s a new car or an old one, consumers will always look forward to increasing the safety and security of their vehicles. However, the main limitation of the service industry is their technological challenges for expensive hybrid cars which require additionally trained technicians.
To keep up with the overgrowing market, many auto shop owners use digital marketing to manage their business in a better way, given the amount of dependency we have on the internet. E-commerce sales are especially on the rise as they offer convenient prices with home delivery systems. All you would need is to select the services from their website and check out! And just like that, they will arrive at your doorstep with the tools required to fix your car. In addition, some companies provide coupons or package offers which helps them build more traffic and hence increase their sales. But mobile servicing is not a widely used concept, even in today’s fast-growing world. There are a lot of issues with mobile servicing. You might not have a suitable set up; many office parks or communities don’t allow vehicle servicing on their property at all. It is also very difficult to carry the heavy equipment around or obtaining additional parts that were not initially diagnosed. Moreover, many customers don’t want to pay extra cash for house-call services. However, there are a couple of customers who want that and believe me, the technophiles are finding a great success in this with affordable and transparent pricing.
By the help of SEO, Social Media and ads they get a huge impact on sales. Another successful strategy they use is to target newcomers. According to a report, it is seen that within the first 6 months of shifting to a new place, 54% of new movers already start using repair services while 49% purchase auto parts.
Growth in Sales stalls in 2014
According to a report by Sageworks, a financial information company who collects and analyzes data from private companies and provides accounting solutions, the privately owned auto service shops had a 1.7% sales growth in 2014, which was the lowest growth since 2009. Even though it was bad news for auto shops, the automobile dealers had a pretty good time, as the U.S. auto industry sales increased to 11.9% in the previous year. It was also noted that the public auto repair shops had stronger sales growth than private shops. Even though the sales growth dropped, the average auto repair shop got some advantage. According to the data provided by Sageworks, the net profit margin actually doubled from 4.7% to 9.1%, due to less operating expenses.
Tough break for mom-and-pop shops
Independent small shop owners go through a lot of difficulty in their businesses, especially due to insufficient funding. From 2005 to 2013, about ⅕th of small auto repair shops disappeared.
In 2015, financial condition for over one-third of owners was worse than their previous year. More than 56% of the shop owners consider exiting the industry for a variety of reasons. In a study, it was seen that about 32% owners took less than nine vacation days, which was way more than any industry in that study. Over 33% of them faced difficulty with funding and 22% of them remortgaged their houses to keep their business alive. According to the U.S. Bureau of Labor Statistics, the number of small mom-and-pop shops dropped from 165,315 to 159,547, since 2005. The number of employees in the repair industry also went down from 885,281 in 2005 to 863,888 in 2014. But the decline in small shops does not reflect less service on cars. According to NADA Data 2014, an average dealership’s sales totaled $5.6 million, which was an increase of 5.2% from 2013 and also wrote 17,070 repair orders, an increase of 22% from 2013.
Cost to start up an Auto Repair Shop
The average startup cost to start an auto repair shop is between $40,000 to 50,000$. According to an article by AppointmentPlus, the startup items would be as follows:
- Money spent on tools- $15,000
- Rent of facility- $8,250 average per month
- Insurance- $4000/year
- Lift with installation- $3700
The average pricing of their services
According to the U.S. Bureau of Labor Statistics, an average American family owns 1.9 vehicles and pays around 1.5% of their annual income on car expenses. In 2004, a typical family earned $54,453, out of which they paid $817 per year on car repairs (excluding the amount they paid on gasoline).
The pricing for car services varies due to a number of factors:
- The type of shop (independent or dealership)
- Vehicle model
- Whether the shop is in a rural or urban location
- Shop overhead
Skill levels/certifications of technicians
Some repair shops advertise “package” pricing followed by discounts or coupon, which makes it easier for the consumer to get a general idea about the pricing. According to the Georgia SBDC report, there are 10 general services that a typical auto shop will provide:
- Oil and Lube- $30.0
- General diagnosis- $55.0
- Spark park replacement- $82.0
- Alignments (up to 2 or 4 wheels)- $75.0
- Brake service- $223.0
- A/C repair- $276.0
- Refrigerant recycling- $177.0
- Electronic engine control services- $184.0
- Alternator repair- $184.0
- Emission control services- $155.0
- Replacing mass air flow sensor
- Replacing spark plugs
- Changing the catalytic converter
- Inspecting for loose fuel cap
- Replacing oxygen sensor
But not all types of services can be estimated using the pricing listed on a shop’s menu, as every troubleshooting process is different. As a result, they will quote a basic charge to diagnose your car within a given time limit. If the problem cannot be identified within the limit, they will call you and ask for more time (as well as money) for further diagnosis.
According to the Autocare Association, there are over 4.2 million people working in the industry. The total cost of repair for vehicles 0-4 years old is around $20.7 billion whereas for older cars of 8 years or more, costs about $77.3 billion.
It is seen that almost 90% of repairs are for the durability of the car. The average service costs for vehicles across the U.S. is $356. The most expensive auto repair service costs around $8,200 which include removing the cylinder and checking for faulty parts; replacing if required. And the least expensive service costs $3 which is to inspect the gas cap; tighten or replace if required. According to Statistics by CarMD, Arizona has the highest average of $421.5 whereas D.C has the lowest at $265.3.
The five most common fixes in 2010 were:
Future of Auto Repair Market
As the economy in the aftermarket is increasing exponentially, competitions are at large. In order to increase and secure future yield and customers, many shop owners are implementing new business models.
One such method, as we previously discussed, is E-marketing. By 2020, online sales of car parts and other accessories alone are estimated to hit $20 billion. A U.S. auto repair shop, OpenBay, launched an app that detects issues in the car computer through a plug-in-device that automatically sends the consumer repair quotes from local auto repair garages (currently in Beta).
Online automobile repair services also provide doorstep delivery of both new and used auto parts for old and classic models which are not largely available in the physical market Such kind of organizations are dominating in the US with wide acceptance.
Bosch’s (an aftermarket manufacturer) online shop on TMall, generated an estimated $9 million during the first year of its implementation. Many shops already started to follow this trend to compete for the spotlight.
Consumers who can fix minor issues on their vehicles usually buy accessories online. But the majority of the vehicle-owners depend on garages and physical shops for their servicing. Online aggregators like OpenBay and RepairPal fill in the gap between online and brick and mortar shops. They work as an advisor to digitally connect consumers with garages based on their location, requirements and estimated quotes.
By the end of 2017, Augmented Reality is said to arrive in the auto repair industry. This will help the technicians scan the overall shape of the car including the interior feature, and hence saving plenty of time and money.