Vehicles are more durable. The economy is more fragile. Yet most mechanical service businesses view these two potentially profit-draining scenarios as opportunities, according to an Automotive Service Association (ASA) annual membership survey.
It is common perception that budget-conscious consumers are keeping their vehicles longer and so are more willing to invest in maintenance to extend the vehicle's life and avoid costly repairs. Successful independent repair shops have adjusted by selling maintenance service to offset a downturn in repairs, the ASA said. In conjunction with this, more shops are now charging for diagnostic service instead of offering it for free.
“Although the car count may be down, the average service or repair ticket remained the same or higher,” the ASA said. It is estimated that 70 percent (176 million) of out-of-warranty vehicles are repaired at independent auto service shops.
About 60 percent of the 120 survey respondents reported increased profits last year and saw growth in their customer base, and about 51 percent boosted monthly repair orders compared with 2007. However, another 26 percent of respondents reported a decline in profits, with 20 percent citing a reduction in their customer base.
The survey determined that 79 percent of mechanical business customers are repeat buyers.
For 2008, there were an estimated 78,560 independent general mechanical service businesses in the U.S., on par with 2007. These shops generated an estimated $37 billion in sales last year, up from $35 billion in 2007, based on U.S. Census Bureau figures. By comparison, the approximately 21,522 auto dealerships with service facilities took in about $30 billion ($17 billion in labor and $13 billion in parts) in 2007, according to the National Automobile Dealership Association.
An estimated 89 percent of independent repair shops are family owned and have been in operation an average of 16 years, according to the survey. ASA determined that the mechanical repair sector remains predominantly independently owned.
Back in the third quarter of 2008, when the survey was conducted, 76 percent of respondents had a rosy outlook for sales in 2009, while 16 percent expected revenues to hold steady and 8 percent predicted a slump in sales.
Nearly half of the respondents claimed marketing and advertising was a contributing factor for increased sales. Essentially all businesses surveyed conduct some form of advertising, with word-of-mouth continuing to be the leading form of promotion.
However, business owners reduced their advertising budgets to average about $16,173 last year, down from an average $21,347 in 2007.
On the employment front, auto repair shops employ an estimated 328,480 individuals who provide service and repair for more than 251 million motor vehicles.
The ASA noted that the demise of several new-car dealerships last year generated an abundance of qualified technicians looking for jobs. However, the ASA warned that these technicians have certain expectations: “They want training, tools and information needed to do their job correctly.” They also expect to be generously compensated and work in a clean service bay. The ASA said auto repair shops will have to offer these benefits if they want to attract and retain these skilled technicians.
Based on survey responses, an experienced technician earned an average annual compensation of $47,115, an entry-level technician received an average $31,006 and an apprentice earned $23,451.
Along with competitive compensation, the ASA reiterated the need for training as vehicles become more complex. According to the survey, entry-level technicians received an average of 24 hours of training annually at a cost of $781; experienced technicians obtained an average of 26 hours at an average cost of $1,224; and management received an average of 33 hours of advanced learning a year for an average of $1,958.
Owners continued to foot the bill for a majority of employee training. According to the survey, 67 percent of employers fund continuing education for technicians; 17 percent sought to split the expense with the employee; and 9 percent didn't offer training, up from 5 percent in 2007.
Seventy-one percent of business owners allowed technicians to attend training during the workday, with just over half of those compensating the technicians.