As 2019 winds to a close, it is important to recognize trends that are occurring in the world of Fixed-Ops. 2019 has brought many changes and evolutions in the automotive world. The landscape is rapidly changing. Some changes are good, some might be perceived as negative. Here is a look at the trends will have an impact on fixed-ops for the remainder of 2019.
While it has been predicted that Millennials would bring about the end of vehicle ownership as we know it, this is proving not to be the case. Yes, in big cities, many millennials have shown a preference for ride-sharing over vehicle ownership, but this trend is not universal.
After living the life of freedom that Millennials have stereotypically flocked to as single individuals, many of them are starting to settle down with families in the suburbs. This means vehicle ownership, and the service and maintenance that goes along with it. Having a marketing plan directed at these buyers is an important part of this trend.
Used Vehicle Prices
As the price of new vehicles continue to rise, used vehicle prices continue to rise as well. Higher new vehicle prices also means that more buyers are looking to buy used. This presents several promising opportunities for dealership fixed-ops.
Starting with reconditioning, higher priced used vehicles allow for a higher threshold of reconditioning costs. Secondly, used vehicles generally require more repairs and maintenance after purchase. There is great opportunity here.
Increasingly Sophisticated Mechanical Repairs
According to Ibrahim Mesbah of RevolutionParts, “Most dealerships strive for 100% absorption rate, but a shifting auto landscape led to a 2019 Q1 average of just 57% for US auto dealer,” says Mesbah. “This is a problem when Fixed Ops Departments are on the hook to cover overall dealership expenses through service, parts, and body shop profits.”
With collision repair declining, so is the need for auto body parts. To boot, revenue generated from service repair is projected to be significantly cut within the next decade.
However, according to Mesbah, “The future for Fixed Ops is bright. With mechanical parts becoming more and more sophisticated, a new door is opening for franchised dealerships to secure a greater share of the mechanical parts market,” he says, “a sector of the parts industry that has been traditionally aftermarket-dominated.”
Increased Length of Ownership
Studies have shown that the average length of vehicle ownership for both new and used vehicles has increased 60% in the last 10 years. This is correlated with the rise in vehicle prices and the decline in repairs. While repair trends indicate that vehicle owners will bring vehicles in less frequently for service, it conversely indicates a rise in the lifetime value of each owner.
Consumer Trends toward Large Franchise Auto Repair
Consumer behavior is proving that customers prefer to work with a repair facility that has a good reputation, a strong presence in the market, one that can offer a quality guarantee, and one that knows and understands their vehicle history. Dealership service departments are uniquely positioned to take advantage of this trend.