Service department performance was mixed in July as both work volume and revenue declined from the previous month.
According to data from Cox Automotive’s Xtime Metrics platform, dealerships saw the number of repair and maintenance orders fall 7.8% from June and 3% from July 2022. As a result, service department volume hit a five-year low for the month. Since the start of 2023, car dealers have witnessed periodic jumps in service activity. In June, Xtime Metrics recorded a 1.3% increase in work volume from May, although the number was 2% behind last year’s pace.
Earnings from fixed operations also declined in July but at a slower pace than work orders. Compared to June, service department revenues dropped 1.9% or $10 across the U.S. Revenues have now fallen for four consecutive months. However, despite the relatively sluggish period, dealership fixed op earnings increased 3.5% from the same period last year to their highest point since 2018.
Since the start of the COVID pandemic, retail automotive has seen service department earnings and demand fluctuate. To manage uncertainty, some dealers have turned to new technologies and practices to sustain revenues. In June, Cox Automotive published its 2023 Forward-Thinking Dealership Study, which suggested that dealers who had achieved higher levels of transparency, flexibility and efficiency in the service department saw their fixed operations profits rise 28%. However, a majority of dealers had yet to make improvements in these areas at the time of the report, limiting their growth potential for the remainder of the year. In order to protect themselves in the event that revenue and volumes continue to decline for the remainder of 2023, dealerships will need to revise their service department workflows and upgrade their toolkits to improve customer retention and attract more clients.