The operating environment for independent automotive workshops has been challenging in recent years, with many businesses facing declining work volumes, cash flow difficulties and unsustainable profit margins.
A recent survey conducted by ACA research of the sector shows that over a third of businesses expect the number of vehicles they service to increase. The biggest threat to future success identified by these more confident businesses is a skilled labour shortage.
Around two thirds of respondents to our survey said that business in the last year was either stable or increased. About a fifth of these workshops said their biggest challenge in the year ahead is accessing manufacturer support for new vehicle technology.
This positive outlook echoes similar sentiment expressed at the recent Biennial Automotive Aftermarket Conference convened by the Australian Automotive Aftermarket Association. A record number of attendees heard consistently positive predictions about the future of the Australian automotive industry. The underlying growth drivers for the automotive aftermarket are an increased investment in infrastructure continuing to drive vehicle sales and a population growth of around 4.2 million over the next ten years.
If we look further afield, a recent report from the Boston Consulting Group indicates the European Automotive Aftermarket is facing similar pressures to Australia. Customers increasingly expect and receive higher quality and lower cost automotive repairs. For example, maintenance costs in Germany sank 21% from 2003 to 2010.
The prices of parts in Europe have risen slightly over the last few years and while this coupled with the increase in competition has started to squeeze single independent workshops, the bigger chain stores have thrived. Along with the lower purchasing volume dictating higher procurement costs for the small independents, the increasing technical complexity of new vehicles requires investment in training and diagnostic tools to offer a strong service.
At a macro level the sector appears healthy, while on a more micro scale it is apparent that there will be fierce competition for businesses to retain their clients and maintain a strong business. The businesses likely to survive and thrive are those that successfully manage their cost base, attract and develop new talent and deliver to customer needs.
Once costs are equal, customer experience becomes the new territory where automotive workshops can differentiate themselves from competitors. Car owners will be looking for workshops that offer a customer centric experience. Already some workshops are offering enhancements such as a pick up and return service. Service offerings that might differentiate businesses in the future may focus on increased transparancy in how their vehicle has been serviced. For example, in the UK Nissan offers a vehicle assessment video so when repairs are recommended, auto technicians film the issue and make a personalised video which is emailed to the customer.
Finally one factor that has been mentioned in a previous post but should also be mentioned here is the role insurers, fleet operators and lease companies are having on the market. In both Europe and Australia it has become common for these organisations to select a group of appropriate workshops and negotiate costs with them on behalf of the customer. This means that workshops should expect ongoing market disruption as other businesses exert greater influence and control. If you would like to learn more about how these organisations are transforming the automotive repair sector click here.
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