Welcome to the 2006 Underhood Service Repair Market Industry Profile, our in-depth report of the independent automotive repair market. This profile highlights many of the elements of doing business in today’s repair shops. The information presented is a good indicator to make short-term predictions about these shops. It’s also a fair yardstick to see how your business measures up to other independent repair shops, and help your shop prepare for changes in the industry in both vehicle trends and servicing customers.
Unless otherwise cited, the responses, charts and data is from Babcox Research, which executed a mail survey to a random sample of 4,000 subscribers to Underhood Service magazine.
First, we’ll take a look at what some of the industry experts are forecasting for the automotive service industry. Then we’ll investigate how your shop measures up to other shops in the country. Throughout this report, we’ll also touch on some of the trends and service factors that will affect your business over the next few years.
Most industry associations and marketing experts are predicting steady sales growth in the U.S. market, which should be good news for your shop’s business.
The Automotive Aftermarket Industry Association (AAIA) reports in its 2006/2007 Aftermarket Factbook that the U.S. motor vehicle aftermarket sales grew by 5% in 2005 to $267.6 billion, the largest increase since 2000.
“We’re extremely pleased to see steady growth in aftermarket sales while the new car dealerships’ share continues to slide for the fifth consecutive year,” said Kathleen Schmatz, AAIA president and CEO. “And contrary to the frequent prediction that DIY is dying, our data shows that the DIY side of the industry grew by a healthy 5.6%.”
AAIA contends that industry growth was led by the medium and heavy-duty segment, which expanded 6.2% to $70.6 billion. The automotive light vehicle segment increased 4.6% to $197 billion.
Another aftermarket industry organization, the Automotive Aftermarket Suppliers Association (AASA), also is reporting good financial news for the service industry.
According to AASA’s 2006-2007 AASA Automotive Aftermarket Status Report, the value of the light vehicle aftermarket (parts and labor) broke the $200 billion mark for the first time in 2005, finishing at $200.4 billion — a 5.2% increase from 2004.
AASA, a division of the Motor & Equipment Manufacturers Association (MEMA), said the jump was the highest the industry has experienced since a 5.6% increase in 2000. If the $54.5 billion heavy-duty aftermarket (Class 6 through 8 trucks) is included, the total U.S. aftermarket is $255 billion — a 5.1% increase over 2004.
AASA estimates that the light vehicle aftermarket will end 2006 at nearly $209 billion. Growth will continue at a somewhat slower pace and reach $239 billion by the end of the decade.
“We expect the aftermarket to only get stronger in the years to come,” said AASA executive director Steve Handschuh. “Our industry is vital to keeping the 232 million vehicles on U.S. roads running safely and efficiently and, ultimately, in keeping Americans productive and mobile.”
AASA said vehicles more than 10 years old account for the largest share of the dollars spent and provided the largest boost to 2005 overall aftermarket value. This category, along with the six- to 10-year-old vehicle group, is expected to continue to expand at a stable pace, while new to five-year-old vehicles are projected to decline in aftermarket volume through to 2010.
Note: AASA’s estimates for the light vehicle aftermarket exclude warranty work, collision and accessories, but include fleet maintenance and repair. AASA’s estimates do not include parts for medium and heavy-duty trucks and trailers, off-highway equipment, farm machinery, motorcycles and scooters, snowmobiles, watercrafts, industrial equipment or recreational vehicles.
In terms of aftermarket components and services, AASA’s size of the aftermarket estimates is restricted to replacement parts and related services and does not include appearance products and services, petrol, dealer preparation, car audio and entertainment centers, hand tools and service diagnostic equipment, and paint and body equipment.
Parts & Service Trends
According to the 2006/2007 Aftermarket Annual Report from Lang Marketing (www.langmarketing.com), 16 major aftermarket product groups, representing more than 55 separate products, will combine for 3.7% annual growth between 2005 and 2008. Five of the 16 product groups will top 4% annual growth; while three groups will suffer sales declines.
Accessories in the U.S. market will record the highest 2008 dollar volume, passing $17 billion at user-price and achieving nearly $3 billion sales growth between 2005 and 2008. Accessories will outpace all product groups, with 6.2% annual growth. Light truck accessories, compact performance products and mobile electronics will be hot performers.
Worldwide, research from a report by Innovative Research and Products (iRAP) titled Automotive Electric Products — An Industry and Market Analysis indicates the global automotive electric products market growth will continue despite slowing auto sales and production. iRAP estimates that the worldwide automotive electric products market will reach $74 billion in 2006.
Because of the increases in electrical systems and components on vehicles and trends in more hybrid-electric vehicles (detailed later in this report), making sure your techs understand electrical systems and electrical diagnostics will be significant to your business. Lights, heating, ventilation, radiator fans, power windows and entertainment systems all place electrical “loads” on the car’s battery — since they draw power from it — and recharging the battery, in turn, places a constant load on the engine. Some cars today employ more than 35 electric motors in various ways.
We see that as consumers demand ever more sophisticated and feature-loaded vehicles, the OEs will face growing challenges to balance these expectations with space constraints and weight concerns. Every component receives scrutiny to determine if it can be made smaller and lighter to promote fuel efficiency and performance and help fit more content into the available space. Electrical component location and easy access, along with securing the repair information for these systems, will be important concerns your technicians and staff will face as your shop works to retain customers, as well as attempt to pull customers from dealerships.
Other Parts Repair Growth Leaders
According to Lang’s research, Brake System Products will achieve 6.0% annual growth, exceeding $8.5 billion at user-price in 2008 volume and gaining nearly $1.4 billion in sales from 2005 to 2008. Equipment for repairing cars and light trucks will rank third in average annual growth, 5.2%, followed by Tools and Drivetrain Components, each recording the fourth-strongest rate of 4.2%.
Lang also said that Heating and Cooling Components will increase at a 3.4% annual pace between 2005 and 2008, followed by Electrical System Parts, 3.3%; Gasoline Fuel System Products, 3.2%, and General Service Parts averaging 3.1% annual growth. General Service Parts (including batteries, filters, spark plugs and miscellaneous products) are expected to top out at $12 billion in car and light truck products at user-price.
Accessories, Brakes and General Service Parts will combine for nearly 40% of total 2008 light vehicle product sales. This reflects a growing concentration of sales strength among a shrinking group of aftermarket products.
“The 3.7% combined annual growth of the 16 major product groups will generate $7.9 billion in additional car and light truck product sales between 2005 and 2008,” said Jim Lang, president of Lang Marketing. “This will provide a strong growth core for the car and light truck aftermarket, which we project will top $95 billion by 2008 in product sales at user-price.”
Other Good Indicators: Growing Populations
The number of licensed drivers in the U.S. rose from 189.9 million in 2004, to 201.7 million in 2005. Looking back 10 years, we see that in 1996, the number of licensed drivers was 179.9 million.
The number of total miles traveled on U.S. roads also continued to rise in 2005 to 3 trillion miles. This increase of miles driven was only 0.1% more than 2004, and the smallest increase percentage in 20 years. These low numbers are largely believed to be the result of record high fuel prices in the past two years. It will be interesting to see the totals for 2006 when fuel prices reached an all-time average high in the early summer.
The increase in drivers, coupled with a steady increase in the population of motor vehicles and miles of road traveled is expected to provide shops more service opportunities. According to AAIA, the 2005 U.S. motor vehicle population rose to nearly 240 million vehicles (an increase of 3.2% over 2004’s number of close to 233 million vehicles).
Of the 240 million vehicles, most of our readers service light vehicles — cars and light trucks. The number of these vehicles on the road based on 2005 registrations (134 million cars and 98 million light trucks) increased 3.1% over 2004’s totals — making it the highest growth rate in more than 10 years, according to AAIA.
AAIA’s 2006/2007 Aftermarket Factbook states that a declining vehicle scrappage rate and increasing vehicle average age are evidence of the continuing lengthening of vehicles’ lives. For the fifth year in a row, the number of motor vehicles being scrapped in the U.S. fell. AAIA reported that the scrappage rate for motor vehicles dropped to 4.3% in 2005. On the other hand, vehicle life increased, and the average age of motor vehicles on the roads has grown to a historical high of 10 years. Light trucks’ average age increased to 8.7 years old in 2005.
Because vehicle age has a significant impact on independent repair shops, we feel that this is good news for shop owners. Research from AAIA has shown that vehicles in the intermediate age (8-11) often require much more maintenance and repair as compared to vehicles in the 0-3 and 4-7 year ranges. Vehicles older than 12 years old, while frequently need repair, typically do not receive the necessary services because their owners often try to avoid repairs unless it is essential for keeping the vehicle on the road.
Shop owners also should consider that just because fuel prices have slowed down the number of miles driven each year, it also has raised vehicle owner awareness to have preventative maintenance, tune-ups, lube/oil/filter replacements and other services to improve their vehicle’s fuel economy.
According to Babcox Research, the typical shop owner spends about 26% of his/her time repairing vehicles, 25% of the time working with customers, 20% managing the business, 16% of the time diagnosing vehicle problems and 10% of the time working with suppliers. The remaining 3% was listed as “other” on the survey. See chart above. These percentages were very similar to 2004 results.
As you can imagine, the fewer techs a shop has, the less time the shop owner spends managing his/her business. Respondents who employ one or two techs spend 16% of their time managing the business. At shops with three or four techs, shop owners spend 23% of their time minding the shop. With five or six techs, 27% of the shop owner’s time is spent managing. This percentage (27%) was also the amount at shops with more than six techs.
Taking a look at repair facility demographics, the average general repair facility...
Has 5.1 bays (up from 4.4 in 2004);
Has four full-time employees (up from 3.7 in 2004);
Employs 3.1 technicians;
Has been in business 22.5 years (down from 24.3 years in 2004); and
Charges $62.60 as the hourly labor rate (up from $58.53 per hour in 2004).
Although the car and light truck population on U.S. roads soared more than 39 million vehicles between 1996 and 2006, there were 44,000 fewer service bays to maintain and repair them during the last decade, according to Lang Marketing. Lang’s Aftermarket Annual Report states that the number of vehicles per service bay in the U.S. grew between 1996 and 2006, creating a service bay crisis.
In August, Jim Lang said the number of cars and light trucks per service bay will approach 200 by 2008, and deepen the service bay crisis in the vehicle repair market.
Lang Marketing’s weekly market letter, Aftermarket Insight, reported that:
With the number of cars and light trucks on U.S. roads dramatically increasing over the past 10 years, one would expect a proportionate expansion in service bay population to accommodate this expanding market. However, the opposite occurred. Dollar volume of products installed by mechanics rocketed more than $18 billion during this period, but the car and light truck service bay count plummeted.
There were fewer than 155 light vehicles in the U.S. for every service bay during 1996. However, with nearly one in 20 service bays closing over the next 10 years coupled with a 22% unit gain in light vehicles on U.S. roads, the average number of cars and light trucks per service bay grew rapidly.
In 2000 there were 166 light vehicles in the U.S. for every service bay, with that number jumping to nearly 180 during 2003. At mid-year 2006, there are more than 190 cars and light trucks for every service bay in the U.S. Lang Marketing’s forecast of nearly 200 vehicles per service bay by 2008 underscores the growing scope of the service bay crisis.
“The growing service bay crisis has significant consequences for vehicle fuel efficiency, highlighted by skyrocketing gas prices, as well as vehicle safety,” said Lang. “One solution to the growing crisis,” he pointed out, “is improving service bay productivity. Better mechanic training, enhanced tools and equipment, as well as sophisticated diagnostic techniques and shop management software are force multipliers, which enable service bays and mechanics to handle more vehicles.”
Does this mean that vehicle owners will be inconvenienced? Lang believes so. “How the aftermarket responds to the growing service bay crisis will play a critical role in determining the future of the light vehicle service market in the U.S.,” said Lang. “The increasing number of cars and light trucks per service bay in the U.S. makes it less convenient for Americans to have vehicles serviced, and reduces the relative repair capacity of the U.S. vehicle service industry. This growing service bay crisis has implications for vehicle fuel efficiency, underscored by record gas prices, and even vehicle safety.”
When we asked Underhood Service readers, “What is your average daily car count?” the average response we received was 10 vehicles per day, and the median was eight vehicles. Looking closer to the numbers, we saw that 39% of respondents say they average up to five vehicles per day, 32% said they service six to 10 vehicles and 17% work on 11 to 15 vehicles per day. Only 6% of respondents handle 16 to 20 vehicles daily, 2% service 21 to 25, and surprisingly, 3% of respondents handle an average of 30 or more vehicles a day.
As more dealerships close and bay numbers from that segment are reduced, we feel it is important for independent shop owners to be prepared for this trend of “more vehicles per bay.”
According to the U.S Department of Labor, automotive service technicians and mechanics held about 803,000 jobs in 2004 (down from 818,000 in 2002). The majority worked for automotive repair and maintenance shops, automobile dealers, and retailers and wholesalers of automotive parts, accessories and supplies. Others found employment in gas stations; home and auto supply stores; automotive equipment rental and leasing companies; federal, state and local governments; and other organizations. More than 16% of service technicians considered themselves self-employed, more than twice the proportion for all installation, maintenance and repair occupations.
AAIA reports the number of service repair technicians at around 867,000 (2005 estimate). AAIA also noted that since 1980, the demand for service repair technicians and the supply of technicians have increased significantly. During this period, demand for techs increased an average of 0.8% each year, while the supply of techs grew an average of 2.3% per year.
So, when we asked Underhood Service readers if their shop plans to add technicians to your staff in the next year, we weren’t too surprised to see that 37% of respondents said “yes,” and nearly two-thirds (63% replied “no”).
Of those shops that plan to add techs, a majority (72%) said they planned to hire one tech, 23% planned to hire two techs, and 3% planned to add three techs to their staff.
The number of shops that plan to add a tech seems to reflect the response to our question “Have you lost any technicians in the past year?”
More than one-third of the shops (38%) said they lost a tech in the past year. Interestingly, 31% of respondents said they did not know where the tech they lost ended up, 26% of respondents said they lost a tech to another independent shop, 24% said the tech left for another industry, 10% left to work at another dealership and about 9% retired from the industry.
Speaking to industry experts and shop owners, we find that the general belief is that niche service work is a very vibrant industry and one that can be profitable for independent automotive shops. Since there are more and more licensed drivers driving more miles in more vehicles than ever, these consumers are in a critical position to drive the aftermarket away from the residual effects of recent economic downturns in the U.S. economy.
When Underhood Service readers were asked what type of niche services their shop offers and the percentage of annual business from that work, we received the following data:
The graph at the top of the page provides details on specific services today’s independent shops provide. As you can see, most shops (64%) offer vehicle engine replacements.
Our data also showed that the average number of engines replaced each month by shops providing this service is about 2.3, or just over 27 replacement engines per year.
We asked shop owners to rank their top three concerns regarding their business over the next year. The following seven issues are ranked in the highest to lowest response.
Shop profitability: 62%; difficulty of repairs due to vehicle design: 57%; finding quality/trained employees: 54%; finding vehicle repair information: 46%; governmental regs/environmental concerns: 31%; competition from car dealerships: 22; and use of management software: 17%.
Delving deeper into the issue of finding vehicle repair information, we asked shops a series of questions regarding OEM service repair information. When asked if they can find the OEM repair information that’s critical to their business, most of the respondents (69%) said they do find the OEM information successfully. However, only 23% of shops said that they subscribe to OEM repair information websites. And 20% of shop owners said they believe the costs to these repair information websites is “reasonable.”
Most responded (63%) that they had problems acquiring service information from the OEMs.
Getting the Info Shops Need
When we asked readers to cite the source from where they receive the most information on new products, trade magazines (such as Underhood Service and TechShop — Equipment, Tools and Supplies) ranked the highest at 66%; followed by jobber/stores: 18%; manufacturer reps: 5%; vehicle enthusiast magazines: 3%; automotive websites: 3%; manufacturer clinics: 2%; trade shows: 1% and television programs, 1%.
Trade magazines also topped respondents’ choice as the most useful method for technicians to obtain technical information. See chart below.
Good news! Since our last industry report in 2004, technician salaries have increased. According to the U.S. Department of Labor, median salary wages of reported hourly earnings for automotive service technicians and mechanics, including commission, were $15.60 in May 2004 (up from $14.71 in 2002). The middle 50% earned between $11.31 and $20.75 per hour (up from $10.61 and $19.84 an hour in 2002). The lowest 10% earned less than $8.70, and the highest 10% earned more than $26.22 per hour (up from $25.21 an hour in 2002).
Median annual earnings in the industries employing the largest numbers of service technicians in May 2004 were as follows:
Local government: $38,160
Automobile dealers: $38,060
Independent automotive repair and maintenance shops: $28,810
Gasoline stations: $28,030
Automotive parts, accessories and tire stores: $27,180
AAIA also noted in its Aftermarket Factbook that technician salaries increased by 3% in 2005 over 2004. This was the highest percent change in hourly wage rate from the previous year since 2001 when the hourly wage rate increased by 3.9% over 2000’s wages.
It should be noted that many experienced technicians employed by automobile dealers and independent repair shops receive a commission related to the labor cost charged to the customer. Under this method, weekly earnings depend on the amount of work completed. Employers frequently guarantee commissioned technicians a minimum weekly salary. Source: U.S. Department of Labor/Bureau of Labor Statistics
When asked about ASE certification, 69% of our survey respondents said they have at least one ASE-certified technician. However, 23% of the shops responded that all of their techs are ASE-certified.
At present, ASE reports that there are 398,600 professionals that hold current certifications (through May 2006). (Note: According to ASE, this is a net total, meaning individuals with multiple certifications are counted only once.) Although they work in every segment of the automotive service industry: car and truck dealerships, independent garages, fleets, service stations, franchises, auto instructors and more, a majority of ASE professionals (more than 293,000) are certified in the Automobile Technician category. A little more than 41,000 professionals are certified as Parts Specialists. Using the government’s statistic of 803,000 techs and mechanics in our industry, combined with the nearly 400,000 ASE-certified techs, you see that the industry is close to 50% certified techs and mechanics.
Note: For the list of all ASE professional categories and certificate totals not typically associated with car and light truck underhood service (i.e. medium and heavy-duty truck, CNG, bus, collision, engine machinists, etc.), visit www.asecert.org.
One of the more interesting results from our survey is that we found underhood shop owners and technicians are brand conscious and brand loyal. More than half of the time (“frequently” 50% plus “always” 12%) a shop will specify a brand name when ordering a part.
Another 29% said they “sometimes” specify a brand. This data explains that shop owners and technicians are discriminating customers when it comes to the products and parts that they use to service vehicles.
Only 2% of the shops say they “never” request a brand and 7% replied “rarely.” Although this may seem unfavorable if you are a business trying hard to market your product to a shop owner, these survey results showed us that when they do not specify a brand name, it is because they (90% of respondents) already know what brand the supplier will provide.
When asked what they do if a jobber distributor does not have the brand they specified, 66% shop owners responded that they call another jobber for the brand they request. Other responses included, “ask the jobber to order it” (32%), “accept a brand recommended by the supplier” (27%), “specify another brand” (16%) and “other” (1%). (Note: Results here will add to more than 100% since there were multiple responses.
Whereas shop owners and technicians are very critical when choosing brands, our survey shows that their customers rarely specify a brand name when their vehicle comes in for service. Only 7% of the respondents said customers “frequently” request a brand name when ordering a part, 1% said customers “always” specify a brand, and 21% of respondents said their customers “sometimes” request a brand. Most customers (64%) rarely request a particular brand of replacement part. Looking at this data, we see that you, the technician and shop owner, can be the most influential decision-maker when it comes to the parts replaced on a customer’s vehicle.
Charging and Purchasing
According to respondents to our survey, 88% of shops said they charge for diagnostic time. We also found that most shops that charge for diagnostic work charge the same amount as their normal labor rate. The reported average hourly labor rate charged to customers is $62.60.
About 15% of shops charge more than their normal labor rate, and 20% charge less than their labor rate, sometimes significantly discounted. Twelve percent of respondents said they do not charge for diagnostic work if they end up doing the repair.
We also surveyed shop owners on what influences their parts buying decisions. Asked to scale the importance of nine purchasing decisions, the respondents voiced that “quality” (fit and performance) and “availability of primary parts source” were the top two influences. The remaining influences for buying parts, in order from most important to somewhat important were: “strong brand name,” lifetime warranty,” “full-line coverage,” “informative catalog,” “low price,” tech hotline/training” and “promotions/contests.”
We also asked what was the approximate dollar value of parts the shop purchased from all sources in the past year. The percentage of shops and their annual parts purchases were as follows: less than $50,000: 22%; $50,000-$100,000: 29%; $100,000-$150,000: 13%; $150,000-$200,000: 10%; $200,000-$250,000: 9%; and more than $250,000: 17%.
Where Shops Buy Their Parts
On average, respondents to our survey said they buy parts from about three different jobbers in a typical week. They also report buying parts from about three new car dealerships in a given week. Our research shows that there are some parts and components that shop owners seem to prefer to buy from dealerships.
The parts that have high percentages of being purchased from dealerships, according to our respondents, include electrical (77%), followed by emission components (68%) and fuel system parts (44%).
Independent jobbers and retail parts stores seem to be the main supplier of other parts and system components to independent shops. We found that only 31% of respondents said they normally buy heating and cooling parts from dealerships, followed by engine parts (25%), drivetrain (24%), suspension (20%), brake parts (12%) and filters (10%).
In the chart on page 66, you can see the factors that influence shop owner’s decisions for buying parts at dealerships.
Quite a bit of research has come out lately on what technicians will be servicing in upcoming years. Obviously, hybrid vehicles and alternative-fueled engines will be the biggest factor in the evolution trends to the automobile.
Recently, the nation’s top mechanics — ASE-certified master automobile technicians — weighed in on this issue in a survey conducted by ASE and Valvoline.
The 300-plus technicians, surveyed in April, were divided somewhat in their opinion about when alternative fuels will replace gasoline in most American automobiles, but they universally believe it will happen, according to the survey.
“Clearly alternative fuels are on the minds of expert mechanics, just as they are capturing public and major automaker’s attention as gas prices continue to rise and stay at higher than traditional levels,” said Valvoline Marketing Director Bryan Emrich.
Asked when most cars will be fueled by alternative fuels, the ASE mechanics predicted the following:
14% within five years
26% in five to 10 years
31% in 10 to 15 years
28% in more than 15 years
Only 1% said it would never happen.
“Mechanics are the front line of car care and good predictors of trends,” Emrich said. “If they are right, it is a matter of when, not if alternative fuels will be the norm, rather than the exception.”
As average fuel prices remain near the $2.30-a-gallon mark, Americans are expected to buy more alternative fuel autos, diesel and ethanol-capable vehicles, according to automakers.
“Our priority is to get the word out that alternative fuel autos are on sale now, and these vehicles are the quickest way to reduce gasoline use,” said Fred Webber, president and CEO of the Alliance of Automobile Manufacturers, which represents nine global automakers selling vehicles in the U.S. “No one wants to see high gas prices and concerns about energy security, but the good news about today’s energy situation is that more Americans are purchasing one of the many fuel-efficient automobiles on sale today,” said Webber.
The number of alternative fuel automobiles on U.S. roads has reached 9 million, according to new figures released by R.L. Polk & Co. The Alliance of Automobile Manufacturers said that there were approximately 8.3 million alternative fuel autos on the road at the close of 2005, and more than 700,000 hybrids, diesel and ethanol vehicles have been purchased in the first half of 2006, putting automakers on track to reach their goal of sales of 1 million in 2006, and 2 million by 2008.
Automakers are now selling 46 models of alternative fuel autos, including ethanol vehicles capable of running on 85% ethanol (or E85 vehicles), clean diesel autos and hybrid electric vehicles. A list of these vehicles can be viewed at www.DiscoverAlternatives.com. Another 35 models of alternative fuel autos are in development for future introduction.
Nearly every model of auto is available today with some kind of fuel-efficient technology, such as variable valve timing, continuously variable transmissions and cylinder deactivation. We feel this will force progressive shop owners to seek additional education and training for their technicians on these systems.
The second biggest trend we see in the development of light vehicles are hybrid-electric vehicle sales. According to the J.D. Power and Associates’ Automotive Forecasting Services Hybrid-Electric Vehicle Outlook, these vehicles are anticipated to grow by 268% between 2005 and 2012.
J.D. Power’s research shows that hybrid vehicle sales are expected to grow from approximately 212,000 vehicles in 2005 to 780,000 by 2012. Despite the large increase in sales volume, vehicle models utilizing a hybrid-electric powertrain still will remain a small portion of the market, growing from 1.3% of U.S. light-vehicle sales in 2005 to 4.2% market share by 2012.
“Future growth will be the result of more vehicle manufacturers entering the hybrid-electric market and a greater number of hybrid models,” said Anthony Pratt, senior manager of global powertrain forecasting at J.D. Power and Associates. “There are currently only 11 hybrid models available in the U.S. market, and by 2012 that number could increase to 52 models.”
While the number of hybrid models hitting dealer lots in the next several years is expected to increase dramatically, Pratt said many of those vehicles will be in segments currently void of hybrid vehicles.
“Consumers tend to purchase within the vehicle segment that best suits their lifestyle,” said Pratt. “When hybrids were first introduced, they were only available in sub-compact cars that were not practical for all vehicle buyers. This trend changed with the introduction of the Ford Escape in late 2004, and we anticipate this trend will continue in the future. By 2012, consumers will have the opportunity to purchase a hybrid vehicle in nearly all segments, including full-size pickups, minivans and luxury cars.”
Executives for auto parts supplier Johnson Controls Inc. also see the hybrid market growing. Over the next decade, hybrid engines could be put into 5 to 8% of new cars built worldwide, said Gregg Sherrill, group vice president and general manager of power solutions at Johnson Controls Inc. That would mark exponential growth from their current market share of less than 1%.
“Clearly we see hybrids playing a significant role,” said Sherrill, “There will probably be multiple technologies, I don’t see hybrids taking over 100% of vehicle builds.”
Key to increasing hybrids’ share of the market will be lowering their cost, Sherrill said at the Reuters Autos Summit in September. He said the hybrid battery systems his company sells to carmakers cost from $800 to $1,600, compared with $25 to $30 for a traditional car battery.
In addition to selling batteries for new hybrid cars, Sherrill said the company would also have a chance to sell replacement batteries. The batteries used in hybrid cars are warranted to last for about 100,000 miles.
We hope you found this report informative and helpful as you make your business plans for the next year. We also hope that this profile will help strengthen your commitment to the industry.
According to our research and industry indictors, progressive independent shop owners have an excellent opportunity to increase their profit and grow their businesses. Industry data also points to a secure future for shop owners and service repair technicians.
You can look to the staff at Underhood Service to continue to provide you with the business and technical information each month that will help your shop succeed as industry changes occur.
The staff at Underhood Service would like to thank all of those who provided information and statistics to this report. Interested parties seeking more data on the readers of other Babcox magazines can contact Bob Roberts, marketing research manager for Babcox Research at 330-670-1234, ext. 252 or e-mail at firstname.lastname@example.org
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