The professional auto care industry is undervalued by its customers and the people on Wall Street. On its own, the U.S. aftermarket industry would rank as the ninth largest economy in the world. It is four times greater in size than the new-car industry, but when it comes to our image, I fear the perception is still that of the dirty mechanic working in a tiny shop.
Every month, I see startups, social media platforms and tech companies that have never turned a profit or delivered a finished product with a valuation in the billions. Even the much-ballyhooed Tesla has not turned a profit and is racking up considerable debt, but investors still keep the stock price high due to rampant speculation.
In the aftermarket, I see viable companies with cutting-edge technologies, large customer databases and efficient infrastructure that are valued at less than their inventories and facilities are worth. Most of these companies are growing and have proven business models, but they play second fiddle to some teenager with an idea for a phone app.
The aftermarket is changing and is being forced to keep pace with evolving technology and consumer tastes. It is a fearless industry that is not afraid to service vehicles that are two or 20 years old, and it is one that is not afraid to find new ways to retain old customers and attract new ones. In all, the auto care industry adapts more efficiently and faster than any other. Why? Our end users need to get to work and back again.
The older I get, the more I realize that the economy is in a constant state of flux. Good times are followed by a sudden and painful fall as the bubble bursts, and the reality of simple household economics sets in.
Economists think there is a bubble building in the tech sector. For example, Uber has a market valuation of around $60 billion. But, the company will have an estimated revenue of only $3.5 billion this year, and it will lose almost a billion dollars thanks in large part to subsidies for the company’s drivers. Uber is a shell game, and any growth is pure speculation. Eventually, the ride will come to a stop, and someone will be left holding the bag.
The auto care industry continued to grow even during the Great Recession, and it continues to grow today. Whenever the next bubble bursts, the aftermarket’s 3-5% growth in revenue year-to-year and healthy profit margins will be a safe bet for investors while everybody else is busy looking for the “Next Big Thing.”
Our industry is not a glamorous one. But with hard work, a person can be prosperous. It is not crazy money, but they are honest profits that are economically sustainable for everyone in the aftermarket supply chain. I know this because the aftermarket has provided a living for three generations of my family.
The professional auto care industry is an economic underdog. When the economy hits hard times, we keep people on the roads without missing a beat. About the only thing we speculate on is if the tool truck will show up. n