Have you ever wondered what Wall Street thinks about your business? Did you know that Wall Street even cares? Several times a year, I consult with investment analysts to help them understand what is happening in the independent repair sector. The funny thing is that I’m sure I learn far more from them than they learn from me.
Without breaking any confidences, I want to talk about a couple of key areas of interest for Wall Street, and ultimately, what drives their investment. If you are looking for a reason to read on, keep in mind what happened to the collision industry when big investors outside of the industry got involved in consolidation. Trust me, these people affect your business in far more ways than you might guess.
Not surprisingly, analysts see similar risks for our industry as we do. At the top of this list is the lack of qualified technicians entering the tech ranks. A second hot-button issue is with the aging VIO. Some years ago, I wrote a piece talking about the low number of vehicles sold during the recession in 2008-2011. The gist was that these key transitional vehicles that were moving to Advanced Driver Assistance Systems (ADAS) and vehicle connectivity were not going to be a training ground for the next generation of these technologies.
My Wall Street friends take it one step further and suggest that this gap will also affect the parts market, as it will be difficult for parts suppliers (both aftermarket and OE) to rationalize keeping these model year parts in the pipeline if they might never provide a reasonable ROI. The used car market, and by extension the 70% of the market that does after-warranty repair work, would normally be seeing these model years skyrocketing in their respective businesses. I don’t know about you, but that is not happening in my shop. Instead, I’m seeing the average vehicle age climb. This is something you may want to watch when considering what services and training to focus on in your shop.
The other area I am asked about most from the financial sector is in regard to auto parts distribution. Wall Street loves Amazon, and they are always asking when the Internet giant will take over as a major player in commercial auto repair. Amazon would certainly bring an interesting dynamic to the distribution model, but I have it on good authority that traditional wholesale suppliers are prepared to answer the Amazon Prime model. In fact, several have a high-speed delivery mechanism that could be even better in the pipeline.
I think that a disconnect between investors and the real world occurs because much of Wall Street’s intel is driven by publicly-traded companies. To look good, automotive investor sweethearts are actively involved in courting the DIY side of the market. Keep in mind that this segment is only 33% of the market. When you consider this, it becomes easy to see why some of your wholesale suppliers have such aggressive walk-in customer pricing to try to drive that segment.
There are several readily available sources you can turn to to see what trends are coming down the pike. The folks at the Aftermarket Auto Supplier’s Association and the Auto Care Association do a great job of disseminating this high-level data every year. Forrester and Polk are sources for online sales data. Several government agencies such as the Bureau of Economic Analysis and the Bureau of Labor Statistics publish reports that are also useful. Of course, stock reports for publicly-traded companies are a great source to show which way the winds of change are blowing.
My overarching point is that when you look only at things that happen in our industry from your own point of view, they can often seem counterintuitive. But if you follow the money, you can get a much better understanding of where we are, where we have been and (most importantly) where to be in the future.