I have been asking a lot of shop owners and technicians one question, “how’s business?”
In all honesty, I’ve been surprised at the responses. At the shop level, we are not doing too bad during these tough economic times.
It is safe to say that we are in the worst recession in more than 20 years. The media is fixated on gas prices and the cost of a barrel of oil. Its painful, but its not changing consumers’ driving patterns dramatically. In fact, the changes they are making are helping the automotive repair industry and shops! A lot of shops owners and technicians say they are busy and that there has not been a slow down. Most shop owners are saying that their business is either flat or growing.
Some people are quick to cite that the miles driven are down by 4% to 7% for this year according various surveys. Its a scary statistic, but when you crunch the numbers and look at new car sales it is not that bad.
Robert Gross, the CEO of Monro Muffler Brake Inc., put it in context in a recent earnings conference call:
“While consumer confidence prevents people from making purchases, the average driver is reducing their driving by 7%. It is less than that because there are more cars on the road but the average individual is driving 7% less on an average miles-driven per year of 13,000 miles. That is 800 miles a year. That is effectively one fourth or one fifth of an oil change. That is 800 miles off 50-60,000 before they get their shocks or struts replaced; brakes, 20-30,000 miles. So in the realm of actually negatively impacting our business and leading into the summer driving months you are probably not going to hear that as one of our excuses.”
Last month, I visited my old stomping grounds of Detroit, MI to see how some of the shops on North Woodward were doing. The eight-mile stretch between Ferndale and Birmingham has more shops per mile than any other road in the country. But, the Detroit area has been ravaged by layoffs by the automakers. Iconic shops like Vinsetta Garage and Wetmores on Woodward are doing just fine according to their owners. But, other shops like Bruce’s Alignment and Airline Auto Electric were gone.
Some of my technician friends chalked it up to the economy, while others said that they were bound to close no matter what. I think that there is some truth in both opinions.
One shop owner commented the mix of work is changing. A lot of his customers who would have traded in their current vehicles are keeping them long after they are paid off. The repair work and scheduled maintenance they have put off is now a rational purchase, when compared to a new vehicle monthly payment. Another shop owner is noticing a lot more of his customers are purchasing smaller vehicles like used Ford Escorts, Dodge Neons and Geo Metros as primary or secondary vehicles due to their exceptional fuel economy. Some drivers are willing to authorize repairs that would have been a tough sell not too long ago. Every shop owner said their costs are going up. For some, even if revenue was flat or growing, profits were down. This has forced some shop owners to look more closely at how to do business.
One shop owner I talked to said that she raised the shop’s labor rates, and not one customer complained. Another shop owner stopped offering $19.95 oil changes and $99 brake specials, and he remarked that he should have done it a long time ago.
In my opinion, the auto repair industry will come out of this downturn stronger and wiser.