The recession will result in severe market contraction and widespread closure of franchised workshops and independent garages in the UK over the next five years. That’s just one of the disturbing findings of the authors of the Castrol Professional Car Service & Repair Trend Tracker 2008.
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The report predicts that the UK service and repair market will fall by five per cent over the next five years, equivalent to GBP400m of revenue per annum at today’s prices. And this decline is on top of previous drops of 14.5 per cent from 2000-4 and 6.5 per cent from 2004-8.
The impact of this downturn will last for many years, according to the research, as the retail downturn will reduce the number of cars within manufacturers’ warranty periods, upon which many dealers rely heavily for workshop revenues.
Franchised service departments will most severely shoulder the effects of this contraction in aftersales work, although the ripple-effect through the car parc will also impact independent garages, autocentres and fast-fit chains beyond 2013.
“The recession will see motorists seeking value for money to service and maintain their cars, meaning non-franchised garage chains and autocentres are among those most likely to benefit,” said Chris Oakham, Trend Tracker analyst and co-author of the report. “The larger chains are best placed because they can achieve scale economies and greater discounts on parts purchasing, while also avoiding the overheads of the franchised sites.”
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By GlobalDataA gradual shake-out of service and repair supplier numbers is already under way and will continue as the credit crunch impacts on potential car buyers’ spending power. This will add to the long-term trend of increasing car reliability and extended service intervals.
The Castrol Professional Car Service & Repair Trend Tracker 2008 records a 17 per cent fall in the numbers of service and repair outlets in the marketplace since 2003 – much of which is accounted for by over 3000 independent workshops. The researchers forecast a further 19 per cent fall in service and repair outlets by 2013. Most of these closures will again be borne by the independent sector, but the franchised workshop sector could also see the closure of 15 per cent of sites.
The relatively small manufacturer-authorised repair sector is likely to benefit, however, with up to 32 per cent more sites opening over the next five years. This will offset some of the closures across other parts of the industry.
“The common above-inflation increases in labour charge-out rates that franchised workshops have introduced to maintain revenues are unsustainable,” says Oakham. “Dealers will have to adopt a new way of competing with the independent and fast-fit centres, such as menu-pricing, different tariffs for different makes and ages of car, or even offering lower cost non-OE replacement parts.”
More: The Castrol Professional Car Service and Repair Trend Tracker 2008 (download)
