Trend Tracker’s new Market Facts and Business Information (MFBI) study shows that the number and value of car services and mechanical repairs both rose from 1994 to 1998, but have since fallen despite growth in the UK’s car population.
Labour sales, which account for 63% of garages’ profits, have declined by nearly one third and average hourly labour charges have risen by 29% to compensate – but only in line with the Retail Price Index.
Spending on service and repair labour grew by 21% between 1994 and 2004 to reach £3.57bn; faster than spending on replacement parts, which increased by 17% to reach £3.81bn.
Between 2005 and 2010, MFBI forecasts volume demand for servicing will fall by 12% and volume demand for mechanical repairs will fall by 7%. Labour and price inflation will not be sufficient to prevent a 4% fall in combined car service and repair market value.
MFBI predicts that these trends will cause the cut of outlets providing car service and mechanical repairs by 7% from 24,175 in 2005 to 22,400 in 2010; independent garage numbers will fall by 12% from 13,200 outlets to 11,600.
The report says the fall in profits from aftersales will provide declining cross-subsidy support for the marginal profitability of manufacturers’ and franchised dealers’ car sales operations. With falling demand for replacement parts, car manufacturers will need higher profits from new vehicle sales and finance; franchised dealers will become increasingly dependent on used car sales and vehicle finance.
You can buy the report online at www.trendtracker.co.uk.