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Report forecasts decline of service outlets

Car service suppliers have been raising prices in the last decade to offset a decline in demand for servicing.

The latest Market Facts and Business Information report, 'UK service and mechanical repair market' shows that between 1994 and 1998, the volume of mechanical repairs carried out on passenger cars increased by 19% to reach 22 million - due to stricter MOT testing and a relatively high failure rate together with a comparatively old car parc. But from 1998 onwards, the volume of mechanical repairs began to decline, falling by 15% to reach 18.9 million repairs in 2004.

Volume demand for car servicing declined by 8% between 1994 and 2004 to 31.5 million services; the frequency of servicing has fallen from 1.44 services to 1.06 services per annum. More significantly, the decline in the number of services combined with less time required per service, has resulted in a 32% decline in the number of labour hours that garages have been able to sell.

However, service and repair market value has remained steady, at £3.68 billion for car servicing and £3.70 billion for mechanical repairs, due to a 21% increase in average service costs and a 26% increase in average repair costs over the period between 1994 and 2004.

Over the next five years between 2005 and 2010, although the car parc is expected to grow by 11% to 33.8 million cars, the service market is forecast to decline 12% in volume and 4% in value while the market for mechanical repairs is forecast to decline by 7% in volume and 4% in value.

Consequently, the number of car service and repair outlets in Britain is forecast to decline by 7% by 2010. Independent garages are expected to see the largest decline in number with a 12% fall in the number of outlets.

The author of the study, Trend Tracker Ltd director Robert Macnab, says: "Franchised dealers have a significant disadvantage when competing with independent garages in that their service costs are 48% higher at an average of £197 compared with £133 at independents. Hourly labour charge-out rates average £59 at franchised dealers and £37 at independent garages.

"This is largely due to rising labour costs as service visits on younger cars become less frequent, and the unwillingness of franchised dealers to use generally lower cost ‘non-OE’ or ‘OE-equivalent’ parts on the cars they typically work on. Around 8% of parts used by franchised dealers are non-OE compared with 52% in independent garages."

"Franchised dealers face a significant fall in market share for servicing - unless they win a larger share of the service market for older cars. They can’t simply keep on putting up the charge out rates."

  • MFBI is a specialist researcher. The ‘MFBI UK Car Service and Repair Market’ study surveys the structure and future development of the market from 1994 to 2004, with forecasts to 2010. It costs £775 For more information: www.trendtracker.co.uk/carservice.htm
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