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Changing Oil and Changing Times: The Independent Auto Repair Service Dilemma

Apr 2, 2008
If you see fewer auto repair shops in your area then you are witnessing a trend that is spreading throughout the auto repair industry. The small independent auto repair shop is getting squeezed by both the dealers and the 'backyarders' creating shrinking margins and putting many auto repair independents out of business.

The global problem is the auto repair and service market has been shrinking in the last ten or fifteen years. Technology has made cars much more reliable with fewer breakdowns, repairs and scheduled maintenances.

Many manufacturers offer some sort of 100,000 mile warranty meaning that the independent will get little chance to work on that car for the first 5-10 years it is owned.

As new car sales margins have gone down, VW, Chevrolet, Toyota and other manufacturers are looking to their service departments to make up the difference.

Additionally many dealers such as Porsche and Saab have been adding other value added benefits such as a loaner car while repairs are being made. Independents are now being forced to give courtesy rides to customers in an effort to keep up with the dealers since customers now expect this service.

Furthermore dealers such as Mercedes and Ford are now directly offering specials on services making their dealer prices comparable to independent repair shop prices.

But it's not just competitive pricing that is worrying the independents.

The battle for skilled labor is also being won by the dealers: the dealers have always competed for skilled labor and now have become even more aggressive. With fewer young people entering the auto repair profession and opting instead for careers such as health and technology, the total talent pool of the top skilled auto technicians is shrinking.

Increasingly it is becoming harder for independents to hire and retain these highly skilled employees. As an automotive technician, would you rather work for Audi or Joe's Garage?

The dealers are picking up the best 'mechanics' or as they are known today, 'technicians.' A top end dealer technician can make $100,000 a year with benefits while an independent shop owner would have to gross over a $1,000,000 a year to make that and still have to pay for their own benefits and social security.

Because of these economic realities many independent owners are now closing their shops and going to work for GM, Nissan and other dealers.

This puts the independent auto repair shop at a distinct disadvantage when diagnosing and repairing difficult drivability, fuel injection, electronic and computer related problems.

Additionally, if a diagnosis is made and a part needs replacing the dealer will have it in stock, not only verifying the diagnosis but greatly speeding up the repair time and increasing customer satisfaction. Big advantage Cadillac and Mercedes.

But it's not just a skilled employee war. Techs cannot fix cars without information and there has been a long and ongoing dispute between the dealers/manufacturers and independents over technical information access and diagnostic tools.

The manufacturers claim that their technical information is proprietary while the independents claim the information should be available to anyone that owns or fixes that make of car.

If the dealers wanted to they could stop all outside repairs on their vehicles but the problem is there are not enough dealerships to service all geographic areas, especially smaller towns and less populated areas. So the manufacturer/dealer gives out some information but not all, often charging the independent repair shops for this information.

Not only does the independent have to buy some parts from the dealer, but also some of the technical information as well. Big advantage Honda and Dodge.

Some independent owners simply watch their business steadily decline over the years as they go out of business. Younger independent owners are willing to work harder and for less financial reward hoping industry conditions will eventually improve.

In essence the independent auto repair industry has matured and is now in a decline. Some consolidation is going on but much of the repair work has either disappeared or is now being done by the dealers, auto repair chains or one person 'backyard' shops.

The opportunities are there for those that want to work hard but those opportunities are increasingly limited. In a declining market, only those independents that can develop new competitive strategies will survive and thrive.

As with all mature and declining markets there will be new opportunities for those owners that can adapt and make the changes. Those independent auto repair shop owners that don't modernize, strategize and compete will go the way of the Edsel and Model T.
About the Author
Jack Deal has worked in the auto industry for many years and is the owner of JD Deal Business Consulting, Monterey and Santa Cruz, CA. Related articles may be found at http://www.jddeal.com/blog/strategy http://www.freeandinquiringmind.typepad.com
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