Automotive Franchise Report 2012 - Industry Trends

For entrepreneurs looking into the industry there are strong opportunities as a result of these and other industry trends:

Quality Over Price?

Though new-car sales have seen an uptick in recent months, a very large number of drivers are keeping their cars longer. The increase in the expected amount of time drivers are planning on keeping their current vehicles increases the chance for long-term relationships with auto service providers. “Prior to the recession we were a disposable society, if something broke we bought a new one rather than fix it,” says David Portalatin, an aftermarket industry analyst for market research company NPD. “The current consumer mindset is to maintain and repair and keep it working for a long time. We want to keep our cars maintained and on-the-road for a longer period of time than we did a decade ago. Value in terms of quality and long-lasting is what’s key to today’s consumers.”

Results from the 2012 Aftermarket Consumer Outlook Study, done by NPD, show that only nine percent of consumers surveyed in 2011 purchase the least expensive aftermarket products for their vehicle as their main determinant – a two percent drop from 2010. Forty percent of those surveyed said that they purchase the highest quality auto product regardless of price. Additionally, quality was the only attribute among the ten measured within the survey that registered an increase in importance over the 2010 survey with 45 percent of respondents rating it as “very important” on a five point scale from very to not at all important.⁴

Do It for Me vs. Do It Yourself

The mechanical attributes of automobiles have come a long way since the early versions. Cars today have essentially become a rolling computer network with features such as navigation systems, airbags, multimedia functions, and computerized engine components like position sensors and oxygen sensors – and all of this is before you get into hybrid or electric platform vehicles. Even the title for those who work on cars has slowly changed over the years from auto mechanic to auto technician to reflect the ongoing evolution.

While there are still some select areas where drivers can still do certain things on their own (e.g. oil changes), the complexity of technologies used in newer model automobiles has necessitated specialized knowledge and, maybe more importantly, specialized equipment for maintenance and repair jobs. Nowadays more consumers than ever before are comfortable with trusting professionals to handle the maintenance of their vehicles instead of considering if they could handle doing it themselves. This is made more evident by the fact even for professionals “it can be difficult to keep up with new certifications and repair practices,” says Byers.

Overseas Opportunities

During the recession there was a shift in the world automotive market. Through substantial government incentives, China experienced record auto sales and overtook the U.S. as the world’s largest auto market in 2009.⁵ And there are several other markets showing considerable growth as well.

For example, car sales in South American countries such as Brazil, Peru, Argentina, and Colombia also are rapidly rising. The increase in these countries is attributed to relatively stable economies, a fast expanding middle class, and easier access to credit.⁶

The U.S. auto market has since bounced back to a degree, but there are a couple of things that are undeniable: there are more vehicles on the road each year, and it’s not just Americans that love their cars. Consequently, all of these cars on the world’s roadways are going to need maintenance and repair eventually, and automotive franchises are in prime position to gain from the increase in prospective consumers.

⁴ NPD Press Release, https://www.npd.com/wps/portal/npd/us/news/pressreleases/pr_111101

⁵ http://www.usatoday.com/money/autos/2010-03-04-chinaconsumption04_CV_N.htm

⁶ Car Sales in Latin America Skyrocket, http://articles.latimes.com/2011/apr/22/business/la-fi-latin-america-cars-20110422

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