Outlook For The Automotive Franchise Industry - Business Report IV

The outlook for the US auto manufacturers, their suppliers and dealerships is very uncertain. There are positive signs however. There are expectations that the government's massive stimulus package could start boosting economic growth sooner rather than later.  A surge in consumer confidence in April and May has added to hopes that the US economy will start to recover later this year. The latest Conference Board Consumer Confidence Index™ states that the proportion of those who said they planned on buying a car over the next six months rose to 5.5%, its highest in over a year. In short, consumers are considerably less pessimistic than they were earlier in 2009. The credit crunch is easing and this too will lead to a slow growth in new car sales in 2010.

The outlook for franchises operating in the auto industry is good. As discussed in this report there is a considerable untapped market of deferred and underperformed maintenance. Consumers are holding onto their cars for longer requiring more service and repair. The increased cost of cars relative to income means that consumers will spend more on in auto maintenance and reconditioning to help retain the value of their cars. The growing demand for navigation systems, car safety systems and entertainment and systems has created growing niche markets for auto franchises. Other niches have emerged in the delivery of “green” environmentally friendly services and products. This niche can only grow larger as more stringent emissions and fuel efficiency standards are introduced.  The increased complexity of cars means that owners are far less likely to service them themselves as they might have done in the past. They increasingly rely on auto repair shops with required technology and expertise.

Above all, the American love affair with the car continues. The car represents personal freedom, individualism and the American dream. Americans will continue to drive their cars in large numbers for the foreseeable future.

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