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Auto Dealer Whisper

Auto Dealer Whisper
 

Research Question: Will parts and services revenue growth at auto dealerships continue to accelerate for the 0-5 year-old units in operation based on its current momentum?

Companies Covered: AutoNation (AN); Penske Automotive Group (PAG); Lithia Motors (LAD); Group 1 Automotive (GPI); Ashbury Automotive Group (ABG); Sonic Automotive (SAH)

Report Available: October 16, 2013

 

Blueshift’s initial research shows auto dealerships expanding their parts and services segments and extending warranties to capitalize on an already-growing revenue stream, but a plethora of competitors could deter the potential for accelerated growth.

 

Observations

  1. Americans are buying more used cars and keeping their cars longer. The average age of all cars on the road in the United States in 2012 was 11 years, up from 9.4 in 2009. This is leading to increased importance on parts and services departments at dealerships. Also, with 26% of new cars being leased, there is an increase in the number of used cars available to dealerships and high demand among consumers for these low-mileage pre-owned vehicles.
  2. In an effort to increase customer loyalty to their parts and services business, auto manufacturers have begun to extend the lifetime and breadth of coverage of their warranties, increasing “bumper to bumper” offerings, as well as shifting from a 3-year to a 5-year coverage period for certain parts. These extensions allow auto dealers to gain revenue through servicing vehicles for a longer period while ensuring customers choose dealerships instead of competitors for their parts and service needs.
  3. Auto dealers will face challenges as they seek to expand their parts and services operating segments. Competition is high from independent dealers, local mechanics, auto parts retailers like AutoZone and O’Reilly, and a surge of online auto parts sales. Online auto parts had sales of $4.6 billion in 2012 with continued growth expectations over the next seven years, offering 20%-40% cheaper parts, accounting for 10% of aftermarket revenue, and illustrating a clear adoption by tech-savvy price-conscious consumers.

 

To better assess the growth potential of auto dealerships’ parts & services revenue streams, Blueshift will gather data and issue a market research report from independent sources in the following areas: corporate-affiliated new and used car dealerships, independent new and used car dealerships, auto parts suppliers, auto mechanics, and industry specialists.

 

To see other ideas Blueshift Research is currently working on, please click here.