The fleet is old, getting older and becoming a bigger share of our vehicles in operation — that means more business
First it was the Agricultural Age in the 18th century. Then it was the Industrial Age of the 19th century. The 20th century is commonly referred to as the Information Age. Now we find ourselves in the first quarter of the 21st century wondering what will happen next. Are we in the “Technology Age?”
And if we are, how will this affect our businesses? Will we survive and prosper? To the last question I shout out an emphatic YES! To the first, yes, it will affect our businesses.
We’ve all heard that our vehicles are second only to our homes as an expense. There are over 284 million vehicles in the fleet, and a total of $1.5 trillion in loans. In fact, loan payments average about $725 a month per vehicle. That’s an increase of $75 over last year, and more than 100 million Americans are in hock every month. And used vehicles are averaging $625 per month in payments.
Not a lot of help there for the budget minded. In fact, many believe that between housing and cars we’re putting off families, buying a bigger house and more. What this means to you is that the fleet is old, getting older and becoming a bigger share of our vehicles in operation (VIO). That means more business.
News from the lenders doesn’t offer much hope for those with low incomes or bad credit. The typical credit score for a car loan at Chase has been reported to be 620 or higher, with a rough average of 700. Toyota Financial reports their typical loan has a credit score of 744. The average U.S. credit score is now 718. And younger means lower credit scores. What this means to you is that while the 55-plus crowd are able to buy new with great credit terms, it’s not so much for the under 55 crew. There is still plenty work to be done.
Is it any wonder why the average age of a vehicle is now 12.5 years, up 3 months since 2022? Highest ever. Older average age means you, the aftermarket, whether repair or parts, will be the savior for many people, as the overall repair expense of a vehicle according to the AAA is roughly $800 per year, or about $67 per month. A lot less than a loan payment. What this means to you is that you offer an amazing value as compared to loan payments. More business for you.
As for EVs, I must take a victory lap here. Many months ago, based on the demographics of the buyers, and how the vehicles were being used, EVs were not the flash the politicians made them out to be. If you need proof, look at releases from major vehicle makers and others to see they are pulling back their grandiose EV plans. As soon as all of the government money stopped and losses began hitting the bottom line it was game over.
Recently Goldman Sachs put out some news that, while 25% of vehicles will have some electric, the great many are hybrids, not EVs. And that 95% will still rely on fossil fuels. According to McKinsey, the share of EVs in the overall fleet is .5% and expected to be 1.5% by 2025. What this means to you is that there is no reason to hang up your parts and tools anytime soon. EVs will not be the death of the aftermarket.
There is little doubt that we are in another vehicle evolution — similar to the 1980s. But, this isn’t a revolution. Instead there will still need to be real people with real skills to repair and maintain the vehicle of the future. Okay, I’ll concede one thing, it may well be that there comes out of the blue some amazing technology to move people.
And yes, there are tech disruptions such as ride sharing, ride hailing, electrical, amazing new vehicles and more. We will evolve and learn how to repair all of these and there are still cars used at Uber, Lyft and others. True as well for self-driving and robo taxis. Both a ways from coming to a road near you soon.
There are a couple of definite things that do need to be addressed. Fortunately the aftermarket is already there, too. One is rural versus metro markets. New technology needs support. As an example, it doesn’t tend to be popular in rural areas to buy an EV truck. Just ask those who have launched EV pickups. No chargers. Really poor range. Not good in heat and cold. A history of working with good old fashioned ICE vehicles and equipment. While there are surely hybrids to be found away from metro areas, they are being handled by the aftermarket already. Parts and training are both available now.
Shops and techs — Don’t undersell yourselves
Another issue is capacity and the shortage of techs. In my humble opinion, neither you nor your techs are charging enough. From all that I’m able to find, the average hourly shop rate is $60 to $175 per hour, the higher numbers in larger metro area or specialists. The typical wage of a tech is $41,000 to about $70,000. The median is $58,000. Yes, there are a few specialists and techs in heavy metro markets that may earn north of $100,000, but they are few and far apart.
Looking at the shop rate and the hourly wage, would you find any other profession — and it is a profession — that charges as little? Accountants, attorneys, MDs, electricians, plumbers … any? It’s time to confess we are as much a profession as anyone else and need to be paid that way. We lose too many techs to the other professions simply because they pay better and one could argue that working conditions are generally better.
Back to the initial questions. Will we survive? Will we prosper? Again, an emphatic yes. As long as we grow, train, evolve and address our customer needs and issues.
At a young age, industry veteran Tom Langer started detailing cars for his family’s dealerships, which then led to work in the jobber and warehouse business, along with a machine shop and auto body shop. He held a variety of positions with an auto parts manufacturer for 10 years, and remained in the industry working with shops, warehouses and manufacturers in research and more.