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Dealerships focus more on service and repair as new-vehicle sales decline

Expansion of operating hours, increased quick service lanes, broader nameplate repair and lower rates are competing with independents

Fort Wayne, Ind.—As new-vehicle sales are down from record-high levels of 2015 through 2019, the number of vehicles up to five years old on U.S. roads will decline between 2020 and 2022 due to factors such as the chip shortage and COVID-19, according to a new report.

In response to fewer young vehicles, many dealerships are shifting their service bay focus to an older and all-makes vehicle mix and promoting used vehicle sales — which results in refurbishing and future maintenance — and it will have “important consequences” for the growth of dealerships’ repair services in the coming years, stated the 2022 Lang Aftermarket Annual analysis.

The following are a few takeaways from the report.

Fewer Vehicles Up to 5 Years Old

Car and light truck annual sales averaged more than 17 million vehicles between 2015 and 2019, a record-high level from which the 2020 market fell precipitously. Lang Marketing estimates that between 2020 and 2022, there will be a decline of nearly five million cars and light trucks up to five years old on U.S. roads compared to the previous five years.

Dealerships Respond to Slumping New Volume

Dealerships are the first to feel the service bay impact of lower new vehicle sales, since they have traditionally focused on the repair of cars and light trucks 5 years and younger.

To compensate for fewer young vehicles, dealerships are promoting bay service to an expanding mix of vehicle nameplates and age categories, and increasing their used vehicle volume, with the refurbishment and maintenance business that this brings to their bays.

Focusing Dealership Bays on Broader Vehicle Mix

To make their bays more attractive to a wider mix of vehicles (beyond the nameplates that they sell new and older vehicles), many dealerships are making bay service more convenient by expanding operating hours and adding quick service lanes.

Competitive Pricing

Dealerships are boosting their appeal to a broader mix of nameplates and a wider range of vehicle age groups by making their repair prices more competitive with those of independent repair outlets, especially for older vehicles whose owners are usually price sensitive.

Tire Sales and Oil Changes

Many dealerships are aggressively promoting tire sales and oil changes to expand their bay reach to a broader mix of nameplates and vehicle age categories. This increases the likelihood that these vehicle owners will return to the dealership for other types of repairs, because of the repair relationship that dealerships have cultivated with them.

Quick service lanes have been effective in attracting nameplates other than those sold by dealerships and an older mix of vehicles, particularly in terms of oil changes and tire sales.

Hot Used Vehicle Market

The current used vehicle market in the U.S. is encouraging many dealerships to promote used vehicles as a means of developing their service bay business.

The used vehicle market offers dealerships a number of benefits: used vehicle sales (with high profit margins) to replace the lower volume of new cars and light trucks, refurbishing of vehicles to make them resale ready, and future repairs on the used vehicles they sell.

The growing dealership bay volume in the broader mix of nameplates and older vehicles (whose owners are often price sensitive) is expanding the use of non-OE parts in dealership service bays. This provides independent parts manufacturers and distributors with the opportunity to increase their parts sales to dealership bays.

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