Several forces are at work such as the shrinking number of repair shops, the evolving capabilities of major types of repair outlets and more
Fort Wayne, Ind.—Competition in the DIFM repair of internal combustion engine (ICE) vehicles is increasing and will intensify in the near future. Several forces are at work such as the shrinking number of repair shops, the evolving capabilities of major types of repair outlets, the increased complexity of ICE repair, and the changing nameplate mix of the ICE vehicle population, among others.
Many dealer outlets are pursuing in the ICE repair market, which will significantly change the ICE vehicle DIFM competitive landscape, according to the latest Lang Aftermarket iReport.
“Facing reduced new vehicle volume since 2020 and with little improvement in sight, dealers are turning to the service bay repair and used vehicle sales (which involve repair) as primary profit sources,” states the analysis. “In addition, as all-electric vehicle (BEV) sales increase, dealers recognize that their service bay business will fall dramatically. This marks an inflection point for dealers as they focus on the ICE repair market to generate significant volume through their service bays.”
The following are key takeaways from the report.
Expanded Service Bay Marketing
In recent years, many dealers have adopted a strategy of marketing their bays to a broader range of vehicle age groups (dealers previously had focused on vehicles under five years old) and nameplates beyond those that they sold. To achieve these goals, many dealers have installed oil change lanes and offered quick service options to their customers.
Used Car Market
Used cars and light trucks provide dealers a needed supplement to the low new vehicle market and offer much higher gross margins than the sale of new models. In addition to the bay work to refurbish used vehicles to resale condition, dealers motivate used vehicle buyers to return their bays for repairs and maintenance by offering incentives and selling service contracts.
Increased Dealer Aftermarket Share
The expanded service-bay focus of dealers has had a positive impact on their repair market share.
Between 2015 and 2019, dealers increased their share of the expanding car and light truck repair market, adversely affecting independent (non-dealer) repair outlets.
Ripple Effects of COVID
The pandemic and subsequent supply chain challenges impacted new vehicle inventories and sales. Not only have dealers adjusted to lower new car and light truck sales by expanding their bay marketing efforts, but the historic increase in the value of used cars and light trucks has made the used market very attractive. Dealer service market share increased during 2020, and they have added to their DIFM share through 2023.
Dealers Focus on the ICE Aftermarket
As sales of all-electric EVs (BEVs) increase in the coming years, dealer bays will be the first to be adversely affected, since much of their business still derives from vehicles under five years old (BEVs require less maintenance). Dealers recognize that maintaining their service bay business will depend on expanding their share of ICE vehicle repair.
To accomplish this, dealers will need to further increase the range of ICE vehicles they attract to their bays, in terms of both vehicle ages and nameplates. This will increase competition in the repair and maintenance of ICE vehicles, with independent outlets increasingly challenged to compete with more aggressive dealer ICE repair activities.
Overview
This growing focus of dealers on ICE vehicle repair will create a new era of competition in the aftermarket as dealers expand the scope of ICE vehicles that they attract to their service bays and attach new incentives to the used ICE vehicles that they sell to bring the buyers back to their service bays for future repair and maintenance.
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