Lower new vehicle sales will ratchet up competition between dealers and independent shops in the repair and maintenance of ICE vehicles
Fort Wayne, Ind.—The likelihood that tariffs will delay the sales recovery of the new vehicle market will motivate dealers to seek ways to replace this loss of profits. And there’s a growing focus by dealers on ICE vehicle repair as a major hedge against those lower sales in other aspects of their operations, which will create a new competition in the aftermarket.
According to the latest Lang Aftermarket iReport, dealers will expand the scope of vehicles they attract to their service bays and work to bring used buyers back to their service bays for future repair and maintenance.
“This year was expected to mark a turning point in the new vehicle market’s efforts to regain the high annual sales levels it achieved before the 2020 onslaught of COVID-19,” states the analysis. “However, new tariffs on imported vehicles and foreign-made parts used to assemble vehicles in the U.S. have dampened these hopes.
“With the potential for significant declines in new vehicle volume, dealers are turning to the repair market and used vehicle sales (which have repair market implications) as primary profit sources to offset the anemic new vehicle market.”
The report notes that even when new vehicle sales revive, dealers will remain focused on their service bays, recognizing that as EV sales increase, their service bay business will decrease.
During 2020 and 2021, new vehicle sales fell by more than two million each year from the record-high levels between 2015 and 2019, when average annual sales topped 17 million. While dealers adjusted to lower 2020 and 2021 new car and light truck sales by expanding their bay marketing activities, the increase in the value of used cars and light trucks has made the used market attractive to dealers.
Dealer service market share increased during 2020 through 2023. Although the 2024 analysis will not be available for several more weeks, Lang Marketing believes that dealers’ bay business continued its upward swing last year.
As sales of EVs increase in the coming years, dealer bays will be the first to be affected since their repair business is mainly derived from vehicles up to five years old. Dealers recognize that maintaining their service bay business will depend on increasing their share of ICE vehicle repair.
To accomplish this, Lang reports that dealers must expand the range of ICE vehicles they attract to their bays, both in terms of vehicle ages and nameplates.
This will ratchet up competition in the repair and maintenance of ICE vehicles, with the independent (non-dealer) segment of the aftermarket increasingly competing with more aggressive dealer ICE repair activities.
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