People are buying new cars again. According to a monthly report compiled by Ward’s Automotive Group, year-to-date sales of cars and light-duty trucks through March 2011 are up 15.7 percent over this time last year. The caveat is that sales in 2009 were so poor due to the Great Recession that even modest economic improvements are generating a significant improvement in new car sales. Still, this is good news for everyone, including the aftermarket, but there are some other trends worth watching too.
The Automotive Aftermarket Industry Association (AAIA) has just issued the first of what they call their Business Confidence Index, in which respondents rate their confidence in the future of the automotive aftermarket relative to the general economy. The survey will be updated each month, and it’s expected to “play a major role in predicting and/or validating major trends in the automotive aftermarket and the economy over time.” For its inaugural month, respondents reported they are roughly “twice as confident in the future of the automotive aftermarket” as compared to the general economy.
No reason is given for this confidence, and AAIA membership includes all segments of the aftermarket. So I did my own quick-and-dirty survey of a few trusted shops around the country, and it looks like the service business is generally up over last year too. This lends weight to the AAIA index because, as someone (George Witt?) once told me, the guy who takes the parts out of the box is the one who pumps money into the system. In other words, in the automotive aftermarket, as in all consumer-driven industries, money flows from the bottom up.
So people are buying cars and buying automotive service. But what kind of service are they buying from you, and how are they paying for it?
Even in good times, every shop owner I’ve asked has said that selling maintenance is not easy. Some customers understand that “recommended service” will keep their vehicle running trouble-free for a very long time. But unless there’s a warning light on the dashboard or the A/C quits blowing cold air, the vast majority of people don’t think about automotive service. You have to sell maintenance, especially in states that don’t have regular safety inspections.
When times are bad, how many more of your customers defer scheduled maintenance? How many have difficulty paying the bill? How often does a customer have to choose from a list of needed repairs because they can’t afford to really fix the car?
Economists tell us that individuals and businesses alike are in a better position to get through tough times when their debt is manageable and they have the resources they need to keep going. Capital investments should be made when times are good, and ideally that investment should be something that will help you get through the next storm.
And storm clouds are gathering. While the economy is technically growing, the new wealth is concentrating at corporate levels, not in our pockets. That means the recovery is fragile, and it would take little more than a serious increase in fuel prices to cause Another Big Problem. If business is good now, then maybe now is the time to consider investing in that factory scan tool, or the new tire changer, or in technician training. With the right resources, you’ll be ready for rain or shine.