Number of body shops at dealerships declining

Jan. 1, 2020
The number of on-site body shops at franchised car dealerships has continued to decline, according to the National Automobile Dealers Association's (NADA) annual state of the industry report.
The number of on-site body shops at franchised car dealerships has continued to decline, according to the National Automobile Dealers Association's (NADA) annual state of the industry report.

According to NADA's estimates, only 33 percent of franchised dealerships operate on-site body shops, down from an estimated 37 percent in 2007. However, over that same time period the number of dealerships has dropped precipitously, from about 21,000 to 17,700.

That means the number of on-site body shops has fallen from nearly 7,700 to 5,841, a decline of 24 percent in slightly more than three years. Receipts also are down, but not as much. Bodywork performed by new vehicle dealerships brought in more than $6.4 billion in 2010, down from $6.6 billion in 2009.

Dealership closings have been rampant during the past few years. The industry lost 1,550 dealers in 2009, and another 760 in 2010. According to the report: "The net dealership count decline in 2009 was as bad as that of the worst year for dealership losses, 1980, during the 1980-82 recession, a time when extremely high interest rates greatly reduced new-car sales. In the recent recession, real estate and banking problems persisted despite historically low interest rates; the net result was the drop in new-car sales.

"The typical recession causes some dealerships to go out of business," says NADA chief economist Paul Taylor. "In recent years, though, we've seen dealers closing not only because of the difficulty of economic conditions, but also because the manufacturers went through reorganization processes in recent years." Both General Motors and Chrysler closed thousands of dealerships as part of their government-funded restructuring.

Taylor is quick to point out, though, that the decline in body shops simply reflects a drop in on- site facilities. Many dealers own off-site body shops facilities, and it's unclear whether the number of those shops has diminished significantly.

"The dealer principles may still have an interest in body shops, just not on the dealership location," Taylor says. "It frees up space for retail operations, and the separation in some cases can simplify conformance with specific environmental regulations, or provide a perceived advantage in legal liability."

 

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Moving the body shop off site also can have other business benefits.

"One of the things that drives off-site body shops that are separate from the dealership is so that they can handle cars from a wide range of dealerships," Taylor says. "They also have a more specific technical ability on site as a result of that. They wind up being better capitalized body shops if they are drawing from a wider range of dealerships and/or the general public in order to support things like technical expertise and equipment to deal with handling body work."

The good news for dealerships was that total dealer service, parts and body shop sales reached $78 billion 2010, and sales by the typical dealer were up by 5.2 percent. Total service and parts sales for the industry were up by 1.9 percent, after having dropped by 1.8 percent and 6.9 percent in 2008 and 2009, respectively.

After a 19.2 percent decline in 2009, wholesales parts sales posted a 1 percent improvement in 2010. Wholesale parts accounted for approximately 27 percent of parts sales for dealerships last year.

Many dealers also have begun to offer non-OEM parts by signing up with leading aftermarket providers like Mighty Auto Parts to become franchise locations or even act as regional distributors. "Aftermarket parts remain an important part of the overall parts and service picture," Taylor says. "An increasing number of dealers are doing business in that area, and there is lots of room for growth in the future."

While dealers continue to face robust competition from aftermarket shops, competitive pricing and upgraded facilities helped draw in service customers. Service growth was also powered by stronger light vehicle sales, in addition to recall activity and the aging vehicle population (the average vehicle age is now 10.2 years, according to NADA's estimate).

Average dealership service and parts sales were $4,386,547 in 2010, representing 14 percent of total dealer sales. That's a slight decrease as a percentage of total sales, as the figure for 2009 was 15.7 percent.

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