Growth for Auto Repair Shops Slows as Retail Sales Explode
As the south braces for another winter storm, adding the recent severe cold and icy conditions in much of the U.S., related car repairs may provide a much needed boost to auto repair shops’ slowing growth.
According to Sageworks, a financial information company, privately held auto repair and maintenance shops continue to see sluggish growth even as U.S. auto sales hit a six-year high in 2013.
Sageworks data shows private businesses providing auto repair and maintenance on average posted 1.7 percent sales growth last year.
According to Sageworks’ financial statement analysis, this makes the industry one of the slowest-growing out there.
And last year’s movement marks the smallest sales growth since 2009, when sales actually decreased.
Why the slow climb?
Peter Brown, Sageworks analyst, pointed out the exact cause isn’t clear, but increased sales may have cut down on the level of aging vehicles on the road.
“As we’ve seen record growth in sales in the auto industry — both at the retail and wholesale levels — it’s likely that people who’ve been buying cars in the last year or two have not needed repair work done,” Brown said. “Also, when you look at the data for public auto repair shops, they had stronger sales growth than the private shops, so it may be that the bigger repair shops gobbled up some market share.”
Specialized repair shops posted generally weaker sales growth than general auto repair and maintenance firms, though the reason behind the difference isn’t clear, Brown said.
But there is some good news for U.S. auto repair shops. Though growth was slow last year, profitability did improve.
Net profit margin nearly doubled, to 9.1 percent last year, from 4.7 percent in 2012, according to Sageworks’ data.