The second report is the Repair Trend Tracker, run since 2005, and based on consumer surveys too. The third report is the UK Car Service and Repair Market report, published every two years since 1994, looking at market size and trends and the garage supply structure in the UK.

The USP of this body of work is the trend data reaching as far back as 1987, crucially before the recession in the early 1990s, which enables us to produce the forecasts going forward five years to 2015 contained in the new report. We shall not bore you with the details of the econometric model utilised, but suffice to say it has produced surprisingly accurate results in the past.

Of the various inputs to the forecast model, the effects of each vary and can be interdependent. This time, as in the recession of the early 1990s, the dominant variable was the fall in new car sales leading to changes in the age profile of the UK car parc. Of course new car sales have been falling since the peak in 2003 and thus the number of cars up to four years old, so essential to dealers’ service departments, had been falling for a while to stand 15% below its peak at the beginning of the recession. By the end of next year the four-year car parc will be 25% lower.

The recession of the early 1990s resulted in similar falls in the four-year car parc, and the effects on the servicing and repair market this time will be the same, although ameliorated by longer new car warranties. Quite simply, the ups and downs of each car parc age segment affect, in turn, the market providers. Thus franchised dealers draw most of their work from the four-year car parc, as the new report illustrates, and therefore a 25% fall in this segment obviously reduces the potential customer base for dealers’ workshops. In other words, the changing car parc age profile, and the number of cars in each age segment, effectively transfer work between provider sectors. So with such concrete historic trends available to us, the forecast was relatively easy, and we trust accurate.

Written by Trend Tracker director Chris Oakham, this piece first appeared his column in the subscription monthly Auto Retail Bulletin in June 2010. (See //auto-retail.co.uk
for subscription details.)

Chris Oakham

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electric vehicles car servicing

The most recent editions of these compendiums give some reason for optimism. For example in 1952, buses accounted for 42% of all travel (expressed as billions of passenger kilometres) followed by cars at 27% and rail 18%. In the latest year for which complete statistics are available, cars were the basis of 84% of all travel with buses and rail on 6% and 7% respectively. So cars are firmly entrenched as the UK’s premier mode of travel and it would require a seismic shift in public transport to compete. Indeed the forecasts provided by the DfT going forward to 2025 anticipate a 33% increase in the number of cars compared to 2003.

The popularity of cars is further emphasised by the growth in driving licence holders – up from 48% of all adults in 1975 to 75% in 2008 to around 34.5 million. Access to cars for households has also increased dramatically, from a mere 16% of households having one or more cars in 1952 to 76% in 2007, when 6% of households had three or more.

On the downside, car owners are driving less, according to the DfT. In their 1995/1997 survey, they calculated average annual mileage as 9,700 miles. In 2008 it had fallen by 10% to 8,690 miles per annum, with private motorists averaging 8,130 miles and company car users 19,760. The fall in average mileage probably has a lot to do with multiple car ownership.

The DfT’s analysis of MOT testing reveals the potential of this area of aftersales business. Before 2006/07 MOT testing was not computerised, so the data are not as robust, but in 1999/00 some 22 million cars were tested and 7.4 million failed. In 2008/09, with computer data available, 28 million cars were tested and 10.2 million failed. The major areas for failure in 2008/09 were lighting (18.9%), brakes (17.1%) and suspension (12.2%). While a reasonably significant proportion of MOT tests is paid for by dealers when selling used cars – perhaps three million tests –MOT testing clearly represents an important profit centre in its own right, in addition to the ten million failures requiring a fix.

Another point of interest from these reports is how many people are employed. The DfT lists garage owners and proprietors, mechanics and technicians, car body operatives, and tyre and windscreen fitters, so there are many other occupations not researched by the DfT. The total for these four categories in 2008 was over 300,000, with mechanics and technicians the largest contingent at 207,000.

Overall, then, the facts and figures paint a picture of a large and essential sector of the UK economy, and leave you with the overwhelming impression that the car business is here to stay, along with cars.

Written by Trend Tracker director Chris Oakham, this piece first appeared his column in the subscription monthly Auto Retail Bulletin in May 2010. (See //auto-retail.co.uk
for subscription details.)

Chris Oakham

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electric vehicles car servicing

For example, a few years ago we carried out a series of site visits for a dealer group client looking specifically at gross margins in their service departments, and with their permission, we can share one of the findings. The group’s minimum margin for sublet and sundry sales was fifteen per cent. But the actual average across all the sites we visited was just over fourteen per cent. On closer inspection, we found the majority of sites just added 15% to the cost price of sublet and sundry sales, which is a margin of 13%. To achieve a minimum 15% margin they should have added 17.6% to the cost price.

In this case, the difference in gross profit between a 13% and 15% margin is around £2,000 per annum for the average service department, because sublet and sundry sales only make up eight per cent of sales. However this group’s minimum margin on sublet and sundry was too low anyway – between 17.5% and 21.5% is average. At this higher level, more than £3,000 potential profit is lost because of the wrong mark-up.

We have seen similar instances of incorrect mark-ups that cause far larger losses in potential profit in sales, service, bodyshop, and parts. We have also seen evidence that ignorance of this relatively simple maths can affect the ability to negotiate good deals with suppliers and customers.

In the body repair market,for instance, bodyshops invariably have an inflated idea of their margins on refinish paint. When you research the specific question of paint margins, the results usually range from thirty-five to forty-five per cent. Yet the average gross profit margin achieved on paint is a fraction over 30%. In fact body repairers are probably quoting the discount they get from their suppliers – their so called ‘buying discount’. They are not taking into account discounts they give to work providers and customers, the vagaries of computer estimating systems, or any wastage (which can be huge for the more careless).

Going back to the dealer group case study, the upshot of the gross margins audit was a five-hour training course on mark-ups and margins. This extended to all departments across the group, and individual courses included a mixture of departmental delegates. A further audit after twelve months revealed a big improvement, with some of the best results coming from accessory sales through the showroom. Getting the basics right can make all the difference.

Written by Trend Tracker director Chris Oakham, this piece first appeared his column in the subscription monthly Auto Retail Bulletin in June 2006. (See auto-retail.co.uk
for subscription details.)

Chris Oakham

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electric vehicles car servicing