6:29 am, November 12, 2008
FRANCHISED workshops are to suffer five years of widespread closures, says a new report.
That’s because the UK service and repair market will fall by five per cent in that time. Doesn’t sound much? In monetary terms, that’s £400m down.
It’s already dropped by 14.5 per cent between 2000-2004, and 6.5 per cent from 2004-2008.
And, looking ahead, the Castrol Service & Repair Trend Tracker 2008 says numbers of UK service and repair outlets are to fall by one-fifth. Independents will bear the brunt of this, but franchised service outlets will also drop by 15 per cent in that time.
Blame lies at the door of the recession. The threat of cash-poor car owners switching from franchises to cheaper non-franchise garage chains and autocentres is a real one.
There will be plain fewer cars in the network. As new car sales decline, so too will the number of vehicles within manufacturers’ warranty period.
It is these cars many dealers rely heavily upon for workshop revenues. Although here, the ripple effect will hit independents and fast-fit chains from 2013.
Don’t forget improving car reliability trends, and extended service intervals, too. They are also keeping cars out of workshops.
So who’s going to survive this doom-laden scenario? The larger chains, says Chris Oakham, Trend Tracker analyst and co-author of the report.
‘They can achieve scale economies and greater discounts on parts purchasing, while also avoiding the overheads of the franchised sites.’
The relatively small manufacturer-authorised repair sector should also do well, with up to a third more sites opening over the next five years. This will offset some of the closures across other parts of the industry.
Oakham is in no doubt as to one of the key problems. ‘The common above-inflation increases in labour charge-out rates, that franchised workshops have introduced to maintain revenues, are unsustainable.’
‘Dealers will have to adopt a new way of competing with the independent and fast-fit centres, such as menu-pricing, different tariffs for different makes and ages of car, or even offering lower cost non-OE replacement parts.’
Adrian Brabazon, Castrol OEM & franchised workshop marketing manager, said: ‘This is one of the most thorough and comprehensive reports available to the industry, and that it paints such a gloomy picture is very worrying for the motor trade.’
