Automotive Repair Shops
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Industry Overview
The US auto repair shop industry includes about 170,000 establishments (single-location companies or branches of multi-location companies) with combined annual revenue of $90 billion. Large companies include Midas, Monro Muffler Brake, and Belron US. The industry is highly fragmented: the 50 largest companies generate less than 10 percent of revenue.
The industry includes fast lube/auto oil change services and car washes, which are covered in separate industry profiles.
Competitive Landscape
Demand depends on car usage and the number of cars on the road. The profitability of individual companies depends on convenient location and good marketing. Large companies can maximize use of expensive diagnostic equipment and have advantages in purchasing, distribution, and marketing. Small companies can compete effectively by providing superior customer service or offering specialized services. The industry is labor-intensive: average annual revenue per worker is about $100,000.
Competition includes other venues that provide automotive services, including some gas stations, car dealerships, and branches of chain stores, like Sears and Kmart. Auto repair shops perform an estimated 70 percent of repairs for out-of-warranty vehicles, according to the Automotive Service Association (ASA).
Products, Operations & Technology
About 70 percent of industry revenue comes from mechanical repair and 30 percent from collision repair. Mechanical jobs include repairs to "undercar" systems, (mufflers and exhausts, transmissions, brakes, and shock absorbers) or in "underhood" systems (engines, electrical systems, radiators). Body work includes exterior and interior repair and glass replacement. Other services include oil changes and car washes. Companies may sell parts for do-it-yourselfers (DIY).
The industry includes national and regional chains, franchises, and independent operators. The majority of auto repair shops are independently owned, although many are franchises of large companies. Car repair shops may specialize in a particular field of repair, such as brake jobs or collision repair, because of the specialized knowledge and equipment required. Most companies in the mechanical field provide generalized services, such as regular maintenance, in addition to specialty services.
In auto repair shops, estimators review vehicles and give customers quotes on the approximate cost of a repair. Estimators may rely on car makers' recommendations or computer software to help develop an accurate estimate. Repairs sometimes uncover other problems, resulting in additional work and charges in excess of the estimate. Regardless of the cause of error, inaccurate estimates have resulted in unhappy customers and general mistrust of the industry.
Mechanical repair shops deal mainly with deterioration of parts due to normal wear. Common repairs involve air conditioning, brake, transmission, and electrical systems. Because of the increased technological complexity of newer cars, most shops have specialized diagnostic equipment to identify and fix problems. Shops typically keep an inventory of replacement parts or have arrangements with quick delivery parts suppliers. Experienced, well-trained auto technicians are critical to quality repair work. Companies may also employ apprentice or entry-level technicians.
Collision repair involves two distinct types of repair: body work and painting (or refinishing). In the body shop, technicians correct damaged car frames and panels. Each repair is unique and depends on the accident that caused damage. The painting process includes several standard steps and operates more like an assembly line. Paint preparation includes feathering (smoothing the surface) and priming. Paint application typically involves applying multiple coats. Finishing provides a protective clear coat. Collision repair jobs usually take four to eight days. Equipment includes welders, paint booths, frame machines, and plasma cutters. Key staff includes framers, technicians, and painters.
A typical mechanical repair shop is 5,300 square feet and has seven service bays, according to the Automotive Service Association (ASA). The number of repairs usually ranges from about 200 to 250 per month. A typical body shop is 12,000 square feet and has 17 service bays. Body shops average about 85 repairs per month.
Auto repair shops may buy replacement parts and supplies from full-line vendors, such as NAPA, or have supply arrangements with multiple distributors. Some large companies have purchasing contracts with specific suppliers. Chains of repair shops often maintain parts distribution centers to minimize the parts inventory needs at individual stores. With hundreds of parts needed for thousands of car models and production years, individual stores can't keep complete inventories. Shops may install OEM or aftermarket parts (rebuilt).
Many shops use computerized information systems to help manage point-of-sale, inventories, purchasing, accounting, and customer relations. Database programs give companies fast access to customer and vehicle information and repair histories. Electronic cataloging allows companies to research maintenance requirements and specific parts needed for a vehicle's particular make, model, and mileage. Diagnostic computer systems are essential equipment for mechanical repair shops because modern cars are filled with sensors and onboard diagnostics (OBD) - a vehicle's self-diagnostic system.
Many shops have websites that communicate basic information, including hours of operation and services performed. Some companies allow customers to schedule appointments or obtain estimates online.
