COVID-19: Independent repairers will be in the trough of the wave in 2030
Since mid-March, the COVID-19 crisis has badly affected the whole automotive industry including aftersales.
In some markets, such as France or the UK, repair and maintenance workshops were allowed to remain open during lockdown to carry out essential repairs and services on emergency vehicles or delivery vans. However a number of dealers, authorised repairers, independent garages or service chains chose to keep their doors shut to protect their staff and customers from the virus.
These closures combined with the lockdown effect on individuals have driven to a fall in the overall repair and maintenance business - in April, in France - ranging from -70% down to -85% depending on the source of data (i.e. AM Today or CNPA).
Now that the lockdown is over – at least in France since 11th May – those repairers who have been closed are now reopening their doors.
One might argue that aftersales will recover reasonably quickly from the crisis for two main reasons:
On the one hand, in the very short term, workshops will have to handle operations that have been postponed because of the lockdown
On the other hand, for the mid-term, if concerns about maintaining social distance move people from public transport to private cars, this will translate into an increase of the mileage driven and therefore an increase of R&M demand.
Much evidence underpins this scenario.
According to an AM Today survey, based on a representative panel of 100 French independent garages (with or without multi-brand franchise, achieving a turnover of €300,000 and more), during the first week after the end of the lockdown, the independent repairer panel still records a drop of activity compared to the week before the lockdown, although the decline is limited to 16% only against an average drop of c.60% during the lockdown.
For the OEM franchised workshop, over the past couple of weeks, a number of dealers have been pleased to share that their workshop capacity is fully booked for several weeks ahead.
However, above this circumstantial and short-term impact, the COVID-19 crisis will affect aftersales business for some time. Indeed, if we look at what might happen at the 2030 horizon, we can legitimately assume that the independent repairer business will still be suffering.
Why?
The industry expects, in France as globally, new cars sales to drop sharply in 2020 (-30%) with the decline continuing in the first half of 2021, before the beginning of a recovery in the second half, generating a further overall decline in 2021. It is therefore not totally insane to assume that new car sales will not be back to their pre-crisis level before 2023 or even 2024.
If, as seen in the 2007-08 financial crisis, the car parc volume is resistant to the negative impact of lost car sales, its structure per age will be inevitably affected.
Therefore, in 2030, focussing on the French market, we can assume that the 7-11 y.o age category could lose up to 1.3 million vehicles (including PCs and LCVs) compared to what this volume should have been without the COVID-19 crisis and its consequences.
Given that the French IAM channel share on this older vehicle market segment is and should remain above 70% on average in the future, the lower volume of vehicles in this age bracket being on the road in 2030 will inevitably generate a decline in the overall number of operations to be performed by French IRs.
French dealers will have been impacted by this “wave” sooner, so that, at the 2030 horizon, they will benefit – by contrast with IRs - from the full recovery of new car sales initiated 5 or 6 years before. This new registration recovery will have fed the volume of the 0-6 y.o vehicle parc mainly which is a market segment where dealers are leading in terms of share.
At the 2030 horizon, combining these various fortunes, we assess that the IAM channel share should drop by 1.3% compared to today. Independent repairers will be in the through of the wave while OEM franchised workshops should surf on the crest.