Several public dealership groups saw growth in the parts-and-service business in the first quarter -- the first signs of life after a long slump.
The increase was small, buoyed in some cases by Toyota recall revenue. And retailers remain watchful for longer-term challenges in the service department now that the industry's sales plunge has reduced the number of vehicles on the road.
Parts-and-service revenue increased 1 percent at AutoNation Inc., the first improvement since the beginning of 2008. Excluding the Toyota work, revenue was flat, CEO Mike Jackson said.
At Group 1 Automotive Inc., parts-and-service revenue jumped almost 3 percent and gross profits rose 4 percent. Excluding the Toyota recalls, revenue was still up 1 percent.
Both AutoNation and Group 1 have significant Toyota business and expect the recall work to boost warranty revenue in the near term. Unintended-acceleration recall repairs will go into the third quarter, Group 1 CEO Earl Hesterberg said.
But a more fundamental recovery may be under way.
Customer-pay business at Group 1's domestic-brand stores also rose a "very surprising" 8 percent in the quarter, Hesterberg said.
"There is probably some pent-up demand from people who were put-ting off repairs for their vehicles," Hesterberg said.
Penske Automotive Group CEO Roger Penske concurs. His company had a 1 percent increase in same-store parts-and-service revenue in the quarter.
"People are going to spend money on their cars," Penske said. "We'll see increases in customer labor over the next 12 months."
Parts-and-service revenue at Sonic Automotive Inc. rose 3 percent. Gross margin improved by nearly 1 percentage point.
Executive Vice President Jeff Dyke attributed the increase to recalls, improvement in the economy and effort to go after customer-pay work, especially tire sales.
Although Asbury Automotive Group's parts-and-service revenue slid, gross profits rose 1 percent. An influx of customers returning for repairs ended a four-quarter decline in year-over-year customer-pay grosses, COO Michael Kearney said.
Beyond the Toyota boost and customers catching up on repairs, retailers say they face a more daunting problem: fewer units in operation.