While auto sales have been slumping in the U.S. this year, revenues are rising at dealerships and auto-parts stores. Why the disconnect? Older vehicles grinding out more miles each month require repairs and replacement parts.
“The vehicle fleet is still getting older every single year, in spite of our record sales,” said Steve Szakaly, chief economist for the National Automobile Dealers Association. “So you’ve got a significantly larger population of vehicles that require service and are coming in for service pretty regularly.”
Car dealers didn’t use to handle so much repair work. But when the auto market last contracted in 2008 and 2009, new-car retailers looking for a revenue boost improved their service business to win share from independent shops. They’ve managed to keep a lot of that profitable work even as new-vehicle sales recovered.
“It really goes to the fundamentals of how the industry has changed since the last recession,” Szakaly said. “It’s becoming more diversified.”