According to a recent report by RevolutionParts, crash rates in automobiles have been decreasing over the last several years. And it’s no surprise. “With radar and sensor technologies, ride share apps, and backup cameras which are now required in new vehicles, crash rates are projected to reduce considerably over the next ten to twenty years,” says RevolutionParts CEO, Ibrahim Mesbah.
This is a 12% year-over-year decline in collisions over the next 5 years.
“Considering most of the average dealer’s wholesale business is made up of collision parts, we expect that revenue stream to experience a crunch,” Mesbah continues.
What does this mean for dealers in these coming years?
The average appraisal value per collision in 2018, also cited in the report by RevolutionParts, was over $3,100, with $1,400 made up from parts. This is a H-U-G-E source of revenue in Fixed Ops that is now experiencing a crunch.
Absorption Rate on the Decline
“Most dealerships strive for 100% absorption rate, but a shifting auto landscape led to a 2019 Q1 average of just 57% for US auto dealer,” says Mesbah. “This is a problem when Fixed Ops Departments are on the hook to cover overall dealership expenses through service, parts, and body shop profits.”
What Does This Mean for Fixed Ops Departments?
With collision repair declining, so is the need for auto body parts. To boot, revenue generated from service repair is projected to be significantly cut within the next decade.
“The future for Fixed Ops is bright,” says Mesbah. “With mechanical parts becoming more and more sophisticated, a new door is opening for franchised dealerships to secure a greater share of the mechanical parts market,” he says, “a sector of the parts industry that has been traditionally aftermarket-dominated.”
2020 Trends Threatening Fixed Ops Revenue – Live Web Chat
To talk about this, we welcome Ed Roberts, Fixed Operations Director at Bozard Ford Lincoln in Saint Augustine, Florida along side FIXED OPS DIGITAL Co-Founder and CEO Owen Moon, and RevolutionParts Co-Founder and CEO Ibrahim Mesbah.
Aired September 24th
About This Session
Fixed Ops for Auto Retail is a free program we are launching on AutoConversion where Dealers and Thought-Leaders can come together on a routine basis in a Roundtable-like forum to address important matters as they pertain to fixed operations.
> Follow this link for more information and to learn how you can participate in this free program for Auto Retails.
Be Part of the Conversation
What other ways are franchise dealerships able to combat threats to fixed operations revenue? Leave your comments below.