KN50002

KEY NOTE AUTOMOTIVE SERVICES : SEPTEMBER 2002

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This report covers: automotive servicing, car servicing, fleet, car repairs, garages, fast-fit,

Companies covered include: Arriva, CD Bramall, Dixon Motors, Inchcape, Lex Servcice, Lookers, Pendragoon, Reg Vardy, Ryland Group, The Automobile Association, Green Flag Group, The Royal Automobile Club, Halfords, Kwik-Fit Holdings, Stapletons,

EXECUTIVE SUMMARY

The automotive services market includes car servicing and mechanical repairs, car body repairs, and breakdown and recovery services. In 2001, the collective value of these amounted to an estimated £12.98bn and the value of these services increased by a total of 11 percent from £11.65bn, in 1997. During the 5-year period to 2001, the growth trend for the industry was very moderate, despite the steady increase in the number of vehicles on the road. Strong competition for business, longer warranties for new vehicles, the better quality and durability of parts and sub-assemblies and longer service intervals were all factors influencing the level of demand. In terms of relative size, the automotive services market is dominated by car servicing and mechanical repair, followed by car body repairs and car breakdown and recovery services.

There are a number of different providers of motoring services within the industry. Franchised car dealers and independent garages compete with each other in the aftercare market, although in general, the franchised dealers' garages obtain the bulk of the warranty work. This normally lasts for around 3 years — the length of the warranty period — after which the independent garages begin to take over, and servicing intervals become more irregular.

Insurance companies, banks and even a gas and electricity company have become heavily involved in the automotive services industry. They have taken over some of the leading providers of both repair and rescue services while continuing with their longer-standing activities. Removal of block exemption could bring other non-automotive organisations, such as supermarket chains, into the industry as sellers of low-price cars but probably not as providers of aftercare. The automotive services industry will be transformed by recent developments in its structure and organisation. As the car manufacturers will have less control over their dealerships, new companies will be attracted into this market because of the removal of restrictions on sales of new vehicles. The larger dealerships will seek to expand into a few mega dealerships and some manufacturers will try to protect their prestige brands by buying and operating their own exclusive sites.

Car ownership has already reached saturation levels, but this is not likely to deter a high level of new purchases every year by private, company and fleet buyers. Most people regard the car as indispensable to their lives, regardless of the high costs of maintaining them, so the demand for automotive services will increase. The rate of increase will, however, be slow, as recommended servicing intervals are extended by the manufacturers, automotive components and oils and lubricants are made more durable and reliable, on-board computers give early warning of potential faults and cars are likely to be scrapped earlier despite their longer life, as new ones become cheaper to buy. The automotive services market is therefore expected to grow by 10.7 percent from 2002 to 2006, which approximately continues the same trend rate of growth in value terms as in the previous 5 years.

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Text © 2002 Key Note

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