by Chris Dekker, Owner, My Garage Auto & Tire, Airdrie, Alta.
These are exciting times for anyone involved in – and passionate about – the automotive service industry. We are on the cusp of a revolution like the industry has never seen before; a revolution that has many auto service businesses (and even car manufacturers themselves) genuinely worried. Cars will change more in the next 15 years than they have in the past 50!
In this article, I would like to look into the future by discussing the four topics that I feel will shape our industry the most over the coming decade. For the top 20% of automotive shop owners, this is all exciting stuff. For the rest, it’s something to start worrying about.
The electric cars are coming – fast.
Nobody can make money on an electric car right now. Late Fiat Chrysler CEO Sergio Marchionne publicly stated that every time someone buys an electric Fiat 500E, the company loses $20,000 US dollars. General Motors loses at least $10,000 on every Chevrolet Volt they sell. Except for Nissan, no automaker – even Tesla at this point – makes a profit building electric vehicles. And yet most of them are rushing to bring dozens of hybrid or fully electric vehicles to market over the next 5 years. Why is this?
Because nobody wants to be left behind, or perceived as last. Between the development of electric and autonomous (or self-driving) vehicles, there is a massive “space race” happening in the automotive industry right now. It’s an expensive space race, too. Companies like General Motors are already closing factories and laying off thousands of employees in order to build up cash for their impending electric car spending spree, expected to cost billions of dollars. Some manufacturers have decided they can’t go it alone, entering alliances like the recently-announced Ford-Volkswagen or Subaru-Toyota electric vehicle collaborations. Even archrivals BMW and Mercedes are working together on an electric car.
In the service bays, electric vehicles are really shaking things up as well. Technicians require specialized training to service them, and shops require specialized tooling: everything from new screwdrivers to new air conditioning machines. As I’ll discuss later, electric vehicles will be a career ender for a lot of technicians. Electric vehicles also require a lot less service work than their gas-powered relatives. (We’ll have more about that later on too.)
The technician shortage is real – and it’s here.
For years, experts have been warning of a time when automotive shops wouldn’t be able to find enough qualified technicians to operate their businesses. Today, that time has come. Baby boomers (who make up a large percentage of the technician population) are retiring and there aren’t enough young people coming into the trade to replace them. Part of the problem: Many young people just aren’t as interested in the trades today. Others enter the automotive world, but quickly leave as they learn that modern cars are a lot more complex than they expected.
Another part of the problem stems from the type of person who makes a good technician in today’s industry. The carburetors are long gone, and even engines themselves are now starting to go away. Cars in 2019 are as much a rolling computer as they are a piece of machinery. Because of all this, the best and highest-paid technicians are no longer the mechanically-inclined types who grew up “wrenching” on cars with their dad. They are the people who should have gone to university, but didn’t. Or maybe they did; many technicians today are university educated – including one of ours. They were the kids who built computers in their basements, or achieved a 95% score in math class.
This is all good news for the technicians themselves, of course! It has become a real struggle to attract a truly qualified technician, which means that shops like ours need to pay a lot more than we did ten years ago. Technician wages will continue to rise sharply over the next decade as the shortage intensifies. Automotive service has elevated to become less of a trade, and more of a professional service like a dentist or a doctor. Shops who don’t run their businesses as such soon won’t have technicians to work in their bays. (More about that when we get to the “house cleaning” soon.)
Specialization is coming, and it’s necessary.
We have a whole page about specialization on our website, so I’ll keep this part pretty brief. From that page, here’s the gist of our thoughts on specialization
The age of the “all makes and models” automotive shop is drawing to a close. As new vehicles become increasingly complex, even formerly simple repairs now require the use of sophisticated calibration tools and training. It is no longer financially feasible for one business to support the costs of the specialty tooling, diagnostic equipment and service information to truly service all vehicles on the road properly and completely.
It’s true! On a brand new vehicle, you can’t even replace a power window motor or a brake caliper without performing some sort of computer programming or relearn procedure. Wheel alignments can take as long as three hours because they now involve aiming all of the vehicle cameras, and re-calibrating features like the adaptive cruise control or lane keep assist. All of this requires expensive, brand-specific scan tools and software subscriptions that get more expensive every year. Shops like ours have two choices: either specialize in less vehicles brands so we can offer all of this; or choose to offer a lower level of capability and service.
At My Garage, we are staying ahead of this industry trend by initially focusing on seven vehicle brands that make up 84% of the vehicles on the road in Alberta. This lets us offer true dealership-level capability on these brands at a price that we can afford. It’s important to point out to clients that servicing less brands is a strength of our business as it lets us offer more capability than our competitors, not a weakness. In the future, we are ready and prepared to narrow down the number of brands we service even further as needed.
The “house cleaning” coming to our industry.
Along with many others, I feel there is a major shift coming to the automotive service industry, one that will result in a substantial amount of shops going out of business. The elite shops who adapt to the rapid changes coming our way will thrive, while the rest will be left behind. I predict that in 20 years, Canada will house less than half the number of automotive shops than it does today. My reasons for this are as follows:
Electric vehicles present a huge learning curve for an aging technician population. In the 1980s, the switch from carburetors to fuel injection forced many mechanics into early retirement, and nearly ended the careers of many more. And the changes coming with electric and autonomous vehicles are way bigger than anything we saw back then. Many technicians simply won’t be able to adapt and keep up, especially with less young talent coming in to the trade. This will leave the shops who have invested in the most skilled technicians at a serious advantage.
Modern vehicles – especially electric – require major tooling investment on the part of shops. As mentioned above, these days even formerly simple repairs involve some sort of electronic relearn or calibration. The equipment used to do this is specialized, and expensive. Many shop owners who cling to the dying “all makes and models” business model won’t be able to invest in the equipment required to service vehicles properly, and will lose customers to the shops who can.
Electric vehicles require less maintenance, which means shops will be competing over a smaller and smaller amount of potential work.Think about this: Electric cars don’t need oil changes, air filters or spark plugs. They don’t need timing belts, don’t need mufflers (or even an exhaust system, for that matter), and are way less likely to develop leaks. Even their brakes last twice as long. This is all good news for drivers, but bad news for less technical shops that depend on this low-hanging fruit of “easy” work.
Car ownership is declining. Especially in urban centres, young people today just aren’t interested in owning cars. Paying for and maintaining a vehicle costs a lot of money every year; money they just don’t see the value in spending. The advent of vehicle sharing services like Car2Go, convenient consumer-to-consumer rental services like Turo, and taxi replacements like Uber and Lyft make not owning a car even easier these days. Vehicle “subscriptions” (currently being tested by a half dozen car manufacturers) are another game-changer that will bite into car ownership because the drivers never own the vehicle; the manufacturer does. Even one of the industry’s favourite “curmudgeony old guys,” former GM chairman Bob Lutz, predicts a future where most of the vehicles belong to ride-sharing companies, not individuals. This of course also means less business for repair and maintenance shops.
Who fails first? The “cheap shops” will disappear. There are still lots of automotive shops that compete on price, thinking that offering the lowest rates will earn them the most customers. Unfortunately, these customers will soon find these shops closed up. The cut-rate garages simply don’t charge enough to be able to afford to attract skilled technicians in the ever-tightening competition for talent.
So, what now?
Personally, I feel that all of the changes happening in our industry are great. As clients start to become aware of just how complicated their vehicles are, and understand the complexity of what we do every day, I have never been more respected as an Automotive Service Technician. I am excited to join with other progressive shop owners across the country to shed our industry’s somewhat antiquated image, and show people what kind of professionals we truly are. Our job has never been more challenging, or more fun – and I can’t wait to see what challenges tomorrow brings.
So what’s it going to be: adapting and thriving, or getting left behind? At our shop, I think you know which side we’re on.
This post originally appeared at the My Garage Auto & Tire site. It appears at Indie Garage with permission of the author.
Finally someone who is starting to get it. The only killer is the diag techs like me are already looking at other fields that pay hourly. Flat rate and the introduction of advanced electric cars will eliminate the feeble minded who can’t think on their own. Those who can adapt will finally be making the six figure incomes the tech schools lie about because there will be no warm bodies left.
I think flat rate has contributed significantly to the decline of this industry. It is pushing hundreds if not thousands of techs away. I don’t mind some sort of incentive based pay, but pure flat rate is just lazy and bad management. Because a shop owner or service manager does not know how to manage their labour inventory, they shove it on the backs of the technicians to do so. Not sure where you are Rob, but I know a lot of good hourly shops all across Canada.
There is no shortage of technicians just a huge shortage of pay.Flat-rate in itself is not bad but it is being used in a completely illegal manner now with the internet and software.It is illegal to even suggest flat-rate times to anyone or they are making an agreement with a third party which is collusion to fix costs.They can only politely ask what the technician is willing to perform the work for.I learned all my rights and the laws the first couple hours of school now tech schools are all factory sponsored and they certainly aren’t going to teach that anymore.
Who wants to spend 20 hours on a Volt trans and only be paid 5.6 hours?Ford just dropped warranty times another 40%.They are frying everyone out!!!
Electric cars are the future of the automobile, and this would be a good time for you to invest in this business. I will invest in this business only once my current projects have been completed. That will take me a while.
Dealers are bragging of 87% gross profit margins on service labor now,that is a 751% cost mark up.Those are insane margins and nobody openly more than doubles the cost of anything.Most skilled trades are running between 60-70% over and even a pet shop will pay groomers at least 50%.It is felony price fixing to even suggest flat-rate times to the techs or they are making an agreement with a third party to fix costs.It’s nuts now and dead end!!
Electric cars are throw away after the warranty is up.Nobody is going to buy an $18k battery pack for a $2k car and nobody is going to fix them for free.They can engineer a synthetic carbon neutral liquid fuel from renewable energy now and rip off all the exhaust aftertreatments and e-junk and build an affordable practical car now that would likely cut carbon quicker than electric but Elon Musk is a nut that can’t find techs in Norway or Germany either.
The diesel tech shortage is much more concerning.If they can’t make old school diesel junk monkeys for the money how are they going to make autonomous high voltage high pressure hydrogen proton exchange membrane super wizards?
Wow!This is even more exciting than Steve McQueen,Don Garlits ,Dale Earnhardt and burn cream.
7.1 million scientist and engineers in this country that don’t want to fix your junk cars for free either.
I would say that the exact opposite of this is true!I could rebuild an overdrive front wheel transmission at 18 years old and was considered a prodigy and the only man in 4 states at the same time.I started at my first dealer for the standard 50% of the shop rate and bid my own labor times.Now these dealers are all criminally colluding and capping techs at 25% or less and factory warranties are robbing everyone out.Techs now are idiots and weren’t taught anything about the laws or their rights or their values and they are conditioned into this completely illegal form of the flat-rate system.” Automotive service has elevated to become less of a trade, and more of a professional service like a dentist or a doctor. “Do the receptionist think they are controlling the medical industry?
I don’t know of any shops owned by an actual real practicing technician anymore.They are ex-parts people,ex-service writers,slimy car salesman and other various assorted idiots that own shops but not any real techs.I have owned 3 shops and feel I have an advantage over the others because I can do everything myself and just about anyone can answer the phone but I am ganged up on by the franchises and shitheads that just want to sit in the office and keep all the money.It’s not a shortage of technicians either it’s a massive oversupply of dirtbags trying to collect 90% margins on service labor.
This is the current average gross profit margin for any skilled trade or professional service(On the trailing twelve months basis gross margin in 4 Q 2019 grew to 38.67 %.)More specific to the category(Eqmm EquipmentOperators,MasterMechanics 49.05 392.40 9.2 58.1 28.50 77.55 620.40) This means my value as a technician 61.33-71% of your stated retail shop rate.These creepy car dealers and chop shops are running over 80% margins now and pushing for 90%.A competitive 40% margin is 80% over cost an 87% margin is 751% over cost and nearly 10 times what is normally acceptable!
I completely agree that These are exciting times for anyone involved in – and passionate about – the automotive service industry. That’s why I am selling my house to be involved.
I’m very excited to see this. Finally someone who is starting to get it.
Great! This is even more exciting than Steve McQueen and Don Garlits.