2020 Auto Industry Review

COLLISION & MECHANICAL BUSINESS

Dealer Impact and a Future Look

As we emerge from 2020’s global COVID-19 pandemic, we see its impact in every sector of our industry, including parts sales. Lifestyle changes, such as the prevalence of working from home and distance learning, contributed to a 14% drop in miles driven!¹ With fewer vehicles on the road, vehicle repair counts dropped 15-20% nationwide resulting in reduced demand for collision and mechanical repair parts.²Additionally, eroded consumer confidence reduced the overall demand for new vehicles. In this article, we take a look at some of the key drivers that impacted our industry in 2020.

Number of Motor Vehicle Registrations

The number of motor vehicle registrations in the U.S. has risen over the last two decades. But 2020 painted a different picture. Although the number of motor vehicle registrations is projected to grow 0.4% to 274.6 million in 2021, growth during this period was dragged down by a 1.0% decline in 2020. The decline was driven by the COVID-19 pandemic, which has resulted in a drastic rise in unemployment and drop in consumer spending.³

Average Age of Vehicle Fleet

In 2020, the COVID-19 pandemic and its subsequent effects on the global economy put upward pressure on the average age of vehicle fleet. High unemployment and decline in disposable income pushed consumers to delay new vehicle purchases.

Nationally, the average age of the vehicle fleet is forecast to be 12.3 years in 2021. The demand for parts increases as average vehicle age grows, representing an opportunity for our industry.³

Number of Vehicle Accidents

In general, more vehicles on the road leads to an increased potential for accidents and a subsequent increase in the demand for collision repair services. Advances in vehicle safety and increases in regulatory measures had contributed to an overall decline in vehicle accidents until 2011. Experts believe that mobile phone usage has played a significant role in reversing this trend. Although vehicles on the road and collision counts decreased in 2020 due to stay-at-home orders, the total number of vehicle accidents is expected to increase in 2021.⁴

A Look at Lexus

Lexus and its dealers were not immune to the business effects of the pandemic. Many dealers were forced to close all or parts of their business for weeks or months while Lexus pivoted to address dealer and customer needs and concerns in a volatile environment. The effects of the pandemic on Fixed Operations was most clearly apparent in the drop in Customer Pay repair order volume (a measure of dealer service business) and in net parts purchases by dealers (a measure of dealer service and wholesale parts business). CP R.O. volume was down approximately 17% while net parts purchases were down 20% from the pre-Covid plan.

Both Fixed Operations health indicators (CP R.O. volume and net parts purchases) are showing strong signs of recovery. Both metrics are approaching pre-pandemic levels at the time this content was written.

A Bright Future

Although our industry took a hit in 2020, the outlook for 2021 is a bit more optimistic. The collision repair and mechanical industry is anticipated to experience growth which is primarily driven by the number of accidents that take place per year. As consumers return to the workplace and students return to the classroom, miles driven and the demand for vehicle repair services will increase. Furthermore, the unemployment rate is expected to decline, resulting in greater levels of disposable income and rising consumer confidence.

As the industry evolves, there is no doubt that today’s research indicates that technology will continue to progress in new and innovative ways. At Lexus, we encourage you to embrace the technological landscape as it will help to support your operations such as logistics and procurement and will help to streamline your work environment.

Keep an eye on future issues of Lexus WIN to discover best practices and technology solutions that can help your dealership succeed in our changed but promising business climate.