New study suggests dealer service business at risk from aftermarket chains

New study suggests dealer service business at risk from aftermarket chains

Auto consultancy DMEautomotive, in a review of the $215 billion U.S. auto service market, says aftermarket chains are a growing threat to service profits at new car dealerships.

In a national survey released this week, the firm says, dealership service centers are becoming senior centers as younger consumers favor aftermarket chains. It also notes that the widely reported aging of the U.S. vehicle fleet is also benefiting independent stores and aftermarket chains. The dealership service business gets approximately a $78 billion market annually.

DMEautomotive said 45% of Americans it polled said they are likely to visit a dealership for basic services within the first two years of ownership, when the in-warranty dealership relationship is still strong. As vehicles hit 3-6 years, however, dealerships lose 47% of that initial business, with only 31% reporting they would use dealerships for these services. By 7 years, only 13% of customers will select dealerships for these services, per the survey, which also says independents and aftermarket stores grab significantly more core service business at vehicle-age three — earlier than many dealerships may imagine.

The study, based on a survey of 4,000 U.S. vehicle owners, says loyalists drive 62% of dealership revenues and that these dealership loyalists are more likely to be over 60 years of age than any other loyalist group. Conversely, the study found that about half of aftermarket chains loyalists are under 34.

The study also notes that dealership loyalists from the over-70 segment exiting the market represent about a $3.4 billion annual loss to the franchise dealership industry.

If dealerships dont replace their aging loyalists, and aftermarket stores are successful in retaining their loyalists as they advance toward their prime spending years, a share-of-wallet sea-change is looming that would greatly favor aftermarket stores, while eroding dealerships lifeline service profits, said Doug Van Sach, vice president of strategy and analytics at DMEautomotive.

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