How to really compete in this industry

There is a young fella, about my age, who owns a shop in Saskatchewan. He has a great philosophy about vehicle repair and maintenance that he is very passionate about, and has inspired me to share it with you. He offers all of his clients the opportunity to have him look after their cars so that they run, drive and ride like they did when they were new. I know that not all of his customers share this philosophy; but many do and are saving thousands of dollars over the lifetime of owning that car; and this shop owner has a very profitable business because of this.

Imagine a 2004 Chevrolet Malibu, an average car when it was new, nine years later having good struts and suspension, tight steering, an engine that runs smoothly and gets great fuel economy. Imagine that all the creature comforts are working, the air-conditioning, the power windows (not just the Tim Horton’s order window) and door locks, the tilt steering, the electronic seat adjusters and the seat heaters. If we were to see a car like that in any shop in this country we would be impressed as to what good shape it was in, and probably guess that it only had 60,000 kilometers on it. We would think that it was a typical low-mileage, granny-driven-to-church-and-bingo car that we would love to buy for one of our kids.

What if I tell you it has 225,000 kilometers on it and was driven every day in all the conditions that Prairie weather can throw at it. That it has new shocks, struts, ball joints, sway bar links, tie rod ends. That it still has the original steering rack because of regular power steering flushes. Some of the power window switches, motors and power door lock mechanisms had to be replaced or repaired; and the shop had installed aftermarket seat warmers because the car originally did not come with them. This customer liked their car. It was practical, comfortable and reliable.

I have come to the conclusion that in general our industry, including the new car dealers, do not understand what true preventative maintenance is. In fact, we have all fallen under the spell of the vehicle manufactuers. We have forgotten that a vehicle manufacturer makes money by making and selling vehicles, and the more the better. If we make vehicles last a long time, well past the built-in obsolescence date, they will not sell as many cars; and that creates a problem for them. So they will do everything in their power to create the desire, stress or simply the misunderstanding in the consumer’s mind that makes them want to buy a new car every five years or so.

Challenge of Consumer Debt

However, they are facing a new challenge. Our own government reports the average Canadian owes $1.68 for every dollar they earn. Economists report in the last 15 years the average take-home pay in Canada has only gone up by $100 for a middle class family, when adjusted for inflation. Canadians on average cannot afford a new car every five years; in fact, studies have shown that between 25 and 30 per cent of North Americans cannot afford their car, period. Yet, the majority of our society needs a car to get to work and much of our economy is based on manufacturing vehicles, extracting and refining hydrocarbons, and manufacturing tires. As a society, we are creating a vicious cycle of working to pay for our transportation in order to get to a job to pay for our way to get to work. Few people question this status quo because it has always been this way. We keep thinking the economy is going to rebound, our customers are going to have money again and we will all be fine.

In the meantime, the new car dealers have been taking market share away from the independent sector at a staggering rate in the last five years. The AIA Canada reports a six to eight per cent gain in the new car dealer market share of repairs and service in the last several years. The dealers have done this in various ways and for various reasons. Margins on car sales are down and in order to keep the dealerships profitable they look for other opportunities. That means attracting and keeping more customers in their service departments. This happens with extended warranty periods, pre-sold maintenance and service packages, long-term financing plans, and a lot of marketing that says they are the place to go for service on your particular brand of vehicle. When it comes to the discussion of advanced vehicle technologies and telematics this statement from SSGM Daily News May 31, 2013 is very revealing. “Car manufacturers are building a closed ecosystem for the entire vehicle ownership lifecycle,” said Vehcon CEO Fred Blumer. Blumer was the keynote speaker at the AAIA’s 2013 Aftermarket eForum. In other words, if things don’t change, the aftermarket will get locked out of the vehicle service and repair cycle.

Preventative Maintenance Cost Savings

If I stopped here, I would sound like Chicken Little running around saying “the sky is falling.” My goal is to create awareness of what I see is coming down the pipe and come up with some solutions to the challenges that we face. Over the course of my next few articles I will be addressing these topics, but the current topic is to understand that there is a whole different approach to competing with the new car dealer that very few people use. That different approach has to do with the philosophy of the shop owner I mentioned above. At a certain point, competing on price, convenience and service will run out of impact. Competing on the cost of transportation is a whole different approach. Let’s start with taking a look at depreciation.

The first chart compares someone who replaces his or her car every five years with someone who keeps a car for 15 years. Insurance, fuel and repairs and maintenance are all items that consumers keep track of when making spending decisions on their cars. CAA reports that 75 per cent of Canadians surveyed forgot about depreciation when calculating their transportation needs. Because they tend to have perpetual car payments, they think of it as a mortgage. But think of it this way; how many of us would take out a mortgage on a house, if that house were worth nothing after 30 years? But that is what most consumers are doing with cars. No wonder we are carrying the debt load we are! If you keep a car for 15 years you will save $180,126 over 30 years. That is $500 a month. Any family could use that.

The second chart compares the same concept except using the idea of monthly car payments as the main variable. The impact of this chart shows that if you invest the equivalent of the depreciation on a monthly basis you will not only reduce your costs, but you will actually bank over $80,000 or more in 30 years.

So what are our excuses? My customers won’t do maintenance. The dealers make it too easy to buy a car. My customers qualify for car payments, but don’t have cash to pay for repairs, especially large ones. I will no longer accept any excuses; with knowledge comes responsibility. Let me leave you with two thoughts. One, if you drove a 2004 Malibu with bad struts, poor fuel economy, a rough ride and loose steering, would you be interested in a transmission flush? Two, preventative maintenance is not fluid flushes; preventative maintenance is a philosophy of making something, anything, last a long time! Even if it means changing the oil and filter on a vehicle every 6,000 kilometers or four months!