Among the financial details reported for second quarter 2019 by Group 1 and Asbury were perspectives on emerging vehicle technologies and their benefits to these companies’ service operations.
Group 1 said repair costs are not likely to “materially change” soon, but the nature of the (vehicle) components needing attention will shift.
“As vehicle complexity continues to increase, it becomes more difficult for do-it-yourself (“DIY”) and independent service shops to compete against us,” noted Group 1’s financial results highlights report. “Group 1 analysis suggests that we generate more revenue per repair order for vehicles with alternative powertrains.”
The company said its retention is higher for customers driving electric and hybrid-powered vehicles, versus those driving conventional internal combustion engine-powered ones.
“We’re actually excited about the future of electrification to the hybrid vehicles,” said John Hartman, senior vice president of operations for Asbury Automotive during the company’s earnings presentation.
Hartman agreed with Group 1’s assessment, that owners of emerging vehicle technologies “tend to be a higher retention customer. You make pretty good dollars on those vehicles. So, we see a good upside that goes as far as warranty.”
The complexity of these vehicles requires highly skilled technicians that Hartman believes the independent service market will find it difficult to duplicate and thus be able to service these vehicles.
“We see service retention numbers in the next five to seven years getting at rates that this industry has never seen,” Hartman noted. “For the lack of a better term, (these owners) really have to come back to a brand-certified dealer to work on these vehicles. To go to an independent would not be a smart choice.”