Auto Repair and Car Wash Business Plan

The industry we participate in consists of quite a few sub-industries. The ones that pertain most towards DIY Wash N’ Fix are the Car Wash Industry, the Auto Parts Industry, and the Mechanical Repair Industry.

5.1 Mechanical Repair Competitors

These competitors are less direct than the previous ones because we differ in terms of services. There are different types of competitors:

1. Tire dealers/service centers: The major ones are, Firestone, Goodyear, and Michelin, which have recently expanded their services to include car diagnostic work.
2. Quick lubes: They are mainly small independent stores, but the trend is consolidation, franchises (like Jiffy Lube) and trademark licenses (like Texaco). They are facing increasing competition from other types of outlets whose offerings include the services they provide.  Finally, their main competitive advantage lies in their convenience and competence, not necessarily in low prices.
3. Gas stations with service bays: They generally have fewer service bays and lower average tickets. They are competing against quick lube stores, big chains, general garages, and tire dealers. Their competitive advantage lies in their better-trained technicians, customer service and fast delivery.
4. Independent repair stores: These are typically a small facility run by one owner. They face a declining market share in the favor of big chains and franchises, primarily because they cannot retain a skilled workforce. Commitment is their competitive advantage.

Therefore, the competitors we need to carefully watch are the big repair stores (chains, franchises, licenses) that offer many services thanks to a skilled workforce and heavy marketing expenses. They are able to retain customers and have the advantage of their brand recognition.

5.2 Auto Parts Industry

The after-market auto parts companies are retailers that sell directly to the end users and own stores throughout the U.S. Forty percent of all U.S. auto parts sales are made by the “Big Eight” auto part chains. The six largest retailers are: AutoZone, Advance, CSK, Pep Boys, Discount, O’Reilly, NAPA (National Auto Parts Association) and Carquest.

The following trends are prevalent within the industry:

• Consolidation through joint ventures, mergers and acquisitions.
• Increased competition, including a threat from Japanese competitors in the U.S.
• Expected growth of DIY (do-it-yourself) sales.
• Aging U.S. vehicle population (average car age is 8.5 years).

AutoZone is the number one retailer in this market; last year they realized $3.8 billion in sales. Auto part chains are expecting sales to continue as more car owners buy parts to do repair and maintenance themselves. This is a positive indicator for the potential success of DIY Wash N’ Fix.

Mechanical Auto Repair Industry

The auto repair industry is composed of two categories: the collision repair industry and the mechanical repair industry. Considering our business, with our facility and tool constraints, we will focus on the mechanical repair market and not the collision repair market. However, we expect we will have some customers wanting to do minor collision repairs.

Like the automotive industry as a whole, the mechanical repair industry is currently experiencing major structural changes. These trends include:

• An increased competition among the three main types of stores: the independent service stations and garages, the specialty repair outlets, and import specialists.
• A decrease in the market share of independent stores in favor of specialty repair outlets, which are consolidating.
• A strategic repositioning by many companies: focus on some specialty services or diversification into more types of mainstream services.
• A shift in stores owners: most shop owners are baby boomers who are reaching their retirement age and are looking for a successor.
• A growth in the number of electronically advanced components that are placed on cars, which requires a trained and skilled workforce.
• The growing importance of customer service and satisfaction.

5.3 Car Wash Industry

The car wash industry has entered the mature phase of its life cycle and is becoming increasingly competitive. The increasing competition is becoming apparent through the shift in three major industry trends. They are:

1. Family-business succession issues: most coin-operated car washes are private family-owned businesses and many owners are at, or near, retirement age and are looking for successors.
2. Venture capital: the car wash industry attracts investors who are not already in the business and who are looking to diversify their investments. There are two ways these investors are running their car washes after having bought the facility: they operate it themselves or compensate the ex-owner to continue operating it.
3. Gas station chains: many are offering car washes either on a free or low-cost basis, investing in high technology equipment that requires little maintenance or labor.

5.3.1 Consequences of Trends

The consequences of these trends are:

• Competition is increasing.
• It is harder to differentiate comparable services.
• Customer loyalty will become more critical.
• Customers are more segmented.
• Investment in high quality equipment is required.
• Car wash service is combined with other services.

The main threat within the industry is the water recycling regulations that some states impose. For instance, Maryland requires car wash businesses to recycle 80% of the used water.

The car wash industry is seen as a profitable industry, provided that owners can differentiate their firms, create a loyal customer base, and develop methods to attract new customers. Moreover, profits are greater when a car wash is combined with other car-related services that provide better overall value and helps retain customers. In order to succeed in the industry, businesses must provide:

• Outstanding customer service.
• Quality wash.
• High-quality equipment (investment in long-term tangible assets).
• Easy access to facilities and good location.
• Relevant and quality other car services.