Service, Parts Business Is on the Rebound

Parts and service business is slowly recovering but lags behind the recovery in new-vehicle sales – especially in collision repair, probably because people are driving less and getting in fewer crashes, according to some of the nation’s biggest new-vehicle dealers.

“We are seeing customers return,” says Bryan DeBoer, CEO of Lithia Motors in Medford, OR. He says in a conference call on third-quarter earnings Lithia’s service, body and parts business is up 2% in September from a year ago.

However, for the third quarter, Lithia’s same-store service, body and parts revenue of $324.3 million is down 2.9% vs. year-ago. Year-to-date through Sept. 30, it’s down 7.8%, to $891.5 million, Lithia reports.

Due to coronavirus-related business shutdowns, Lithia’s service, body and parts revenue was down 20% for the second quarter, DeBoer says. Over the next five years, DeBoer says Lithia expects service, body and parts business to grow an average of 5% to 6% on a same-store basis.

That’s partly because the U.S. economy continues to recover, and partly because Lithia is ramping up efforts to make it easy for customers to make service appointments online and get pickup and delivery from home. Lithia is No.3 in the WardsAuto 2020 Megadealer 100, on total revenue of $12.7 billion.

Joe Lower, chief financial officer for AutoNation in Fort Lauderdale, FL, says separately that AutoNation’s average repair order is on the increase, but the collision repair business is lagging behind.

Overall, AutoNation’s parts and service revenue, which the company calls “customer care,” is down 3.7% for the quarter to $852.8 million. Year to date, it’s down 8.1% to $2.4 billion. AutoNation is No.1 in the WardsAuto 2020 Megadealer 100, on total revenue of $21.3 billion.

“The business is recovering, and we do believe collision will be that final straw, if you will, as people continue to increase driving this fall and then through the winter. So that really is probably the only area that has just continued to lag a little bit vs. our expectations,” Lower says.

Jeff Dyke, president of Sonic Automotive in Charlotte, NC, says Sonic’s parts, service and collision repair business for franchised, new-vehicle dealerships also is up in September, although it’s down for the quarter 6.9% to $308.4 million.

Sonic also has a growing number of EchoPark used-car locations. Sonic is No.5 in the WardsAuto 2020 Megadealer 100, on total revenue of $10.5 billion.

“Fixed operations is coming back slowly, but surely,” Dyke says in a conference call. He says the company had projected earlier during the pandemic that, relative to vehicle sales volume, it would take longer for fixed ops to recover.