With Americans driving more and keeping their vehicles longer as the pandemic wanes, the six largest, publicly traded new-vehicle groups in the U.S. see parts and service revenue increase substantially. That’s true for the fourth quarter of 2022 and for full-year 2022 vs. 2021.
“We anticipate continued growth throughout 2023,” in fixed operations, Chris Holzshu, chief operating officer of Lithia & Driveway Motors, says in a conference call to announce Q4 and full-year 2022 results. He cites a rise in the age of the average vehicle as evidence drivers are keeping their vehicles on the road longer.
Lithia, based in Medford, OR, reports same-store service, body and parts revenue of $642.7 million for the fourth quarter, an increase of 8.5%, and about $2.2 billion for the full year, up 9.8% vs. a year ago.
Combined, the six publicly traded groups report same-store parts and service revenue of $12.7 billion in 2022, an increase of 10.5% vs. 2021. For the fourth quarter, the companies report a total of $3.4 billion in same-store parts and service revenue, up 9.1%.
AutoNation Inc. CEO Michael Manley also cites the rise in customer miles in a separate conference call.
The Fort Lauderdale, FL-based AutoNation reports same-store parts and service revenue of $1 billion for the fourth quarter, an increase of 7.2%. For all of 2022, it was $4 billion, up 8.8% vs. a year ago.
“I think it really is a reflection of the fact that there have been more miles driven,” Manley says. “There’s a direct correlation between miles driven and expense to keep the vehicles on the road in a safe fashion.”
According to the Federal Highway Admin., from January through November 2022, vehicle miles traveled on U.S. roads and highways was about 3 trillion (4.8 trillion km). That was up only about 1.2% from a year earlier, but was an increase of 12.4% vs. the same period in 2020, and roughly equal to pre-pandemic 2019.
The age of the average vehicle is 11.72 years as of the third quarter of 2022, up from 11.49 years a year earlier, according to Experian Automotive.
Marty Miller, director of product data and implementation for Experian Automotive, says the average age is increasing in part because there are fewer new vehicles on the road due to lower new-vehicle production.
A more relevant figure might be the growing number of vehicles in what he considers the “aftermarket sweet spot,” from 6 to 12 years old, where vehicles are out of OEM warranty but still new enough to be worth fixing, he says.
As of the third quarter of 2022, 99.3 million vehicles were in that “sweet spot,” up 6.2% vs. a year ago, Experian Automotive says.
Like its competitors, AutoNation is trying to capture a greater share of post-warranty, customer-pay repair and maintenance work, Manley says. “The rate decreases rapidly after the warranty period ends,” he says.
AutoNation expects help from its recent , $190 million acquisition of RepairSmith, a Los Angeles-based mobile service and repairs provider.
Manley says RepairSmith gives the group’s AutoNation USA used-car stores a competitive advantage over sales-only used-car stores that don’t provide service. And heavier repairs that can’t be performed at the customer’s location could be referred to the brick-and-mortar AutoNation service network, he says. RepairSmith could also serve customers who didn’t buy their cars from AutoNation.
AutoNation Inc. had 13 AutoNation USA stores at the end of 2022. Another 20 are under development, and AutoNation plans to eventually have about 130 used-car locations.
In another recent conference call, Sonic Automotive, Charlotte, NC, reports same-store parts, service and collision repair revenue of $404.8 million for the fourth quarter, up 16.9%, and $1.6 billion for the year, up 18.5%.
That’s for Sonic’s franchised segment, not counting its EchoPark used-only stores. Sonic Automotive President Jeff Dyke says he expects “mid- to high-, single-digit growth, if not a little better,” in fixed operations for 2023.
“We saw 12% growth, I think, in January,” Dyke says. “It should be a fantastic year, from a fixed (operations) perspective.”
In earlier announcements, the other three large, publicly traded new-car groups also report increases in Q4 and full-year 2022 fixed operations revenues. They are Asbury Automotive Group, Duluth, GA; Group 1 Automotive, Houston; Penske Automotive Group, Bloomfield Hills, MI.