Parts and service business should keep increasing as more customers are coming in and on average spending more per visit, according to first-quarter earnings reports from the nation’s biggest publicly traded megadealer groups.
Collectively, parts and service revenue for the six big publicly traded groups is about $3 billion, up 14.5% from first-quarter 2021.
“I think it's going to go up” from there, Roger Penske, chair and CEO of Penske Automotive Group, says during a conference call. “I don't see it going down, for sure.”
Penske Automotive Group, based in Bloomfield Hills, MI, reports retail automotive parts and service revenue of $567.3 million on a same-store basis in the first quarter, an increase of 12.9% vs. the same quarter a year ago. That includes revenue from international operations.
“Overall, I think we’re in really pretty good shape. Miles driven is recovering, but it’s still lower than pre-pandemic. There’s no question about that. So, I think it’s positive,” Penske (pictured, left) says.
Like some other public groups, Penske Automotive says customer-pay service work is up, but warranty work is down for the quarter. While the outlook for parts and service is positive, Roger Penske says parts shortages and a lack of loaner cars are a couple of potential negatives.
An ongoing shortage of service technicians is also an issue, according to company reports. “We’ve placed additional emphasis on technician recruiting and retention,” says Daryl Kenningham, president of U.S. operations for Houston-based Group 1 Automotive.
On a same-store basis, Kenningham says Group 1’s technician headcount was up 16% in the first quarter compared with like-2021. He says switching to a four-day work week has helped Group 1 attract and retain technicians while allowing the company to add more service hours per week without adding service bays.
For the first quarter, Group 1 reports U.S. parts and service revenue of $347.8 million, up 18.6%, also on a same-store basis.
In a separate conference call, Asbury Automotive Group of Duluth, GA, reports same-store parts and service revenue of $295.1 million, up 14.1%. Asbury says its warranty revenue was down 12% for the quarter, while customer-pay business was up 17%.
Dan Clara, senior vice president-operations, says growing technical complexity is another reason to be optimistic about the long-term forecast for parts and service. That’s true both for electric vehicles and for advanced driver-assistance systems, Clara says.
“My belief is, the propensity or the frequency of (customers) coming to the shop will be less. But the time in dollars will be greater – not just what they spend, but what we end up charging because of sophistication to work at it,” he says.