The Path to Recovery
In the middle of March is when the impact of the COVID-19 pandemic really began to hit in the U.S. On March 19, California became the first state to issue a Stay at Home Order, which means unless it is essential, people should stay within their households. In the middle of March, the Automotive Service Association, along with aftermarket coalition members, submitted a letter calling for auto repair related facilities to be declared as “Essential Businesses” and allowed to stay open for operation. Soon after, the government issued guidance to state and local government to include the vehicle service and repair industry as an essential service. Because of this, many auto repair shops have been able to technically stay open, but the impact has hurt business and has left some with no choice but to close down operations and most unsure about the future.
During the time when states were beginning to issue stay-at-home orders and the nation started practicing social distancing, electronic management software provider Tekmetric put out The Tekmetric Index to monitor economical trends and see how the industry was performing as a whole during the wake of the pandemic. The index collected data from 500 auto repair shops of varying sizes in the U.S. and Canada measuring ARO and car count. At the beginning of March, the index found that, on average, car count was at 10 and ARO was $414 (all information was taken from Wednesday, to control for day of the week). After the first week of social distancing, average car count dropped slightly to 9, but ARO actually increased to $444. Two weeks in and car count took more of a hit, with an average of 7, but ARO remained the same. The first day of April and the third week into social distancing measures, car count remained at 7 and ARO was at $413. An ARO in the $400 range is pretty typical—in 2019, 34 percent of Ratchet+Wrench Industry Survey respondents reported being in the $400–$599 range, with only 24 percent reporting a higher range.
“Overall, March was a mixed bag,” Jim Murphy, pro service coach for Elite, says of what he’s seen with his shops.
Some, he says, saw record months, while others took an immediate hit. He’s not been able to draw a correlation with the size of the community or the geographical location, he says it’s been “erratic.”
Bob Wills, owner of Wills Auto Service in Battle Creek, Mich., and the chairman of the Automotive Service Association (ASA) board of directors, says that he spoke with another member of the advisory board for ASA, Todd Black, whose shop, Unlimited Service, is located in Washington. Wills says he and Black saw similar trends in March, despite being in different parts of the country, with scheduling down (Wills says he’s scheduling at about 50 percent) and fewer cars coming in, but that ARO seems relatively the same.
Both Wills and Murphy felt that April would be bleak.
“April will be down, there’s no doubt about it,” Wills says.
Wills projects that May will be a cushion month, much like January or February is after Christmas. People will be recovering financially and have bills to pay, so car count may pick up slightly but he doesn’t see it getting back to semi-normal until June.
“Eventually, we will get out of this induced coma that we’ve been placed in,” Murphy says.
Murphy likens this situation to a natural disaster. Afterward, there’s always a hit to businesses, but eventually, everything sorts itself out. The difference is, with this pandemic, the exact timeline for “business as usual” is unknown. The positive for automotive repair shops is that new cars sales were on a downward trend anyways, and in times of financial distress, people aren’t buying vehicles, which means they’ll need to maintain the ones they already have, Murphy explains. So, moving into the summer, businesses may see more vehicles than normal.
In order to make it through, small business owners need to continue to market and remind customers that they’re open, Murphy, Wills and Tekmetric CFO and co-founder, Prasanth Chilukuri, say.
One effective way to do this is by helping out in the community, something that Murphy says many of his clients are doing.
“It’s been encouraging to see how many have embraced doing community events,” Murphy says. “[shop owners] are working with oil and filter vendors and seeking donations and supporting medical and first responders for free oil changes and picking up and delivering their vehicles.”
Another important lesson is to learn from this experience, Chilukuri says.
“This is a refreshing lesson for all of us,” Chilukuri says. “We can see where we can cut down costs and where we can be more efficient. Make sure you maintain enough cash in the bank. I think what shops need to be aware of is that this [the virus] could come back in the Fall when it cools down again. Those that survive need to take that into account.”