2020 - Executive Forecast

12/01/19

Auto Laundry News invited executives from car wash companies that are actively seeking to add wash locations to their holdings to share their insights on how the following 12 months might shape the industry. The participants are: 

Thomas Mangas
Darren Skarecky

• Thomas Mangas, CEO of International Car Wash Group

• Darren Skarecky, CEO of Go Car Wash

We asked the panelists to consider three issues of general interest to car care business operators:

1. The economy — The outlook for 2020 and its impact on the car care industry.

2. How will mobility developments such as car sharing, ride sharing, ride hailing, and autonomous vehicles affect the car care industry?

3. Consolidation — Future activity and its effect on consumers, operators, and vendors.

THE ECONOMY

Mangas

I expect U.S. GDP to continue to slow to a 2 percent growth rate in 2020, a slight deceleration from the 2019 pace. Unemployment will remain near historic lows, but auto sales will continue to slow. While it would be better for the car wash industry for these macro-economic trends to be stronger, I do not think these trends will materially change the trajectory in consumer demand for the express conveyor car wash industry. The express conveyor business already offers a strong consumer value at a range of price points, and it provides an inexpensive way for consumers to maintain their cars as they hold on to them longer. I think the bigger threat to the industry is overbuilding in some markets where operators can quickly get overstretched as new competition comes into their market and returns erode before additional consumer demand can be built.

Skarecky

2020 should continue to exhibit similar economic conditions as 2019. The political environment will play an even more pronounced impact on overall market conditions. As we approach the presidential election, consumers will potentially scale back in spending as the unknown will weigh on anxieties and what the future will hold. This could be uncharted territory for us in the car wash space due to the growth of the membership model. We haven’t experienced a downturn since the exponential growth of the membership model in our industry. We should always be focused on providing value to our customers to combat any potential negative impacts due to any economic downturn. Overall, we will continue to see significant growth in the number of units being built, acquired, and renovated — a positive sign that the long-term future of the car care industry is very strong and will be for years to come. 

MOBILITY

Mangas

While consumers may be OK with riding in their own dirty car, they do not want to ride in someone else’s dirty car, especially if they are paying to do so. So, the trends in car sharing and ride sharing should result in more frequent washing for those cars, well above the average frequency for personal vehicles. That should be a good thing for the car wash industry. The industry’s challenge will be how to effectively set up a servicing network to make it easy for these types of ride sharing services to be able to meet their consumer expectations for a safe and clean experience. The ride sharing firms will likely look for car wash partners who can meet their need for geographic coverage, billing simplicity, and wash quality. As a result, the growth of these ride sharing services likely accelerates consolidation of the car wash space.

Skarecky

As we all know by now, we will continue to see growth in ride sharing and autonomous vehicles. However, the overall impact to the car wash industry in the near term will still be very minimal. As we experience more ride share vehicles they will continue to have a need to wash, which in the end should not have any real impact on our business. We all need to monitor the growth but for now it looks to be a number of years before any meaningful growth with ride share and autonomous vehicles will have any impact on our business. As the average age of vehicles continues to grow to almost 12 years it will further delay the growth of autonomous vehicles. The age of vehicles means that customers will be more focused on the care of their vehicle, which should drive higher demand for the car care industry including the membership programs. Technology will continue to play a bigger role in every business sector so we should all be focused on how we can leverage technology in our current car wash operations. As an example, LPR [license plate recognition] is starting to take shape with Sonny’s and DRB leading the way. It will be exciting to see how consumers adopt and appreciate this new technology.

CONSOLIDATION

Mangas

Consolidation of the express conveyor car wash market will only accelerate in the coming years. Consolidation will likely drive a faster pace of both wash innovation and marketing innovation which is great for consumers and will ultimately drive continued share growth in the express conveyor market. This increased consolidation will be good for consumers as operators that benefit from greater economies of scale will likely be able to pass along some of those benefits in the form of lower pricing as well as better products and customer service to consumers. The operators and suppliers that can sustain the pace of innovation will be successful long term and those who do not will have a hard time competing. As consolidation takes hold, the vendors who are most capable of servicing operators with multi-state or national footprints will win more business as they will be key enablers of consolidation.

Skarecky

Consolidation will certainly continue as more entrants enter the space such as GO Car wash. The real differentiator will be how do new investors appreciate and leverage the current expertise within the car wash industry. The current lack of sizable platform acquisition targets will continue to create entrance challenges for investors. It is important to note that industry experience is truly needed to operate any car wash regardless of size. True value should be placed on the operational performance versus just having a certain number ofsites. We should all be excited about the opportunities in front of us that have been created by consolidation and investment in the space. I encourage all of us to keep an open mind to the changes that will continue to occur in the space with the additional interest and investment. The time is ripe for those considering a potential sale of their car wash business!



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