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COVID-19 Effect - We’re not out of the Woods Yet

Survey results are no longer needed to understand the impact of COVID-19 on the auto-services business. Besides loss of sales volumes, revenues, and market value,

By Robert Roman

01/01/21

Survey results are no longer needed to understand the impact of COVID-19 on the auto-services business. Besides loss of sales volumes, revenues, and market value, most participants in the car wash industry have had to make changes in the way they conduct business.

To comply with social distancing, washes have closed lobbies, limited services and the number of employees allowed on site, and banned in-person payment. Some operators have taken to disinfecting the interior of vehicles driven by essential workers whereas suppliers have created disinfecting arches and new solutions for the exterior of vehicles.

I even saw a news report where a detail shop operator donned protective gear to disinfect the interior of retail stores because demand for these services was greater than demand for detailing cars.

There have also been delays in getting loans approved for new projects because many banks were ill-prepared to deal with the rush of businesses filing for COVID-19 relief loans.

Consequently, the industry has seen a significant increase in construction risk, re-sale market risk, and business operating risks.

Car wash operators have also had to address political risk as governments grapple over defining what businesses and employees are essential or not. Reportedly, the industry is relying on a memo from Office of Homeland Security that identified Automotive Repair & Maintenance Facilities as having an essential critical infrastructure workforce. Since car washing is often classified under NAICS code 8111 (Automotive Repair & Maintenance), associations and operators have taken the position that car washing is an essential business.

In some markets, operators have had to cope with social unrest in the form of protests, rioting, and looting which has resulted in loss of business and destruction of private and public property.

Besides these factors there are subtle changes in the underlying demand for car wash services. For example, the International Carwash Association finds the practice of washing vehicles at home is still declining, slightly, and wash frequency is increasing slightly.

 

On the other hand, the U.S. Bureau of Labor Statistics finds declining expenditures on routine vehicle maintenance are increasingly associated with older vehicles. In other words, as vehicle age increases, the average frequency and expenditure on car cleaning declines as is illustrated in the graphic below left.

This is significant because the average age of vehicles continues to increase, going up from an average of 9.8 years old in 2005 to 11.8 years in 2019.

There is also more evidence how demand for car wash services is dependent on consumer behavior. According to market research company NPD Group, dollar sales of DIY car-care basics collectively grew by a whopping 44 percent during April and May as compared to last year. April and May followed lockdown orders when the pandemic had affected everything from food production to new car sales to real estate markets. In fact, auto parts retailer AutoZone recently announced plans to hire more than 20,000 employees to meet growing demand from retail and commercial customers.

In the final analysis, it’s been a year since the beginning of the pandemic, and we are not out of the woods yet. For example, in-person attendance at all school levels and their associated activities are a concern for many businesses. According to the Safe Routes to School National Partnership, up to 30 percent of total daily traffic is generated by parents driving their children to and from school. If kids don’t go back to classes at schools, that’s a lot of pass-by traffic unavailable for highway-oriented businesses to attract.

 

Bob Roman is president of RJR Enterprises — Consulting Services (www.carwashplan.com). You can reach Bob via e-mail at bob@carwashplan.com



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