Car Love — A Fading Romance?
For decades, self-service was one of the building blocks of the car wash industry. Self-service was a point of entry for people new to the industry to get their feet wet. For some, it was a part-time business to supplement their day job. For others it was strictly a land play — waiting for property to appreciate. And, it made sense in smaller markets thought unable to support a more substantial wash. Today, however, there isn’t much demand to build a new self-service wash.
Evidence of this is self-service equipment spending — down by 92 percent as compared to estimated levels in 2005. Moreover, as shown in Figure 1, the trend in same-store sales now pales in comparison to the trend in the total cost to build a self-service.
Conversely, the International Carwash Association claims consumers continue to turn to professional car washing — those who wash cars at home declining by 2 percent over the last 10 years, and the preference for self-service was projected to go up from 14 percent in 2000 to 17 in 2010.
So, why has there been no apparent growth in self-service same-store sales? I believe part of the reason may be that people’s relationship with the automobile is changing.
Although the two-wheeled vehicle is the primary means of transportation for millions of people in Asia Pacific, consumers in the United States remain committed to cars, SUVs, pickup trucks, and vans. However, there are signs this commitment is slowly changing.
As shown in Figure 2, except for population growth and recovery in vehicle sales, industry demand drivers are under pressure. Arguably, these data provide some evidence that economic factors like income and fuel prices are causing Americans to drive less, switch to transit, and buy more fuel-efficient cars.
Mode of transportation is important to car wash owners since most stores are oriented toward capturing a high proportion of sales from passing traffic. In many cities, commuting to work and getting kids to and from school account for roughly 50 percent of daily vehicle miles traveled (VMT). The late morning and early afternoon account for about 30 percent.
Consequently, when the price of gasoline is sufficiently high to cause an actual decline in VMT, it tends to occur during times of the day when car wash operators capture a good portion of their business. The reason is most motorists do not have a practical short-term alternative to using their personal vehicles to commute to work. Perhaps the tide is changing.
As opposed to taking a transit bus, park and ride, or carpooling, the average commuter spends about 26 minutes on a one-way, 15-mile trip to work or an average travel speed of about 35 mph (15/0.43).
According to Fuel Gauge Report, the average direct cost for fuel, maintenance, tires, and time delays is $0.37 per mile or $11 for a daily round trip to work in Santa Cruz, CA. So, if our commuter rode a bicycle at an average rate of 15 mph, it would take two hours for a daily round trip to work instead of one but saving $11 in the direct costs mentioned.
Bicycle sales in the United States have grown from 8.9 million units in 1981 and remain steady today at between 15 million and 20 million units annually. According to the Bureau of Transportation Statistics (BTS), of the 14 percent of adults who rode a bicycle in 2002, 7.5 percent did for personal errands, while 4.7 percent did so for commuting. Today, 10 percent are commuters.
A faster but more expensive alternative to a bicycle is a street-legal motorcycle. According to the BTS, US motorcycle sales grew by an average annual rate of 24 percent between 1996 and 2007 but remain flat today.
Stepping down a notch are motor scooters and mopeds. The difference between a moped and motor scooter is engine size and capacities. Mopeds are less than 50 cc while scooters are usually over 50 cc.
Scooters can manage highway speeds of up to 60 mph, mopeds about 18 to 45 mph. Mopeds look like scooters but also have pedals like a bicycle, so no driver’s license is required. Mopeds can be driven on most roads but few highways. Today, you can buy a new 50 cc moped on sale for as low as $500.
As shown in Figure 3, when gas prices went through the roof in 2007, so did US scooter sales. People were buying them with their credit cards according to the Motorcycle Industry Council. By comparison, new-vehicle sales were 13 million in 2007. In 2011, moped sales were 24,000 units, up from 16,000 in 2010.
Stepping down another notch is gasoline and electric powered bicycles. Although very popular in other countries, these types of vehicles are just beginning to gain traction in the United States.
Today, you can buy a rechargeable electric-powered bicycle for about $500 on sale. The 450-watt bike can travel 15 to 22 miles with normal pedaling or 10 to 15 miles with no pedaling, at speeds of 15 mph.
According to Pike Research, a market research and consulting team, high oil costs, improved consumer perception, and government incentives are contributing to a growing demand for scooters and mopeds including those powered by electricity.
Pike sees the greatest demand in areas where the population is increasingly moving into cities, where large vehicles are often impractical and expensive to own, operate, and park. Pike predicts compound annual growth rates for e-cycles in North America will surpass 71 percent.
Certainly motor scooters, mopeds, and gas and electric powered bicycles are not going to supplant the sale of a million passenger cars anytime soon. However, what these vehicles do promise is another way for motorists to better manage their mode of transportation and reduce cost of driving.
Consequently, this should be some cause for concern among car wash operators, because every trip a motorist makes using an alternative mode of transportation is one less opportunity they get to sell a car wash service.
Bob Roman is president of RJR Enterprises – Consulting Services (www.carwashplan.com). You can reach
Bob via e-mail at firstname.lastname@example.org.