Automotive Industry in 2015 at a Glance
Car makers such as General Motors, Ford, and Chrysler have been sparking headlines in the past few years over disappointing demand and sales results. While it’s true that these Big Three automakers have had to cut costs and redevelop their strategy, the automotive industry remains a significant contributor to the United States’ economy and has began to climb back from the difficult challenges they have faced in recent years.
High oil prices in the mid 1990s caused many consumers to shift away from high fuel dependent vehicles like SUVs and Hummer’s that the US automakers were producing to lighter and more compact cars. Sales dropped dramatically as more and more people preferred the smaller and more fuel efficient Japanese cars to the more high powered American ones. The financial crisis in 2008 made matters worse as car sales further plummeted and the Big Three needed billions of dollars in government bailout funds.
As of 2010, the automotive market contributed to approximately 4% of the United States’ GDP and employed millions of workers. Sales have risen 11% since last year and is expected to maintain stable growth for the next few years.
These recent events have changed the landscape of the automotive market, but they have also created large amounts of opportunities for aspiring business owners to capitalize on the recent transformation of the automotive industry.
What does the Automotive Franchise Industry Do?
The automotive industry is involved in the process of designing, manufacturing, and selling motor vehicles. However, it is not just about selling cars to consumers. The services required to maintain and distribute cars after the car’s initial sale are part of the automotive aftermarket, a 257 billion dollar market. These services include the car accessories and repairs vital for the automobile ecosystem to function.
The automotive industry is involved in the process of designing, manufacturing, and selling motor vehicles. However, it is not just about selling cars to consumers. The services required to maintain and distribute cars after the car’s initial sale are part of the automotive aftermarket, a 257 billion dollar market. These services include the car accessories and repairs vital for the automobile ecosystem to function.
Interesting Automotive Franchise Industry Business
There are very few instances in history where the automotive industry have experienced as big of changes as they are right now.
There are very few instances in history where the automotive industry have experienced as big of changes as they are right now.
Energy Cars
As fuel prices remain high and there is greater concern for the environment, more energy efficient cars are increasing in demand. Moreover, as part of their bailout specifications, the Big Three automakers are required to quickly release more energy efficient vehicles to the market. This increasing popularity for hybrid and electric cars are going to affect the industry in big ways as it will create a new market for businesses to cater to these new forms of vehicles.
As fuel prices remain high and there is greater concern for the environment, more energy efficient cars are increasing in demand. Moreover, as part of their bailout specifications, the Big Three automakers are required to quickly release more energy efficient vehicles to the market. This increasing popularity for hybrid and electric cars are going to affect the industry in big ways as it will create a new market for businesses to cater to these new forms of vehicles.
People are holding their cars longer
As the United States slowly recover from a recession, consumers are still tight on their budgets and conserving the amount of luxury goods they purchase including new cars and other vehicles. According to the automotive industry research firm R.L. Polk & Co., consumers are holding their cars, on average, for 63.9 months, which is up 4.5 months from the previous year. Additionally, the quality of cars have increased leading people to hold their cars for longer periods of time without the need to purchase new ones. While this can lead to reduced car sales, it can increase the need for repair and maintenance as people choose to keep their older cars.
As the United States slowly recover from a recession, consumers are still tight on their budgets and conserving the amount of luxury goods they purchase including new cars and other vehicles. According to the automotive industry research firm R.L. Polk & Co., consumers are holding their cars, on average, for 63.9 months, which is up 4.5 months from the previous year. Additionally, the quality of cars have increased leading people to hold their cars for longer periods of time without the need to purchase new ones. While this can lead to reduced car sales, it can increase the need for repair and maintenance as people choose to keep their older cars.
Used Cars
Interestingly, growth in used car sales are lower than new car sales as people are preferring to purchase newer cars as opposed to buying used ones. A big part of that has to deal with the fact that there is a reduced supply of used cars raising the price of these cars leading people to just buy new cars.
Interestingly, growth in used car sales are lower than new car sales as people are preferring to purchase newer cars as opposed to buying used ones. A big part of that has to deal with the fact that there is a reduced supply of used cars raising the price of these cars leading people to just buy new cars.
Automotive Franchise Growth and Opportunities
The size and importance of the automotive industry have created many opportunities for people to get involved. According to the Franchise Business Economic Outlook 2011, automotive franchise establishments are expected to increase 3.9% from the previous year. General automotive industry trends and an improving economy are revealing opportunities for anyone with a passion in the auto industry to get involved.
The size and importance of the automotive industry have created many opportunities for people to get involved. According to the Franchise Business Economic Outlook 2011, automotive franchise establishments are expected to increase 3.9% from the previous year. General automotive industry trends and an improving economy are revealing opportunities for anyone with a passion in the auto industry to get involved.
In some parts of the automotive aftermarket industry, there is a significant advantage through franchising versus starting a shop on your own. In the oil change and lubrication market, the top few companies reap in a significant amount of the entire industry’s profits. There are also other opportunities that exist where people can benefit from.
Auto repair will continue to play a big role in the automotive industry. In addition to the routine car and repairs every car owner must go through, there is going to be higher demand for specialized parts and repairs required of hybrid and electric cars. Currently, there is a low supply of shops capable of fixing these hybrid cars despite its increasing demand. The auto repair industry includes numerous franchising segments including automobile body, transmissions, and oil franchises.
The auto accessories market is a $32 billion dollar market with data showing 92% percent of consumers are willing to buy auto accessories. With consumers holding their cars longer and disposable income increasing, auto accessories are beginning to look like a prudent investment for car owners.
The car rental market, which puts 1.6 million cars on the road, is currently seeing a bounce back from the damage the financial crisis created. Companies such as Hertz and Enterprise had to drastically cut costs and keep older vehicles in order to deal with the decreased demand in rental cars. As the economy improves, these companies are hiring more and switching their old cars for newer, fewer mileage cars.
Choosing an automotive franchise
Choosing among the different types of automotive franchise opportunities can be a difficult task. Like any franchise opportunity, the costs are going to depend on a number of variables including the type of franchise, location, and the expected return of your investment.The most common automotive franchise, general repair and maintenance franchises, has a liquid capital requirements that can range from $15,000 (Advanced Maintenance) to $350,000 (Express Oil Change) and contains a royalty fee of about 5%. Some more specific auto franchises like the auto body shop Aero-Colours and Color-Glo are more narrow as they have liquid capital requirements of $46,400 and $50,000 respectively. Thinking about how much liquid capital you have should be a factor in choosing the different types of franchises available.
Choosing among the different types of automotive franchise opportunities can be a difficult task. Like any franchise opportunity, the costs are going to depend on a number of variables including the type of franchise, location, and the expected return of your investment.The most common automotive franchise, general repair and maintenance franchises, has a liquid capital requirements that can range from $15,000 (Advanced Maintenance) to $350,000 (Express Oil Change) and contains a royalty fee of about 5%. Some more specific auto franchises like the auto body shop Aero-Colours and Color-Glo are more narrow as they have liquid capital requirements of $46,400 and $50,000 respectively. Thinking about how much liquid capital you have should be a factor in choosing the different types of franchises available.
Each type of franchise will have their unique factors that affect the demand for their services so it’s important to understand what those factors are. Understanding how the general industry trends are affecting each type of franchise is crucial to your decision of which type of franchise to buy. Some questions that you might ask are:
1. What if people prefer to buy newer cars as opposed to used one?
Auto repair shops will have fewer demand for the time being, leaving them to fix existing cars on the road. However, as these new cars begin to age, demand for these shops will start to increase.
Auto repair shops will have fewer demand for the time being, leaving them to fix existing cars on the road. However, as these new cars begin to age, demand for these shops will start to increase.
2. How does the new green movement affect which type of franchise to choose?
Electric and hybrid cars will need some specialized care in handling these new forms of cars. Parts and Repair franchises who offer services that also helps these new cars will have an increased demand for their services.
Electric and hybrid cars will need some specialized care in handling these new forms of cars. Parts and Repair franchises who offer services that also helps these new cars will have an increased demand for their services.
3. How does the trend towards holding their cars longer affect which type of franchise to choose?
This trend benefits the entire automotive aftermarket ranging from repairs and maintenance, accessories, and auto body jobs. Car washes also benefit as people need a way to keep their cars clean from the constant driving.
This trend benefits the entire automotive aftermarket ranging from repairs and maintenance, accessories, and auto body jobs. Car washes also benefit as people need a way to keep their cars clean from the constant driving.
4. How can other industry trends affect different types of automotive franchises?
Although its effects are sometimes negligible, some other industries can have a direct impact on the automotive franchise market. Car rentals, for example, are directly correlated with travel demand as more people use the airplane or go on trips, so does the demand for rental cars.
Although its effects are sometimes negligible, some other industries can have a direct impact on the automotive franchise market. Car rentals, for example, are directly correlated with travel demand as more people use the airplane or go on trips, so does the demand for rental cars.
These are some of the considerations to look at when determining what franchise you should pursue.
Different Automotive Franchise Opportunities
| Automotive Repair | Automotive repair is useful for any owner regardless of the age or type of vehicle. These franchises offer a wide variety of services that handles the maintenance of both the outside and inside of the vehicles. |
| Car Rentals | Car rentals are important for travelers needing a ride to their destinations. As air travel picks up, demand for car rentals are also expected to increase. |
| Auto Accessories | Auto accessories are helping owners improve the look and style of their vehicles. As spending for maintaining cars increase, the auto accessories franchises directly benefit from this trend. |
| Auto Transmission | Auto transmission checks and services are important to prevent cars from overheating and burning out its transmissions. There are different levels of protection these franchises can provide depending on the owner’s personal preference. |
| Car Washes | Car washes are becoming popular as people hold their cars longer and want to maintain their cars in good a condition. These services may include full-service, exterior, or stationary automatic car washes. |
| Auto Body | Auto body, paint, and glass repairs are necessary to mend damages from car collisions and any wear and tear on the surface of the vehicle. |
| Motorcycles | Motorcycles are a different beast than regular cars and require more specialized services which provides opportunities for people who understands the specific needs of motorcycles and wants to show their knowledge of them. |
| Oil Change | Oil changes are routine maintenance procedures that car owners should be familiar with. The industry is highly fragmented with the 50 biggest companies controlling 35 percent of the entire industry’s revenues which provides a good prospect for franchisees. |
The Future of the Automotive Industry
The automobile industry is not going anywhere soon. As the trends in the automotive industry continue, there exists both old and new opportunities available for those interested in franchising to get involved. Car maintenance, repairs, and body services are regularly going to be in demand regardless of whether people prefer to buy new cars or keep their old ones.
The green movement has hit the automotive industry as all car manufacturers are focusing their attention on producing more environmentally friendly and fuel efficient vehicles. As this infant market matures, there will be a demand for services from businesses that understands how to cater to these specific types of vehicles.
For potential business owners who have an interest in the automotive industry, partaking in an automotive franchise provides a good opportunity for everyone.
Automotive franchises are expanding in your local area, including some that require as little as $30,000 to start. Click here to choose from 100s of franchise opportunities.
Michael Liu is an Analyst for FranchiseHelp.com and is a graduate of the New York University's Stern School of Business.