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The Future Of Our Industry - The Automotive Aftermarket Will Never Be The Same

Consider this with me… what if we in the independent automotive service industry have

now entered a once-in-a-lifetime moment of opportunity?

Where what we’ve come to know as “stable” over the last seven decades, has suddenly

become unreliable and inadequate for us to rely on for future success.

And where our greatest future opportunities will manifest in ways that are new to our experience. With us needing new business strategies, different operational models, and even a new financial language.

Is it our fault? Did we do something wrong?

No! At least a dozen major factors have changed – some from within our industry; many from outside.

The combined impact is throwing our industry into a state of uncertainty where the traditional way that things have always been done just won’t cut it anymore. And this disruptive momentum is only going to become more extreme. There’s no going back from here!

This article begins to unpack just a few of these factors, and the impact that they have already begun to have on our industry owners and their organizations. (Please stay tuned to future Institute content for more information.)

Trend #1 – Automotive OEMs are Reengineering

Imagine with me, that you are the CEO of Ford, GM or Toyota…

What would you do if your company manufactured expensive, extremely complex products (cars and light trucks) that most everyone craved one day, and then almost overnight began to NOT want anymore?

At the same time, the automotive technology you’d learned to master for nearly 100 years for great profit, suddenly became out-of-date… even while the next-generation technology replacement was stubbornly hard to identify?

And that overnight, waves of new competitors (many of whom are not even car companies) began promising new disruptive technologies and services that you can’t currently match?

You would have no choice but to begin to rethink everything you know and do. That’s what the global automotive OEMs are doing now.

“CASA” is threatening a wholesale shift in vehicle technology and use:

  • “C” for Connectivity – Individual vehicles constantly tethered to the OEM group via the internet

  • “A” for Alternative Drivetrains – Whether it be electric, hydrogen, hybrid, or some other, many forces are working to replace internal combustion engines (ICEs)

  • “S” for Shared Mobility – As Uber and Lyft, even Turo, make expensive car ownership less necessary, many are opting to buy rides rather than cars

  • “A” for Autonomous Driving – In its ultimate form, driverless vehicles change the landscape of vehicle ownership, suggesting huge fleets that might replace private ownership

The OEMs understandably would prefer to control the entire vehicle food chain. But that’s not likely, given the scale of investment required to develop and then dominate each of these challenge areas.

And other players like governments and the largest institutional investors are also doing their best to skew the developing outcomes, for their own diverse and sometimes opposing objectives.

Whatever the OEMs do directly affects us in the independent automotive service industry, in both the near and distant future.

We at the Institute can help you dig deeper into these issues, and think strategically about your own business strategy… what are the developing implications for your service offerings, team member training, equipment investments, etc.?

Trend #2 – Baby Boomers Are Nearing The End of Their Careers

The U.S. Federal government estimates that 67% of all privately-held businesses in the U.S. are baby boomer-owned. Maybe even more in our industry.

Boomers are aged 60-78 in 2024. Many stuck around longer than they expected through Covid (big government loans helped them stay put). But time keeps moving… they’re getting older every day.

Sadly, investment experts estimate that as many as 80-85% of Boomers’ companies are not valuable enough to invest in. In other words, the owners used them like cash machines and failed to build investment-grade companies worthy of resale.

Most owners have the majority of their wealth tied up in their company. And 75% of owners regret exiting their business within 12 months of leaving, because of the poor way they handled the sale and transition to retirement.

You surely don’t want to have this experience yourself. We at the Institute would like to help you to strategize your best approach to achieve your unique succession and exit objectives.

Trend #3 – Big Money Investors are Here

Our industry is in the investment community’s mind now and in its sights.

Professional investors foresee a huge opportunity to buy up the wave of boomer company exits. To roll them up for scale and efficiency, and to build increasingly larger investment platforms. There’s huge money in this activity, including for the savvy owner-operators as well. This process has occurred in scores of other industries in the past, and now it’s our turn.

Owner-operators should be proactively prepared to make the most of their auto service company investment, not reactive. Get your company ready to impress the investors – to prepare and present your biggest investment to them through their lens, using their perspectives and their language.

We at the Institute understand this world – I spent 35 years of my career there, before coming alongside our industry. I personally helped five of my owner-operator friends to create and place the Straightaway Tire & Auto consolidation platform with a middle-market private equity firm. We’d like to help you have a chance to achieve the same kind of success.

We’ll discuss many more challenges and opportunities in future articles.

But for now, please be encouraged! “Our futures are so bright, we gotta wear shades!”

Reach out if you’d like to talk.

All the best,

Michael Herzberg Smith

Chief Strategy Officer, The Institute for Automotive Business Excellence

(435) 238-4534

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