Investors pour money into auto repair shops in the United States

  • Firms with deep pockets are flocking to the vehicle repair and maintenance industry
  • Meineke Car Care Centers Finding Potential Franchise Owners in Memphis & Nashville
  • 81 million clunkers expected on the country’s roads within three years

America has become the land of old cars – very old cars.

From road-tired Kia Rio to wrecked Ford Broncos, some 81 million cars will have been in use for 16 years or more by 2021, experts predict, a 20% increase in the number of older vehicles nationwide in five years.

Call it the golden age for the clunker.

Investors are flocking to the nation's auto repair industry, establishing franchise repair shops and purchasing repair chains in response to the aging US fleet.

With mechanics at sparse gas stations and fewer active car dealerships, the aging fleet of vehicles with cracked windshields, tired fuel shippers, rattling brake calipers and other road work begs a question. simple: where will you go to repair your proven car?

Chances are this is a shiny new repair shop.

In cities across the country, companies with deep pockets are flocking to the vehicle repair and maintenance industry. Just as fast food chains a generation ago edged out local diners, auto repair chains backed by wealthy investors are emerging, drawing customers to local garages.

Large companies acquired more than 500 local stores across the country last year, a consolidation led by Detroit-based Icahn Automotive Group LLC, owner of the Pep Boys service shop brand, reports trade newspaper Tire. Business. At the same time, established repair chains have developed.

In Memphis and Nashville, for example, Meineke Car Care Centers LLC is looking for potential franchise owners who can build and operate new stores funded in some cases by loans from the US Small Business Administration.

While new franchise owners must pay Meineke’s license fee of $ 35,000 and post a minimum net worth of $ 250,000, experience under the hood is not seen as a necessity.

“We are looking for aggressive candidates who are eager to grow,” said Devin Hughes, director of franchise sales for Meineke, a brand with approximately 900 stores nationwide. “The vast majority of our franchisees come from US companies and are looking to create an investment for themselves. “

While Louisville, Kentucky and Washington contain many Meineke outlets, Hughes said, underserved metropolitan areas include Dallas, Detroit, Indianapolis to the north, Memphis, Nashville and Orlando, Florida.

Charlotte, NC-based owner Driven Brands Inc. and chain-savvy GM Jonathan Fitzpatrick oversee the auto shop’s expansion strategy. Formerly Burger King’s brand and operations manager, Fitzpatrick intends to double Meineke’s annual sales over the next five years to $ 1 billion.

Profits from the expansion will go to Atlanta, home of Driven Brands owner Roark Capital Group, a leading investor in a stable of well-known national chains. These include Arby’s, Cinnabon, Jimmy John’s, McAlister’s Deli, Moe’s Southwest Grill, and Schlotzsky’s. The Atlanta-based company bought Driven Brands three years ago from New York investor Harvest Partners LP, whose investment pool includes leading funds of fund managers including Goldman Sachs Asset Management, based in New York.

Buy used cars

Part of why the repair of old cars has attracted big investors is based on this figure: 100 million.

Over the past six years, a sales frenzy has put 100 million new cars and trucks on America’s highways. America’s appetite for power and steel might make you think every other vehicle on the road looks new. Look again.

“Despite the record number of new cars, there has been tremendous growth in very old vehicles,” said automotive consultant Jim Lang of Lang Marketing in Fort Wayne, Indiana. “In fact, vehicles 12 years and older make up almost half of the vehicles on American roads.”

The sales boom has contributed in a roundabout way to the clunker fleet.

Strong consumer demand coupled with low interest rates have allowed automakers to incorporate expensive options into vehicles and increase prices year after year on car lots. This summer, the typical dealership buyer paid $ 35,285 for a new vehicle, reports market analyst Edmunds.com Inc. of Santa Monica, Calif. This was about 25% more than the average transaction price ten years ago.

Auto prices have risen so rapidly that many middle-income buyers have given up on new vehicles. They turned to late model used cars. This year, about 40 million used cars and trucks of all ages will change hands, compared to sales of about 17.3 million new vehicles.

Strong demand drove up prices – the used car cost an average of $ 20,085 in October – and pushed back low-income drivers in search of newer, affordable vehicles. They bought older cars instead. This demand in turn raised the prices of older vehicles. Scarcity was also a factor.

When layoffs escalated during the 2008-09 recession, new auto sales plummeted and auto factories cut production. Today, relatively few vehicles assembled between 2009 and 2012 are in circulation.

“Consumers looking to escape record high prices for new and used vehicles are running out of the used market,” Edmunds market analysts recently reported, noting that “less used vehicles of $ 10,000, the most affordable segment, is becoming increasingly scarce “.

Rather than paying dearly for a used car, many drivers have decided to repair and keep their old cars. The reliability of the vehicle was working in their favor, Lang said. Cars designed since the late 1990s tend to outlast earlier cars and trucks.

As a result, the national fleet of nearly 300 million cars and trucks contains an unusually large share of vehicles for the elderly. About 81 million automobiles will have been on the road 16 years or more by 2021, up from 62 million in 2016 and 35 million in 2002, predicts the Auto Care Association, a commercial group in Bethesda, Maryland, in its state. most recent of the Automotive Industry Report.

It is on busy highways, among pharmacies, fast food outlets, gas stations and dollar stores, that repair chains are emerging.

Only 40 percent of motorists have regular maintenance done, reports the Auto Care Association, noting that most drivers cite inconvenience as a reason for avoiding work. Now, repair chains are being set up on the journeys that motorists take between their home and their work.

“This working-class market is where we focus,” said Hughes, noting that Meineke’s new stores often have children’s play areas and bright lobbies.

Car repair

In two decades, 13% of car dealerships have closed their doors across the country.  If work needs to be done, drivers tend to rely on local garages, which account for 65% of service on the nearly 300 million cars and trucks in service today.

In two decades, 13% of the nation’s auto dealerships have closed, leaving many motorists away from dealership mechanics. If work needs to be done, drivers tend to rely on local repair shops, especially drivers of national brands made by Chrysler, Ford and General Motors, Lang said.

Since local stores still account for around 65 percent of maintenance and repair activity, many investors are growing by buying the stores. Icahn Automotive, for example, acquired more than 225 stores last year, including Mathis Tire & Auto Service, a Memphis chain with 12 stores, and WS Haynes, a two-store Memphis company.

Seeing the rise of well-funded stores, Fort Lauderdale, Florida-based AutoNation Inc., the nation’s largest auto retailer, implemented the Approved AutoRepair designation for its garages in partnership with AAA, an insurer and an organization. car service based at Heathrow. , Florida. The retailer said earlier this year that 220 facilities are under the program.

The demise of small stores, said Lang, whose research is used by the Auto Care Association, is due in part to the increasing use of electronic systems in vehicles. While systems such as fuel control modules add to vehicle reliability, they require expensive repair tools and diagnostic equipment often beyond the means of family businesses.

The aging fleet has reshaped the auto industry in another way. Nashville-based tire maker Bridgestone Americas Inc. has responded to industry consolidation over the past year. Bridgestone and Akron, Ohio-based Goodyear Tire and Rubber Co. have formed TireHub LLC. The distribution company was formed to ensure that the remaining independent stores across the country have a steady supply of Bridgestone and Goodyear products.

Another company affected by the aging fleet is AutoZone Inc. The Memphis-based retail chain of stores operates more than 6,000 stores. Storing parts in its warehouses for a range of vehicles, Lang said, “puts an inventory load on them. They can’t remove older coins at the rate they once could.

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Sylvia F. Hernandez

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