Industry Economics

Operators in the Auto Mechanics industry provide mechanical and electrical repair and maintenance for a variety of vehicles, including cars, trucks, vans and trailers.

Over the five years to 2021, the industry largely experienced healthy growth.The number of vehicles on the road expanded, along with the average age of the vehicle fleet.

As a result, demand from consumers and businesses rose.

Moreover, disposable income levels grew during much of the period, enabling more consumers to forego do-it-yourself repairs and enlist industry operators to complete the necessary repairs and maintenance for their vehicle.

However, over the five years to 2021, industry revenue is expected to decline an annualized 0.7% to $65.3 billion due to significant revenue declines experienced in 2020 amid the COVID-19 (coronavirus) pandemic.

The Auto Maintenance and Repair Franchises industry has experienced steady growth over the five years to 2020.

The national unemployment rate declined significantly over the past five years.As a result, many consumers returned to commuting to work, which ultimately increased the number of cars on the road, leading to a rise in total vehicle miles.

As consumers used their vehicles more frequently, general wear and tear resulted in the vehicles requiring more regular repair and maintenance work.

These factors, coupled with rising disposable income, resulted in a rise in demand for industry services over the past five years.

Sustained macroeconomic growth over the early portion of the five years to 2020 has led to increased demand for the Auto Leasing, Loans and Sales Financing industry.

Consumers are most active in this industry when they anticipate future income stability.In addition, a decrease in interest rates reduces financing costs and incentivizes larger purchases, thereby fueling industry demand.

Rising consumer sentiment and declining unemployment translated into higher auto sales and steady car prices during the majority of the five-year period.

Historically low interest rates and the availability of lengthier loan terms aided consumers’ purchasing power, resulting in record automobile sales in the United States in 2016.

According to Cox Automotive Inc. automakers sold 17.0 million new cars and light trucks in 2019, representing a slight decline from all-time highs reached in 2016.

The Auto Glass Repair and Replacement Franchises industry has experienced strong demand over the five years to 2019.Broken or damaged windows in cars and trucks often must be repaired fairly quickly because the damaged glass may interfere with the safety of the driver and the vehicle.

The costs of these repairs are often covered by auto insurance providers, which helps shield the industry from sudden declines in its customers’ disposable income levels.

Nevertheless, the industry still tends to benefit from a stronger economy as individuals are less inclined to put off repairs when they feel more confident in their wallets.

Moreover, as the number of registered vehicles on the road has increased and the average age of vehicle fleets increased, the number of accidents has gone up, benefiting industry operators.

Overall, industry revenue is expected to increase at an annualized rate of 4.2% to $658.3 million over the five years to 2019, including an estimated 1.9% jump in 2019 alone.

The Auto Extended Warranty Providers industry is anticipated to grow modestly as a result of macroeconomic growth, particularly at the consumer level, over the five years to 2019.

Industry operators provide automobile owners warranties that extend past the warranty a car’s manufacturer provides for a new vehicle.Additionally, participants in this industry include car manufacturers, car dealers and other third-party warranty providers.

The industry has benefited from the average age of the vehicle fleet in the United States increasing an annualized 0.9% to 11.9 years over the five years to 2019, as consumers typically purchase auto extended warranties or vehicle service contracts after their manufacturing warranty expires.Moreover, an increase in disposable income encourages consumers to purchase new vehicles, which bolsters sales of warranty plans offered by the manufacturer or dealer and benefits industry revenue.

Consequently, industry revenue is expected to increase at an annualized rate of 0.7% to $17.9 billion over the five years to 2019, including growth of 0.8% in 2019 alone.

Audit Services industry revenue is expected to grow over the five years to 2020 due to increases in the number of businesses and initial public offerings (IPOs) during most of the period.

The industry experiences high consolidation as larger operators acquire smaller players to increase industry presence and services.

Overall, industry revenue is expected to increase at an annualized rate of 1.4% to $34.0 billion over the five years to 2020, with an expected 0.4% drop in 2020 alone.

The decline in 2020 is primarily a result of COVID-19 (coronavirus) effects on the industry, which has decreased corporate profit, the number of businesses and new IPOs, all of which are high-value opportunities.Industry profit, measured as earnings before interest and taxes, is estimated to reach 20.2% of revenue in 2020.