Service business

Parts and service businesses rebound from COVID-induced crisis

Most dealer service and parts business categories continue to rebound from prior COVID-19 shutdowns, especially customer paid labor as customers drive more.

“Obviously the miles driven are up,” said Chris Holzshu, executive vice president and chief operating officer of Lithia Motors. This creates many opportunities for parts and service sales, he said on a first-quarter earnings conference call.

More driving means customers wear out their cars faster and have more crashes, so they need more bodywork. Many customers also come for service work they postponed earlier in the pandemic, Holzshu (photo below left) said.

In a separate call, Michael Manley, CEO of Fort Lauderdale, Fla.-based AutoNation, said, “Our service and parts business clearly shows the benefits” of increased miles driven.

Miles traveled by vehicles on all US roads were 235.7 billion (379.5 billion km) in February, the latest available month, according to the Federal Highway Admin. That’s a 10.6% increase from a year ago. For the whole of 2021, vehicle kilometers traveled increased by 11.2%, to around 3.2 trillion (5.2 trillion kilometres).

For Medford, OR-based Lithia Motors, customer service work was up 15% year over year in the first quarter. Work in the body shop has increased by 5%, according to the company. Warranty work lagged, down about 3%.

The warranty work mix is ​​down because the volume of new vehicles is down, Lithia says. In total, Lithia’s same-store service, body and parts revenue was $437.4 million in the first quarter, up 13.3% from a year ago.

At AutoNation, same-store revenue for parts and service was $966.6 million in the first quarter, up 15.5% from a year ago. Manley says that in addition to the increase in vehicle miles driven, AutoNation is reporting an increase in in-house service work, in part because it is reconditioning more used vehicles. Manley also notes that warranty work in parts and service is down.