The fixed-ops sector of the automotive industry saw an increase in revenue and demand in January, offsetting the negative effects of falling car prices and dealership revenues. According to data from Cox Automotive, dealership service teams had more business in January than in December, despite the severe winter weather across the U.S. The fixed-ops sector also remained ahead of last year’s average, providing a stable source of income for dealers in a volatile market. Here are the details of the fixed-ops performance in January, and its implications for the industry.
Fixed-Ops Volume: A 2.7% Increase from December
The fixed-ops volume, which measures the number of work orders completed by dealership service teams, rose by 2.7% in January from December, according to Cox Automotive. This increase came as a surprise, given the harsh weather conditions that affected many parts of the country, and the ongoing Covid-19 pandemic that limited travel and mobility. Skyler Chadwick, Cox Automotive director of product consulting, said that the increase was “a testament to the resilience of the fixed-ops business and the dedication of the service teams.”
However, the fixed-ops volume in January was still 1.3% lower than in January 2020, indicating that the sector has not fully recovered from the impact of the pandemic. The fixed-ops volume in 2020 was 6.5% lower than in 2019, due to the lockdowns, restrictions, and economic downturn caused by Covid-19. The fixed-ops volume is expected to improve in 2021, as more people get vaccinated and resume their normal activities, and as more vehicles return to the road.
Fixed-Ops Revenue: A 3.3% Increase from December
The fixed-ops revenue, which measures the amount of money generated by dealership service teams, also increased by 3.3% in January from December, according to Cox Automotive. This increase was driven by higher labor rates and parts prices, as well as higher customer-pay and warranty revenues. The fixed-ops revenue in January was also 4.3% higher than in January 2020, showing that the sector has maintained its profitability and growth.
The fixed-ops revenue has been rising steadily over the last four years, due to the inflation and the increasing complexity and age of vehicles. The fixed-ops revenue in 2020 was 18.8% higher than in 2019, despite the lower volume, as dealers charged more for their services and customers paid more for their repairs and maintenance. The fixed-ops revenue is expected to continue to grow in 2021, as more vehicles require service and as dealers offer more value-added services and packages.
Fixed-Ops Importance: A Key to Dealership Success
The fixed-ops sector is a key to dealership success, as it provides a consistent and reliable source of revenue and profit, as well as a way to retain and attract customers. The fixed-ops sector accounts for about 12% of the dealership revenue, but about 50% of the dealership profit, according to the National Automobile Dealers Association (NADA). The fixed-ops sector also has a higher customer retention rate than the sales sector, as customers who service their vehicles at the dealership are more likely to buy their next vehicle from the same dealer.
The fixed-ops sector is also a competitive advantage for dealers, as it differentiates them from other service providers, such as independent garages, quick-lube shops, and online platforms. Dealers can offer higher quality, convenience, and trust to their customers, as they have certified technicians, original equipment manufacturer (OEM) parts, and advanced technology and tools. Dealers can also leverage their customer data, loyalty programs, and digital marketing to create personalized and relevant offers and communications.
The fixed-ops sector is a vital and valuable part of the automotive industry, which has shown its resilience and potential in the face of challenges and changes. The fixed-ops sector is expected to play a bigger role in the future, as the industry shifts to new technologies, such as electric vehicles, connected vehicles, and autonomous vehicles, which will create new opportunities and demands for service and maintenance. Dealers who invest in and optimize their fixed-ops sector will be able to survive and thrive in the evolving and competitive market.