Hold on, because some industry experts predict a bumpy ride ahead
By Dave Sutton
In 11 years – 2025 – the industry will still exist, but might be as much as 50 percent smaller, with fewer repair shops, machine shops and wholesale distributors, according to some industry professionals I recently surveyed.
Their overall consensus was that there just won’t be enough business to support the amount of people who earn a living in this industry today.
Cars will last longer than they do now, and if the OEMs have their way, consumers will rely on them instead of you for rebuilds/repairs.
Besides stock rebuilding, which has declined heavily and will continue to decline, there was overall agreement that racing will also decline. Street rodding will continue as long as those who wish to standout from the crowd still own their own cars or transportation. It was suggested that the trend towards crate engines will have a negative effect. A few said that the youth of today, who will be the buyers in the future, will have less enthusiasm for motorsports as those of the past.
I’m looking at social impact as that “love affair” Americans have had with cars for the last 100 years and how a more practical and pragmatic culture will reduce the automobile down to basic transportation. This would also include urban population growth. If the swing is towards urban dwelling, parking and traffic will dictate a need for fewer cars. More carpooling or more likely, greater use of light rails and busing would seem to fit. Car rental or sharing may increase as there would be fewer owned cars.
Environmental concerns may push us towards more electric or hybrids, unless we make some giant leaps forward with internal combustion technologies. Sadly, I fear politicians will have more to do with these decisions than science. Look around at other industries and the legislation regulating them to see what we’ll be in for in the future.
Economically, I’m concerned with inflation. We just may not be able to spend as much of our income on cars as we have in the past, and do still today. If a Big Mac hits $7.50 or $8 and gas goes to $10 a gallon, the American mindset will change. If salaries continue to lag behind and offshore labor continues to be more economical than labor at home, I foresee a radical tightening in the average household’s monthly budget. You need to be able to pay your bills before you can spend on your hot rod or racecar.
How about attrition? How many shops are being replaced when the owner finally hangs up his micrometer or closes his toolbox for the last time. With fewer shops available to take on machine work or repairs, the business will slip back to the OEM by necessity. Also, the trend to recycle used engines seems to have become somewhat of a norm today. Many of my current shops report that the rebuilt engine business has already been lost to used engines, and that the large PER is no longer as big a factor to them.
As long as we can get fuel to put in them, almost all my experts felt that the restoration market will continue. Though one pointed out that there are fewer cars from the ’80s and ’90s to restore that offer any real excitement like the ’60s and ’70s muscle cars. But, I’ve always contended that if the car has a live rear axle, it’s a candidate for a V8 swap. Maybe we’ll just have more hot rod pickup trucks.
Where the parts come from repair our vehicles also came up in my investigation. With a smaller market, I have to believe that we will have fewer parts manufacturers. We’ll probably see many acquisitions and downsizing. US parts suppliers will be forced to compete on a world market to exist. And how many parts are made in the US today anyway?
The shear number of SKU’s is set to explode over the next five years as many new engine models and designs are on the drawing board (err, computer) today. Possibly, the parts makers will only be able to supply the ever-changing OE market and the OE will dominate the parts supply stream of tomorrow.
If they can keep the information about makes and models a secret from the aftermarket as they’ve tried unsuccessfully to do for years, we’ll be in trouble. Look at what is happening in software and the music industry. If a future generation sees the ownership of knowledge and design along the same lines, cars will be thrown away before we can decide what part goes with which model. Much remains to be seen on these fronts as well.
The next, and frankly, the largest personal concern comes in the form of distribution. Parts manufactures continue to turn their backs on a market place that served them well for many years. Now, if you can write a big check, you can buy direct and sell for as little as you like, to whomever you like from your home on the Internet. When does this come to a point where the manufacturer sells all their wares directly to anyone with a bankcard?
Many of the companies we all support today have consumer friendly websites and sell at a price below retail or even some wholesale prices. Luckily, it costs more to tie up a repair bay than one or two markups impact a price, so availability is the winner today. Price may be the only concern tomorrow. I can guarantee you, there is more going on in online distribution and selling direct to the public to come.
It’s Not All Bad News
Years ago, a friend and machine shop owner told me he needed to get out of the business. He equated himself with a blacksmith at the turn of the century. And he was somewhat correct. But it has not happened as fast as he may have thought. There is a “hot rodder” mentality that prevails in our industry, and those who can adapt and create a market place for themselves will survive.
My feelings are that today is a key time to be thinking about the direction things are going and to work towards the change we want. We’d each prefer to dictate our own future. I hope this means business decisions that reflect a plan for a future without hanging out the “FOR SALE” sign. Maybe it does for those without the wherewithal to ride out the changes.
I look to other industries and watch for trends. I think we need to support those who lobby Washington on our behalf, and not support those who profit at any cost and sell to anyone at any price. The construction industry is down, but builders keep a firm grasp on the sale of their bill of materials. We are not carrying our own eggs into the diner, and so on. We must bill for each of our services at a price that makes us a profit, even though we may spend more time educating our customer about why they need to pay this much.
I can’t say much about social changes other than to support the “Take a Kid to a Car Show” campaign. Learn and participate in the new social media. Get involved with politics and get out to vote. Green means a lot of different things to everyone.
The Green Movement works to keep themselves afloat, and not necessarily to help the “Green” that goes in our pockets. We need to watch this movement and any impact rightly or not that it may have on our future. We each need to educate ourselves on these issues and also apply this to the candidates we choose to represent us in government.
We also need to support those who will come to fill our shoes. With fewer schools spending money for Industrial Arts programs, we may only have to look around our own businesses to see the last generation of independent automotive machinists. In-house training and a mentor like environment maybe your only hope if you wish to sell your business someday. And even then, you better plan on a long-term pay schedule if you’re going to make this happen.
Most prognosticators end up being wrong somehow. 1984 came and went without Big Brother. Hal was not in orbit and running the show in 2001 or 2010. I think the indicators are all there and it will be the will of those living and working in this industry that will keep it alive as long as possible.
Change is inevitable and change is coming. It will be up to each of us to stake our claim to the business at hand and ahead. Keep up with the changes, get involved and you, too, can help shape the automotive industry to come.
Engine Builder Staff
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