Auto Sales Plunge, What does it mean to CW Biz?

[bigleo48]

Someone was bound to bring it up and so I will take a stab at it.

Not having gone through a recession with my wash (4 yrs old), but having lived through a couple, how does new car sales affect car washing?

I guess there are two trains of thought...1-Generally people wash more to take better care for their cars as they will own them longer...or 2-Generally people wash less as their cars are older and worth less (don't feel the love).

How about vacs, detailing, etc.

What are your non-political thoughts (I know washing will drop in a recession, but I want to be more specific on new car sales)?

BigLeo

 

[rph9168]

From my experience the economy and the weather have a much greater effect on car washes than new car sales.

 

[Jim Caudill]

My nonpolitical opinion is that there is no correlation between new car sales and purchased car washes. By asking such a specific question, there is not much room for discussion. As you have hinted, there are much broader issues that are involved, and they definitely have political implications.

 

[mac]

From what I've heard in the past, when new car sales go south, people are keeping their older cars longer, which means they are taking better care of them. The thing to keep in mind is that when you hear the fear stories on the news, it's meant to keep the general public's mind occupied/scared, so we don't notice the real crap the government is pulling.

 

[supersuds]

I think gas prices will effect us more than anything except the weather.

 

[Chiefs]

AMEN MAC - The most dangerous phrase in the English language is "I'm from the government and I'm here to help you." People keeping vehicles longer does indeed mean they take care of them better - normally - though this depression we are about to enter will be anything but normal!

 

[Tom Thumb]

Gas prices and the weather .

 

[Ric]

I've been at this for 25 years. When new car sales slide so has the carwash sales. However, the new car sales slide do to the economy, gas prices, etc. So I think that is just one barometer to measure by.

The increase in leasing vehicles over my 25 years in business has also increased. Those people that lease do not own those vehicles. I don't think they wash as often as someone who "owns" the vehicle. The pride of vehicle ownership is no longer there the way it was years ago.

 

[MEP001]

The increase in leasing vehicles over my 25 years in business has also increased. Those people that lease do not own those vehicles. I don't think they wash as often as someone who "owns" the vehicle. The pride of vehicle ownership is no longer there the way it was years ago.

I'm sure that's true - one of my aunts used to lease her cars and trade them in every three years. She would only wash it if it was free with a fill-up and would only change the oil once a year. When she buys lotto tickets, instead of 10 at a time she only gets 5, so if she wins she might have just saved a couple bucks.

Now that she's buying cars to own for a longer period of time, she's performing all the proper maintenance.

 

[robert roman]

The primary demand drivers for carwash are thought to be population, new vehicle sales and wash preference or tendency. The change in demand is thought to be a function of how these variables change over time.

This finding was published in an independent study of the carwash equipment market conducted by Booze, Allen and Hamilton in August 2006 and is based on judgment of opinion formed by 140 survey participants. These participants included major equipment and chemical OEM's, distributors, carwash associations, carwash operators, consultants and other channel members.

Does this finding hold water? I believe it does but only in the long-run. In the short-run, these variables do not offer much explanatory power.

In the short-run, I believe that demand for carwash is more affected by weather (a given), the tipping point of gasoline and consumer confidence.

Lately, the tipping point of gasoline has been getting my attention. The tipping point of gas (currently thought to be somewhere between $3.50 to $4.00 a gallon) is the price that will actually cause consumers to conserve (i.e. driving less, buying more fuel efficient vehicles, etc.).

Driving less is something that I believe can have a direct impact on the demand for carwash. For example, our local traffic engineers have noted, for the first time, that traffic counts on some of our major highways have declined by as much as 20%. This finding dovetailed on reports that the transit authority has experienced a significant overall increase in transit ridership (up 17% year to year). In the absence of highway improvements on these roads, some traffic engineers have surmised that higher gasoline prices are the principal reason traffic counts are lower. Since some operators here are complaining that sales volumes are off by as much as 30% to 50%, it seems reasonable to suggest that higher gas prices may be one of the culprits.

 

[Doug P.]

I have been in the car wash biz since 82 and have always heard that when times were tough people take better care of their old cars since they can't buy new. What I have observed over the years is that when someone buys a new car they wash it more because they have a pride that they did not have with their old one. I see people washing brand new cars that I have never seen at my wash before.

Weather of course is the number one variable that affects us. One long term trend that has hurt the car wash biz is how much better the cars built over the last 20 years are at not rusting out. We now have a whole generation of car owners that have never had a car rust out. When roads are salted now it is still a big boost but not like it was in the old days when everyone panicked.

Doug P.

 

[rph9168]

I agree that gas prices definitely effect washing habits. I also feel that the effect is much greater on c-store washes than free standing ones. Recently in our area we have experienced a gas shortage with some waiting in line for an hour or more for gas even though pricing is higher than it has ever been in the area and much higher than the national average (can you say price gouging). The weather has been very car wash friendly with good daytime temps and lower nighttime temps putting dew on vehicles left uncovered. C-store guys with washes have been hit hard while the operators with a free standing wash not so much.

I also think that some of the c-store decline is due to people waiting in long lines to get gas do not want to spend any additional time for a wash. I realize that this is a short term situation that has only been a little more than two weeks long but I think it reflects somewhat on the effect of gas pricing.

As someone has already pointed out, high gas prices add to a poor economy in general which causes most to prioritize expenditures so we can see a decline in eating out, entertainment, travel/vacations and high dollar purchases like vehicles or housing. Restaurants in our area have been dropping like flies so we aren't the only industry experiencing a decline in revenues.

 

[Ben's Car Wash]

last week, we had one of the nations LARGEST CHEVY dealers close all 13 locations! in my area, and why I decide not to inject what capital I needed to keep my car wash going (aprox $70K) with no clear end in sight (as I was told that this crisis was coming) is I was down nearly 50% in volume as gas prices rose and the housing market tanked. It is now spreading like ripples across a pond in this economy.

http://www.orlandosentinel.com/orl-bill-heard-chevrolet-closing-092408,0,7099902.story

Bill Heard Chevrolet of Sanford closed its doors at the end of business Wednesday, part of a shutdown of all 13 of the Georgia-based Bill Heard Enterprises dealerships nationwide.
Whether the store will reopen under new management, or by Chevrolet itself, remains to be seen.

According to a statement from Bill Heard Enterprises about 2,700 employees will be affected by the closings.

The company blamed "rising fuel prices, a product portfolio of mostly heavy trucks and sport utility vehicles, economic recession, unfavorable local market conditions for vehicle sales, the crisis in the banking and financing sectors, and other factors all combined to create a business environment in which the company simply did not have the resources needed to continue to operate.''

 

[Ben's Car Wash]

We have also closed all of our PANERA BREAD restraunts (owned by Publix supermarkets) and many restruants.

I don't like this "bail-out" plan that just got passed. I don't like the fact that I lost a LOT OF MONEY in my car wash (but hey... thats risk in capitalism and I knew that when I got in and accepted it). But IMO.... we're screwed and being over burdened as tax payers (and busnessmen) for corporate greed. If we don't act, more business will fail, like car dealerships and it will get worse. But I don't see a short term gain for car washes or a recovery for several years.... fuel prices are too subject to price fluctuations, shortages, hurricanes, war, terror attacks on pipelines, peak oil, artifical manupulation and speculation..... all leave car wash owners very susptable to consumer confidence issues that along with weather patterns will stress this industry.

We need alternatives fast (you guys do... as I am out). I pray for you guys!

 

[rph9168]

Our area had 4 of their dealerships. There was a big article in the paper last week about the Heard situation. The biggest problem Heard had was they constantly sought out the high credit risk customers so they could get extremely high loan points (as much as 5). In a way they were in the same boat as many of the predatory lenders and speculators. They did have a huge SUV/truck inventory but they had many consumer complaints about their business practices and had been charged by the state for sending out bogus recall notices hoping to bring in customers.

As a side note I bought three vehicles from their dealership due to the price but brought them to another dealer for service due to some problems I had with them trying to charge for warranty work. The salesman I bought them from left the dealership a while ago. I had a chance to talk to him since he sent out notices to some of his former customers. He did not say specifically why he left but I could tell he was not happy with the way they did business.

I really don't think their situation applies here since the way they operated was a much bigger problem than gas prices.

 

[Chiefs]

I always have operators and new investor ask me that since we have been so successful why don't we open more washes. Its quite simple and involves something my father taught me long ago, "Pigs get fat and hogs go to slaughter." I'm very happy being a pig. Those who built a house on sand when times were good are bound to lose it when times are not. Only those with firm foundations will survive. That is the nature of capitalism - the worst economic system ever created by man - except for all the others.

 

[mjc3333]

I cannot agree more. I've run a detail shop for 22 years along with multi SS washes. People who lease a vehicle do not take any pride in what they've spent their money on, namely a $25k car. They know that in 3-4 years they are going to "just" give it back, a 'who cares attitude'. Before the big lease sales over the past 10 - 15 years, people actually wanted to have their cars detailed on a regular basis, and in my opinion did wash more frequently. We are only dealing with 2-3% of the drive by population to use our facilities. It does'nt take much to lose their attention.

 

[mjc3333]

Amen!

I always have operators and new investor ask me that since we have been so successful why don't we open more washes. Its quite simple and involves something my father taught me long ago, "Pigs get fat and hogs go to slaughter." I'm very happy being a pig. Those who built a house on sand when times were good are bound to lose it when times are not. Only those with firm foundations will survive. That is the nature of capitalism - the worst economic system ever created by man - except for all the others.

Amen to that!!