Fixed-Ops Revenue Rising

Parts-and-service revenue is on the rise, reported six publicly traded new-vehicle groups in the fourth quarter and year-over-year for 2022.

The groups combined reported same-store parts-and-service revenue of $12.7 billion last year, an increase of 10.5% year-over-year. For the fourth quarter, the companies reported $3.4 billion in same-store parts-and-service revenue, up 9.1%.

“We expect continued growth throughout 2023” in fixed operations, Chris Holzshu, chief operating officer of Lithia & Driveway Motors, said in a conference call to announce fourth-quarter and full-year 2022 results.

Holzshu noted that the average age of vehicles has increased, as people now keep their vehicles longer.

Lithia reported same-store service, body and parts revenue of $642.7 million for the fourth quarter, an increase of 8.5%. Service, body and parts revenue increased an estimated $2.2 billion for the full year, up 9.8% compared to 2021.

AutoNation reported $1 billion, or a 7.2% increase, in same-store parts-and-service revenue for the fourth quarter and $4 billion for the year, up 8.8% year-over-year.

AutoNation Inc. CEO Michael Manley in a separate conference call also cited the rise in customer miles.

“I think it really reflects the fact that there have been more miles driven,” Manley said. “There’s a direct correlation between miles driven and expense to keep the vehicles on the road safely.”

Sonic Automotive, Charlotte, N.C., reported same-store parts, service and collision repair revenue of $404.8 million for the fourth quarter, up 16.9%, and $1.6 billion for the year, up 18.5%.

Sonic’s figures are for its franchised segment, not its Echo Park used-only stores. Sonic Automotive President Jeff Dyke said he expects “mid- to high-, single-digit growth, if not a little better,” in fixed operations for 2023.

“We saw 12% growth, I think, in January,” Dyke said in an earnings call. “It should be a fantastic year, from a fixed (operations) perspective.”

Asbury Automotive Group of Duluth, Ga.; Group 1 Automotive, Houston, Texas; and Penske Automotive Group, Bloomfield Hills, Mich.; reported similar increases for fourth-quarter and full-year fixed-operations revenues earlier this year.

Statistics from the Federal Highway Administration show miles traveled are on the rise. The organization estimates vehicle miles traveled on U.S. roads and highways was about three trillion from January through November 2022. Though miles traveled were up just 1.2% from 2021, they increased 12.4% over 2020.

Vehicles are also older. The average age was 11.7 years as of the third quarter of 2022, up from 11.5 years in 2021, according to Experian Automotive.

More vehicles also now fit the 6- to 12-year-old category. In 2022, 99.3 million vehicles were that old, up 6.2% since 2021, Experian Automotive reported.

Combined, those factors will drive increased service needs.