We’re all aware of the current supply chain issues plaguing our industry. Between the lack of raw materials affecting the availability of rubber, paper, and steel products, and problems with containers waiting in limbo at our ports, these issues are likely to continue through Q2 of 2022 and possibly longer.
This supply chain interruption is happening while new cars are virtually unavailable, forcing people to hold onto their current vehicles, and it’s causing somewhat of a boom for transmission repair. We felt it was essential to look at this issue from a shop’s perspective and see how shop owners deal with the repercussions of these parts shortages.
Grand View Research found that the automotive aftermarket was $75.21 Billion in 2018, and it’s expected to register a 1.8 percent Compound Average Growth Rate (CAGR) from 2019-2025. According to IBIS World, the auto repair industry itself grew between 6% and 7%, reaching $65.6 Billion in 2021. Through our conversations with shop owners and rebuilder executives, it’s clear that there’s a domino effect hitting shops when parts and materials are unavailable or delayed, of course, resulting in delays in the repair process.
“Parts that are usually “same-day” or 24 hours away are now delayed several days,” said Pat Sepe, owner of Dial Transmission in Merrick, New York. “Therefore, the slow movement of vehicles off our lifts has set our scheduling and completion of repairs back several days. This also means vehicles waiting to be worked on are being delayed.”
According to McKinsey & Company, the intent to purchase new and used cars over the next year is back to pre-COVID levels, with new vehicles at 94 percent, a seven percent increase from September 2020, and used vehicles at 97 percent, up by one percent from September 2020. While consumers are hoping for a return to normalcy in their buying patterns, shops face stressors from the lack of materials at their disposal.
“I inform customers of the problems in shipping and delivery of parts,” said Rich Dodzik of Avon Transmission in Avon, Indiana. “[I explain] that this will delay the delivery of their car in a somewhat timely manner.”
There is also extraordinary pressure on shop owners to change tried and true methods of serving their customers, trying to keep the job turnarounds as timely as possible. “I use multiple parts houses including OEs,” said John Parmenter, owner of Centereach Trans on Long Island, New York. “I spend about two hours a day sourcing parts now.”
Many builders concur that the availability of parts now outweighs the price. “We use every parts resource available to us,” said Sepe. “We need to move vehicles in and out; unfortunately, the customer has to absorb the cost,” Sepe says he’s finding price increases daily. Obviously, parts cost and availability uncertainties make pricing jobs difficult. “Unless there is an outrageous price increase, the quote I give [customers] stands,” said Dodzik. “They will be informed if anything changes.”
Some shop owners are even going to reman units when parts are unavailable for a specific job. “We do use reman units when there is a critical time factor in getting parts,” said Dodzik. He added, “Or if the shop is backlogged in the building area.” Parmenter stated, “I would use a reman in a pinch – when I have cars backed up.”
According to Mordor Intelligence, the US automotive parts and components aftermarket was $17 Billion in 2020 and is expected to reach $19 Billion by 2026, registering a CAGR of around two percent during the forecast period 2021-2026. Mordor Intelligence also found that although COVID disrupted the entire supply chain, the parts and components aftermarket is expected to have a steady growth. This is because the demand for parts manufacturing is directly related to automakers’ performance, as they are the largest purchasers of industry products.
Chat posts on several of the rebuilder sites indicate that many shops are buying any available parts and stocking them in anticipation of jobs that may come in the door. While this may have a “boom effect” for distributors now, eventually, it will have to level out.
While all the shop owners we spoke with said their parts distributors have kept them informed of parts issues, they agreed that they’ve had to go beyond their usual supplier network to find needed parts – even using dealerships and local auto parts stores for items. The “any port in a storm” mentality has served all shops during this time. “At one point, filters were a problem,” said Dodzik. “I had to buy them from the local auto parts store.” Sepe added, “Whoever gets the parts here first is whom we’ll use for any specific, hard-to-find part.”
Although this situation is new to the transmission aftermarket, our discussions with shop owners have shown the resiliency they must have to survive in an ever-changing transmission world. A world where new transmissions come out monthly and not keeping up with the latest technology can put a shop behind the competition.
We asked shop owners how they keep up with the latest tech information. Parmenter has presented tech seminars in the transmission industry for 30 years, including the ATRA Powertrain Expo for the last 15 years. He observed, “Anyone who wants to be in the business needs to stay up on things. Right now, I am in the middle of an online class for Dodge 10 speeds.”
According to researchers at Markets and Markets, the transmission repair market is projecting a CAGR of 3.5 percent in the forecast period of 2017-2022, reaching $233.7 Billion by the end of this year. Rising demand for commercial vehicles, larger personal vehicles, increased vehicle sales, and increasing average vehicle miles driven have fueled the market’s growth globally. Linchpin SEO estimates that by 2022, 18 percent of American households will use an auto repair service at least once a year. For automobiles aged 12 years or older, it’s anticipated to increase by 15 percent.
“Providing shops with field problems and fixes via the internet is a way that manufacturers and distributors can help shop owners,” said Sepe. He added, “The learning curve in the industry is massive, and without many years of experience and functioning grey matter, most shops won’t survive, let alone prosper.” Dodzik stated, “Our techs stay on top of changes by going to seminars and visiting helplines online.”
While parts supply chain issues are new to shop owners, technician shortages continue to present a challenge. Shop owners are discouraged about the future of the rebuilding industry due to changing social climates and attitudes of younger generations. Dodzik views the more significant problem will be finding new techs moving forward. “The younger generation has absolutely no interest in repairing vehicles.” Sepe concurred, “As I see it, the younger generation has more options. [They] view their occupations as a mechanism or conduit to spend more time on life experiences.” This challenge is even hitting the dealerships. Most of the shops we spoke to said they do a lot of work for local dealerships mainly because their techs lack enough experience to repair or rebuild the new transmissions.
While the current parts shortages have added a new problem that shop owners must deal with, they’ve taken it in stride and are doing whatever’s necessary to keep the jobs moving out the door in a somewhat timely manner. The transmission industry continues to prosper. The techs and shop owners who keep up will survive and flourish. With electric cars on the horizon, it will be interesting to see the continued resilience of this industry.
Cassidy Sollazzo is a recent UCLA graduate with a degree in Political Science and a minor in Film, Television, and Digital Media. She is doing freelance writing and working with Precision International’s social media efforts.
