Higher labor costs will continue to increase the maintenance spend for routine repairs in 2020, especially at service facilities located in high-cost-of-living metro areas.
“Labor costs, whether associated with aftermarket or OEM parts suppliers, will be important to follow. Our expectation is that labor costs will be the primary cost driver for the foreseeable future,” said Mark Lange, CAFM, technical services consultant for Element Fleet Management.
In addition to higher costs, the skilled labor shortage could translate into extended downtime as wait time at repair shops increases, impacting driver productivity.
“Due to skilled labor shortages and other factors, the increased cost of labor and parts in the automotive service industry has outpaced inflation for the past several years. With the current job market outlook for automotive technicians, machinists, and other technical fields, this trend will likely continue in the near future,” said Kelley Hatlee, CAFS, national service department technical support supervisor for Enterprise Fleet Management.
With the growing skilled labor shortage affecting labor rates, commodity prices remaining high, and vehicle technology increasing in complexity, it is likely that maintenance costs will continue to trend upward.
“We see the impact of rising labor costs as minimum wages increase. Historically, quick lube oil change facilities and tire retailers have been a good starting point for individuals interested in being automotive technicians or working in the industry while attending a technical college,” said Chad Christensen, strategic consultant for Element Fleet Management. “Wages at these types of facilities are typically comparable to other low skilled positions or entry level positions in other service industries. These types of positions are most likely to be impacted by increases in minimum wage with the larger metropolitan areas passing ordinances for $15 or higher hourly wages. For that reason, labor cost will be the driving factor increasing oil change, basic preventive maintenance services and tire installation costs.”
These increased labor costs are passed through to consumers and fleets in the form of rising shop labor rates. In the past several years, many repair shops have raised labor rates and this trend is expected to continue. Skilled technicians are exiting the trade at a rate faster than entering. This will put more pressure on shops to increase wages to attract the best talent.
“While parts pricing is up slightly, increasing labor costs have been the primary factor driving the increase in maintenance/repair costs in 2019,” said Lange of Element Fleet Management.
Increases for maintenance/repair costs have been slightly more than inflationary costs especially in the lower skilled services, such as oil change, tire rotations and other preventive maintenance services. The push to increase wages for low skilled positions will impact labor cost associated with these types of services.
“Labor costs have risen, causing an increase in maintenance spend for routine repairs. While the overall cost for maintenance is only up slightly, when repairs are required on the new technologies the costs can be shocking. Instead of just replacing a part, you may now have to add the cost to recalibrate the vehicle, potentially adding hundreds of dollars to the repair. Thankfully, the failure rates for these components are relatively low,” said Mark Donahue, manager of fleet analytics for Emkay.