Evaluating the Importance of Electric Vehicle Repairs for Auto Repair Business Valuation
As August approaches and the one-year anniversary of the Inflation Reduction Act draws near, the automotive industry is feeling the impact, particularly in the shift toward sustainable transportation. As consumer demand for electric cars grows, and EVs become more prevalent on the roads, auto repair businesses have an opportunity to boost the value of their business as they adapt and respond to the increased demand for repairs and maintenance unique to electric vehicles.
According to JD Power, electric vehicle sales rose by two-thirds in 2022 and account for 5.8% of all new vehicles in sold. In some markets, electric and hybrid vehicle adoption is growing by unprecedented numbers. The San Francisco Bay Area recently saw 38.6% of new vehicles purchased electrified. As rules for federal, state, and local tax credits continue to evolve to encourage the growth of sustainable transportation options, auto repair shops are adapting to the new landscape for repairing modern cars.
Auto Repair Costs on the Rise
New cars, both electric and gas powered, have advanced technology that has a big impact on the auto repair industry. From sensors and cameras to adaptive cruise control, repairs are becoming more complex and more expensive. According to recent federal consumer data, the cost of car repairs is up 19.8%, on an annual basis. There are many factors driving costs up. In addition to labor, inflation, and supply chain issues, new technologies require costlier parts and specialized mechanical labor. For auto repair business owners planning to exit their business, this is welcome news. The median sale price for automotive businesses continues to rise, with 2022 seeing an all-time high of $500,000, according to BizBuySell’s Insight Report.
For EVs, repair costs can often be more expensive. Mitchell, a company that provides data to auto repair businesses, found that electric vehicles are more expensive to repair than non-electric cars. According to a recent New York Times article, the average repair cost for EVs is $6,800, which is $2,400 more than the average repair cost for all cars. As ownership grows, increased demand for EV repairs and maintenance presents unique challenges and opportunities for auto repair businesses. Repairing electric vehicles requires specialized knowledge and training that differs from repairs and maintenance for internal combustion engine (IVE) vehicles.
Impact on Business Value for Auto Repair Businesses
Auto repair shops have a unique opportunity to stand out from the competition by expanding services. For business owners looking to increase the value of their business, investing in training, resources, and equipment is essential. Upgraded equipment and skilled labor are important to an auto repair business looking to capitalize on the growing EV market and add value to their services.
- Provide skilled and reliable labor: There is a growing need for mechanics and technicians with expertise in EV diagnostics and maintenance. By investing in training and equipment, repair businesses can position themselves as trusted providers, attracting a new customer base of EV owners.
- Collaborate with EV manufacturers and dealerships: Collaborating with EV manufacturers and dealerships can help auto repair shops capitalize on an already loyal customer base by offering certified repairs. This expanded customer reach and the potential for higher profit margins from specialized services can enhance the overall value of the business.
- Market EV Expertise: Businesses that promote their expertise in EV repairs, showcase their experience with EV models, and highlight their commitment to staying current with EV technology can attract EV owners seeking reliable and knowledgeable service providers.
The rise of electric vehicles presents opportunities for auto repair shops looking to add value in preparation for selling the business. By recognizing the unique intricacies of EV repairs and investing in the necessary expertise and equipment, repair businesses can position themselves as leaders in the automotive industry. The ability to provide reliable, skilled, and specialized repairs for EVs not only boosts the value of a business but also ensures the business will attract the best opportunities when it comes time to sell the business.