Editor's Note: This article is part of Inc.'s weekly report on business niches in partnership with financial information company Sageworks.

Auto repair entrepreneurs have been watching higher profits roll in for more than a year.

In the face of a still-sluggish economy, Americans are holding onto their vehicles longer and driving them farther. That's creating plenty of opportunities for repair shops, which saw nearly 7 percent year-over-year sales growth during 2014. 

The average age of vehicles on the road is near a historic high of around 10 years, according to General Motors North America president Alan Batey. For many auto owners, that means an occasional trip to a repair shop.

“An automotive repair shop is a little like a physician’s office in that, if you have a car, at some point you will need an oil change, tires rotated or something like that," says Sageworks analyst Libby Bierman. "It’s not as mandatory as healthcare, but it has a similar type of demand. As a result, you’d expect the industry to keep growing at a slow but steady rate.”

According to Sageworks’ financial statement analysis, automotive repair and maintenance is not only growing but also improving profitability. The average net profit margin rose more than 5 percent during the 12 months ending December 30, 2014, a fairly significant increase over the 2 or 3 percent margin the industry achieved in recent years.

"Moving forward, that growth could yield higher dividends for owners or the opportunity for the business to re-invest in better machinery, technology or skilled workers that could lead to better products or service,” Bierman says.

At the same time that car owners are holding onto their vehicles for longer periods of time, more people who do not own cars are in the market to become car owners, according to Sageworks

The Census Bureau reported that sales at auto and other motor vehicle dealers were up nearly 11 percent overall from last year, leading repair shop owners to hope that more traffic on the road will lead to more business headed their way.

 

Published on: Mar 4, 2015