When Should Mechanical Repair Shops Invest in ADAS?
Dec. 3, 2020—Jack Perea, owner of Superior Replacement in Riverside, Calif., saw sales grow as much as 30 percent in a 16-month period, and much of that success can be attributed to his focus on ADAS repairs.
In June 2019, Perea opened a new location, which included 12,000 extra square feet to accommodate ADAS calibrations for body shops. He has performed calibrations since 2017, but was struggling for space. This location does roughly $60,000 per month in ADAS calibrations with pricing for this work in the $250 range depending on what exactly is required. Perea says he believes there’s room for even more ADAS work, which is why he opened another location in September.
Perea has been able to turn it into a profit center, but the investment wasn’t cheap. There’s equipment, training, space and subscriptions to consider. Perea says that he invested close to $300,000 for both of his centers (the second opened in September 2019). Perea has 13 annual subscriptions for access to proper procedures, which he estimates costs him $3,000 per month, and that’s on top of the new building and equipment costs. Perea says the choice to invest was right for him, but it’s not the right choice for everyone.
Making the Investment
Very few shops are able to invest this much in equipment and technology. The 2019 Ratchet+Wrench Industry Survey found that only 15 percent of respondents had a budget of over 10 percent of their annual revenue for technology and tools. However, spending more doesn’t always result in better numbers. The majority of shop owners (34 percent) fell within the 5 percent or less range and seemed to actually perform better in a number of metrics. For example, of those that spent 11–15 percent of their annual budget on tools and equipment, only 16 percent generated over $1 million in sales per year versus 65 percent in the group that reported a budget of less than 5 percent. Sixty-seven percent of those that had a larger budget percent had an ARO between $200–$399 versus only 3 percent that had a lower ARO in the 5 percent or less range.
Spending more doesn’t always equal better results, which is why shop owners really need to determine whether or not the investment is the right fit.
“If you’re going to do it, get some good equipment, get educated and have proper floor space. It’s so precise—there’s little room for error,” Perea says.
Performing Market Research
Before jumping in and making a huge investment, it’s necessary to determine, first off, if there’s a need for ADAS and second, to determine which vehicles your shop sees so you can get the proper equipment and access to repair information for those particular vehicles.
Determine the need in your market.
Do you have body shops around you that are looking for this type of service, or is the market already penetrated? If it is, it may not be worth it. If, however, there’s an opportunity to differentiate your business and create an additional revenue stream, it’s worth looking into.
“The collision repair industry is seeing an abundance of vehicles that needs ADAS, a lot of them don’t have the facilities to do the alignments and they’re typically talking to dealers,” says Scott Brown, founder of the Diagnostic Network and former president of the International Automotive Technicians Network. “Shops that have a relationship with body shops can see that as a revenue stream opportunity. They might just want to invest and funnel that business.”
Note: This story originally ran in Ratchet+Wrench magazine under the headline "The Age of ADAS."