Automobile Mechanics

Industry Data

As of June, 2003, there were approximately 4,813 active automobile garages in the industry. This number includes all types of automobile garages and not only mechanics. This data does not include illegal garages operating without a license or professional supervision. It is difficult to estimate the number of unauthorized garages. In addition, according to Ministry of Transportation data from June, 2003, there are approximately 15,868 authorized garage supervisor and 4081 authorized garage managers.

 

Industry Sub-Division

Automobile mechanics garages provide care and maintenance for mechanical vehicle systems, and constitute a sub division in the car garage industry, including garages specializing in various aspects of vehicle operation- electronics, bodywork and paint, etc.

 

There are 3 types of businesses in the automobile mechanics industry.

  • A garage certified by import companies. These garages specialize in repair and maintenance of specific imported vehicle makes, and supply initial service to new cars still under warranty. These garages are usually required to adhere to high standards regarding parameters of premises, human resources, in addition to part and equipment inventory. They also operate all vehicle maintenance departments.
  • A specialized garage- not associated with a specific import company, however it does specialize in repairs of a defined, small number of car makes.
  • General Garage- Repairs various types of vehicles.

 

Market characteristics

The automobile mechanics industry is characterized as follows:

Licensing and certification is required. The process is relatively long and complex.

Managing a garage requires certification and additional examinations.

Customer allegiance is relatively high, as long as the customer believes in the garage’s integrity and quality of work.

Despite the licensing process, the number of garages is relatively high. The industry is highly competitive.

A garage not certified by the importer and is not associated to one, may have difficult marketing problems, unless it has a specialty field.

Most repairs at certified garages are conducted within a new car’s warranty period. Visits become less frequent once the warranty is no longer valid.

Most repair work due to of an accident is conducted at garages that have agreements with insurance companies.

 

Customers: Defining the Target Market and its Size, Market Segmenting

Customer segmentation according to vehicle age:

Owner of a new car will usually care for and repair the vehicle at a certified garage, as long as the vehicle is still under warranty. If the owner does not do so, warranty may no longer be valid.

As the vehicle ages and warranty term ends, the vehicle owner may choose any other garage. The primary option would be to choose a non-certified, specialized garage. This type of garage is highly familiar with the vehicle make, but prices are lower.

Renewed regulations should be noted, as changes have occurred in the requirement to repair and/or care for new vehicles only at certified garages in order to retain warranty.

Owners of old, cheap vehicles, usually give precedence to the price factor, and tend to choose a general garage.

An additional sector is the business/corporate sector- repairs and maintenance of organization vehicle fleets, executive vehicles, and association with the IDF for repairs of "white" vehicles.

 

Vendors:

Equipment and Tools: 

There is a range of vendors servicing garages. Price and quality of equipment varies.

 

Future development options:

Rapid technological development and the penetration of computerized systems into the vehicle industry dictate professionalism level and require familiarity with new domains beyond traditional garage domains, mainly computers. This trend will reinforce the eminence of specialized and certified garages002e

Increased travel distances between treatments in addition to the extension of warranty period given by importers reduce workload of garages that are not certified by the importer.

 

Presiding judge of the Restrictive Trade Practicing Court, Judge Yonatan Adiel, has given his approval to open competition in the certified garage industry, such that any garage adhering to objective criteria will be able to become a certified garage. The court has validated an order of agreement between the Restrictive Trade Practices Controller and 22 vehicle importers operating in Israel.
This results in nullification of the requirement for certified garages to only use original parts; imposition of prohibition for importers to pose any requirements as to pricing of service, apart from legal restrictions; importers are prohibited to require consumers to seek service only by specific garages, while these consumers are the ones paying for the service (such as regular maintenance and bodywork repairs).

 

Entry Barriers:

Professional threshold requirements: ministry of transportation licensing and certification.

High investment in expensive equipment. Some equipment may be financed by various material vendors (oils, lubricants, parts, etc.) by committing to a long-term exclusiveness agreement.

 

Human Resources:

Direct employees- mechanics employed directly by the garage performing professional tasks. Each garage is required to employ at least one certified mechanic, and one certified garage manager. If more than two persons are occupied at the garage, there is a legal possibility for one person to fulfill both functions.

Indirect workers- workers not directly occupied in professional garage work. For example, administrative assistant, warehouse worker, etc. Legally, apart from the professional manager, none of the employees are required to undergo training.

 

Financing:

Industry revenue and profitability

 Revenue in the industry stems from two main sources: revenue from labor and revenue from parts.

 

Yearly revenue data per worker for 2003 (in NIS thousands)

 

                                    Labor only                labor+ parts

General garage.                   250                 574-749

Specialized garage              266                 612-798

Certified garage                   298                 686-895 at Audi/ Volkswagen garages: 920-1,163)

 

Labor/parts ratio: 1:1.3-1:2.0 (at Audi/Volkswagen garages) 1:2.1 - 1:2.9).

Meaning: for each 1 NIS of labor, 1.3-2.0 NIS are earned from parts

Raw profit percentage from parts: 20-25%.

Raw profit percentage from total revenue:          47-57% at Audi/Volkswagen garages: 41-49%).

 

Typical terms of payment

Customer payment terms are not set. They vary according to extent of customer familiarity, size, frequency of visits, and confidence level. Payment terms range from payment in cash to installment payments by credit card or check for private customers, and EOM+30, 45 or 60 for corporate or business customers.

 

Licensing and Certification:

Local authority licensing is required in addition to Ministry of Transportation authorization and Ministry of Quality of Environment.

Certification is required in order to become a professional automobile mechanic manager.

It is recommended to check updated data on the Garage Union’s website at: www.iga.org.il and on the Ministry of Transportation website: http://portal.mot.gov.il/default.asp

 

Insurances:

Business insurance (for content and inventory), third party insurance, employer’s liability insurance, professional liability insurance loss of income insurance, and garage liability insurance. In addition to the above, an insurance agent should be consulted in regards to the need for additional insurance.

 

Relevant Addresses:

  • Ministry of Transportation, Department of Garages, Ha’Melacha 8, Tel-Aviv, phone: 03-5657154
  • Garage Union in Israel, Karo Yosef 24, Tel-Aviv, phone: 03-5620113, 03-5621597

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