The size of the automotive industry makes it an ideal space for investors to be involved. If the trends and economy are anything to go by, there will constantly be new opportunities for anyone with a passion for the automotive sector.
The franchising model is well suited to the automotive industry as bigger brands have more buying power and consumers trust well-established franchises. Starting an automotive business independently can be expensive and overwhelming, but by joining a franchise you are assisted in starting up and running your business. A well-known franchise with a trusted brand name will also help you secure customers from the get-go.
Potential for Growth
Morné Cronje, FNB head of franchising, believes this is one of the categories in franchising that still has a lot of growth potential. “There has been growth in new products such as window tinting or protective film and windscreen repair or replacement,” he says, adding that the current state of the country’s roads in general gives rise to growth in automotive business opportunities, for example wheel rim repair services. “Lifestyle products such as 4×4 accessories also show potential for growth, and the amount of accidents on the roads, especially bumper bashings, increases the potential for non-structural repair franchise concepts.”
Before You Buy
As a potential franchisee, you need to do thorough research on the brand you are interested in joining. You should not only look at the price, but also the history of the brand and the training and support provided.
“Automotive franchises have traditionally been more focused on trade name franchising and less on business format franchising where the franchisor gives the franchisee a proven business model and system,” says Cronje. He advises entrepreneurs interested in this category to find out what level of support the franchisor will provide on an ongoing basis. “From our experience, many of the franchises in this category are now looking at enhancing their systems to provide more franchisee support and to standardise the customer experience of products and services,” he says.
What it Takes
According to Jane Perie of Mayfair Gearbox Centre, the type of person best suited to owning a franchise in the automotive sector is someone who is tough and reliable.
She says that in order to be successful, it helps if a franchisee has motor industry knowledge. Other attributes include understanding the technical basics, as well as having an entrepreneurial spirit. She advises that franchisees ensure their franchisor is established and can offer 24/7 back-up.
A Bright Future
The automobile industry is by no means getting any smaller, and will continue to grow with the global population. As it grows, there are both old and new opportunities available for those looking at investing in a franchise.
Car repairs, maintenance and body services will be in demand regardless of whether people are buying new cars or keeping their existing ones. One of the topics constantly being addressed is the green movement. Many car manufacturers are focusing their attention on producing environmentally friendly, fuel efficient vehicles. As this trend increases, it creates demand for businesses that understand green issues and can offer the relevant services or products.
Romano Daniels, MD of Bridgestone South Africa says the move by OEMs to produce more efficient products that last longer has led to a decline in turnover in certain product categories for aftermarket franchisees. The same can be said for Government’s move to reduce the sulphur content in fuel which leads to less corrosion.
The AIDC (Automotive Industry Development Centre) has been lobbying for automotive parks in the Eastern Cape for SMEs based on a micro-franchising model to promote new business opportunities. Grant Minnie, supply chain development senior project manager, AIDC, said implementing such a business zone, mainly for the aftermarket, would build a bridge between the formal and informal sectors.
The automotive parks would contain businesses such as windscreen repair, body repair, seat repair, tyre services, vehicle parts, valet services and others. The businesses would be supported by the formal supply chain ensuring supplies were sourced from established entities and brands. These parks would provide the support currently lacking to entrepreneurs, including limited infrastructure, fixed capacity, innovation and access to finance and markets.
- Ford was the first OEM to establish a subsidiary company in 1924 in Port Elizabeth and began to assemble CBU vehicles
- All the major OEMs in the world are represented in South Africa
- South Africa’s motor vehicle population is concentrated in Gauteng, comprising 38% of vehicles, followed by the Western Cape with 17%, KwaZulu Natal with 14% and the other provinces with less than 10% each
- The automotive industry accounts for 12% of exports
- Approximately 90 000 people are directly employed in auto manufacturing, approximately 200 000 are employed in retail and aftermarket activities
- South Africa’s auto production grew by 59% between 2000 and 2011 compared to the global growth of 35%.