Several years ago, Corina Diehl — owner of Diehl Automotive Group — decided to roll the dice and build a 26,000-square-foot standalone collision center in Pittsburgh.
The final cost: About $2.5 million.
The calculated gamble has turned into a smashing success. Since the Diehl Collision Center opened in October 2019, annual revenue has increased by double-digit percentages, despite the pandemic, which hit full force soon after its opening, Diehl said.
In 2020, the first full year of operation, the center generated an average of $243,000 in sales per month. In 2021, average monthly revenue rose to $326,000 — a 34 percent increase compared with 2020. In 2022, average monthly revenue increased to $412,000 — about a 26 percent jump over the 2021 figure, Diehl said.
The center already is booked out for repairs through midsummer, she added, as are six other collision-repair facilities owned by the auto group, which operates 21 stores in Pennsylvania and Ohio.
“It’s been crazy,” Diehl told Automotive News. “I would say the center has exceeded our expectations.”
The collision center’s success offers a blueprint for dealers interested in developing new revenue streams and diversifying into services with high profit margins. There’s not much competition from other dealers for collision-repair services. Only about 35 percent of the 16,752 franchised dealerships nationwide do bodywork, according to the NADA Data 2022 midyear report.
Moreover, that number has been slowly declining since 2017, when it reached 39 percent, according to the report.
There’s no need to convince Diehl about the inherent potential. In fact, the collision business has been so lucrative that during the last three years, the Diehl group purchased three more car-repair shops in suburban Pittsburgh — independent outfits whose owners wanted to retire. The group owned three medium-size repair shops before it built the Pittsburgh center, Diehl said.
“The acquisitions made sense because all three stores were profitable. And in terms of convenience for our customers, they gave us a good geographical circle of shops located around our Pittsburgh-area dealerships,” she said.
The collision center benefits the auto group in other areas as well. For starters, the dealerships can sell parts to the collision centers. While Diehl couldn’t pin down the revenue generated by selling parts to the repair centers, she said there is no doubt that overall parts sales have increased significantly as a result.
In addition, the collision centers serve as a springboard to new-car sales.
“We’ve already had about 30 cars declared total losses this month,” Diehl said in January. “So that’s 30 people who we can introduce to our salespeople and try to sell them a new car.”
Offering collision repairs also diversifies the company’s service offerings and makes it more convenient for customers who prefer to avoid the hassle of going somewhere else for repairs, she said.
“It makes us a full-service one-stop shop, which helps us take complete care of our customers,” Diehl added.
An array of factors contribute to the collision repair center’s success. For starters, the company already owned the land where the center was built, which is a big advantage given the high cost of real estate.
Then there is the facility itself, which features 20 collision-repair bays, two heated downdraft paint booths, two heated paint stations and four estimating and delivery bays. The spacious facility is designed to maximize efficiency, Diehl said.
Technicians are certified to work on virtually all brands of cars, including a dual certification from electric-vehicle startup Rivian to work on both electric cars and electric fleet vans. The collision center is the only dual-certified Rivian facility in western Pennsylvania, Diehl said.
“Getting technicians OEM-certified is expensive, and some brands are more expensive than others,” Diehl said. “But it’s well worth the expense to be able to take care of more customers.”
Other circumstances have also generated revenue growth.
The new-car shortage, for example, has helped goose sales because consumers are opting to repair their vehicles instead of buying new ones, Diehl said.
“We’ve also been successful because we do quality work, we have the right team in place and the Diehl brand is well-recognized in the Pittsburgh area,” she said. “We’ve built up a very good reputation.”
Competitive pricing has contributed to success as well.
“We do a lot of price shopping to be sure we’re competitive in the marketplace,” Diehl said. “We constantly monitor that and do the same in our service departments.”
The collision centers offer a five-year guarantee on repairs, which differentiates them in the marketplace, she said.
Despite the center’s success, it wasn’t all seashells and balloons at the beginning. After the pandemic began, car insurance collision claims dropped as business lockdowns dramatically decreased the number of vehicles on roadways.
“It was a scary time,” Diehl said. “We took in a lot more fleet-repair work to get through it. We reached out to everyone and anyone for business — did everything we could to drag cars through the doors — and discounted our prices.
“But it worked,” she said. “Car dealers are very good at the survival game.”
The ongoing parts shortage makes operating a collision center difficult. Some vehicles have been stranded at Diehl facilities for up to three or four months. Loaner vehicles are hard to come by, too, Diehl said.
Regular communication with customers helps ease their frustrations, she added.
Given the labor shortage and more specifically, the dearth of qualified technicians in the auto industry, it’s easy to assume staffing the new center — which employs 16 people — also would be a challenge. But that wasn’t the case, Diehl said, noting the new facility made recruitment easy.
“A brand-new facility makes it easier to attract new talent,” she said. “Guys who are working in dumps get excited when they see our glorious service bays with 18 feet of work space up above.
“We’re also a family-owned auto group, which I think makes it easier to find employees,” Diehl said. “I still walk through my shops and talk to employees and hold team lunches with technicians without the service managers present.
“I’m very accessible and can help them by making changes,” she said. “The input I get when managers aren’t in the room is very effective.”
To find employees, Diehl said the company uses job recruitment platforms such as Indeed.com, and works with a network of tool vendor representatives who know technicians. Technicians referring candidates who get hired are rewarded with bonuses.
The company works closely with local vocational and trade schools to identify job candidates, and provides technicians with a new set of tools, valued at about $9,000.
“It takes a lot of financial pressure off them,” Diehl said.
Technicians must stay with the company for three years before they can leave and take the tools with them, she added.
Diehl was on Automotive News’ list of 100 Leading Women in the North American Auto Industry in 2020. What advice does she have for other dealers who might be considering entering the collision-repair arena? For starters, hire a manager who knows the repair business inside and out.
“It’s a huge investment, so you have to put someone in charge who understands the collision business,” Diehl said.
“It can’t just fall under an existing manager’s job responsibilities.
“It’s a unique business, unlike sales, parts and service,” she said. “So if you don’t know what you’re doing, it’ll bleed you to death financially.”
Just as importantly, dealers must wholeheartedly embrace the collision business, not just dabble in it, Diehl said.
“You have to lean in hard,” she said. “Don’t do it halfway.”