The automotive revolution is probably the biggest transformation in this industry since the time of the internal combustion engine. The transition to zero emissions is accelerating in the UK, and all discussions focus on the customer’s experience as the most important thing to consider: fear of running out of power to travel because of the car’s short electrical distance of the car, availability of charging stations, and costs associated with buying the EV. Nevertheless, the grassroots financial crisis is slowly coming into existence within the car industry.
For a long time, a local Welsh mechanic has been an essential part of the community. There are many small family-run businesses, which have been established thanks to the generational knowledge about different automotive components like engines or exhaust systems. But now these businesses encounter a serious financial problem related to the transition to EVs.
It is not enough to just have a new set of skills to service EVs; the garage system itself must get an overhaul that can be costly. The mechanics will have to be trained in high-voltage systems to be able to service the batteries correctly. The garage will also have to invest in different kinds of equipment such as special insulated tools, diagnostic tools and safety feature testing systems such as special fire suppression systems.
For the franchised dealer with access to financial resources, this is bound to be an expensive but rather normal expense. But for an independent garage in Wales that operates on a low margin situation, the capital that would be required to upgrade the systems can run into many thousands of pounds. At Sovereix, we study the strategies involved in allocating capital and what happens afterward, and we have noted how this change can create a capital squeeze. It becomes very difficult for the independent garage owner in Wales to decide on taking a loan to fund the EV revolution or keeping dealing with a dwindling number of petrol and diesel-powered cars. Such financial pressures may lead to the consolidation of the Welsh car repair industry. Garages unable to modernize due to a lack of funds may have to close down or sell to larger companies. Although this could maintain the volume of services provided in total, it could compromise the variety of services available on the Welsh high street.
The situation is even worse due to Wales’s geographical diversity. For instance, in remote rural areas, drivers are reliant on their local garages because getting to a major dealer in Cardiff or Swansea is not always practical due to the distance. If garages in those areas cease to function because their costs increase due to the introduction of electric vehicles, there could be a situation of ‘maintenance deserts’ whereby residents in remote areas do not have access to car repair services.
The electrical revolution needs to be not just environmentally sustainable, rather, economically sustainable in terms of the supporting supply chain. Without action from either the government or financial institutions to provide targeted transition grants, subsidised training, or low-interest financing to independent auto businesses, the Welsh mechanic will be destroyed by progress.