Today, 65 million drivers in the U.S. experience a roadside event – whether from lost keys, a dead battery, small accident or a major mechanical failure. Seventy-five percent of these drivers engage professional help from a tow operator or roadside assistance provider during their event.
It stands to reason, then, that as vehicle age and miles travelled grow, more frequent roadside events will be a boon to the towing industry. The reality, however, is that quickly accelerating operational and overhead costs are causing 40% of service providers to believe many of their peers may not survive the next five years.
Were this to come to pass, it would cause a significant ripple effect throughout the industry including substantial cost increases for roadside assistance program sponsors and deteriorating service levels for consumers.
Leveraging federal economic data, internal market and consumer studies, and conversations with providers, our paper attempts to break down the cost pressures felt by towing and roadside service providers and define a sustainable path forward. This includes an analysis of the major factors – labor, fuel and insurance – contributing to a compound annual growth rate of 7.36%, a figure that has grown bymore than two timessince 2016.
Labor:A significant pain point and costly (but necessary) expense is labor, which represents nearly 40% of a service provider’s cost structure and can impact business profitability. Over the past 3 years, payroll for motor vehicle towing has increased an average of 9.12% annually, while average national compensation costs across civilian, private and government industries rose between 2.3-3% according to theU.S. Bureau of Labor Statistics. To add to this, the safety risks, stresses and requirements of the job, combined with growing competition from alternative driver employment options, such as ridesharing or Amazon delivery, have made it difficult for companies to hire and retain drivers.
Fuel:Diesel prices have increased at an average rate of 20.7% per year over the past 3 years. With these costs representing approximately 15% of a service provider’s overhead, the impact is severe.
Commercial Insurance:Insurance premiums – which account for nearly 10% of a service provider’s cost structure – have increased exponentially with major carriers exiting the market. Industry research pinpoints an average growth of 19% industrywide, with nearly three in four providers experiencing a 28% hike in their premium costs.
A snapshot of key findings and datapoints are also included in our infographic:
We believe that a fundamental shift in economics is necessary to put the industry on a sustainable path and that the roadside service industry as a whole is responsible for fully considering the current landscape and future success.
As our Chief Operations Officer, George is responsible for end-to-end operations of our closely intertwined Network and Contact Center functions. George brings over 25 years of Fortune 500 experience as a results-driven executive in manufacturing, quality, and maintenance. His strong focus on collaboration, change, and innovation has produced exceptional accomplishments in strategic planning, lean optimization, M&As, P&L, price/cost management, and sales and marketing. His leadership skills are helping drive Agero’s continuing journey toward operational excellence, delivering more consistent, high quality end-to-end experiences for our consumers while building stronger relationships with our service providers.