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The Economics of Car Washes

joeybunag9

Snow is finally beginning to thaw out and I was sent this weekend to a car wash errand…I was happy to oblige!  There is nothing more satisfying than the sound of rushing water and the gentle scrubbing during this ten-minute errand.  And of course, I can’t help but recall Walt and Skyler’s car wash from Breaking Bad, one of my favorite TV shows. In fact, after a quick Google search, I can’t help noticing that car washes seem to be everywhere!

Walt and Skyler White from TV show, Breaking Bad became car wash owners for less obvious reasons than washing cars.
Walt and Skyler White from TV show, Breaking Bad became car wash owners for less obvious reasons than washing cars.

This wasn’t usually the case, although they have been around longer than we think.  The first recorded existence of a car wash was the Automobile Laundry in 1914.  The earliest car wash was entirely manual, where workers pushed cars and each worker has specific tasks such as applying soap, rinsing and drying.  As automation became the norm in the 1940s, automatic conveyors made the task so much easier, albeit the tasks remained manual.  As technology progressed, manual labor became less ubiquitous and were replaced by automated scrubbers, hoses and dryers.

This photo of an Autowash Bowl is exactly what the name says it is.  Cars drive through a bowl-shaped area to wash the dirt of the tires and the undercarriage and move onto the cleaning bays where the rest of the car is cleaned.
This photo of an Autowash Bowl is exactly what the name says it is.  Cars drive through a bowl-shaped area to wash the dirt of the tires and the undercarriage and move onto the cleaning bays where the rest of the car is cleaned.

This automation made owning and operating a car wash more affordable and less expensive.  In recent years however, the car wash industry has seen incredible growth.  In fact, there are not roughly 60,000 car washes in the country, approximately twice the number of both McDonald’s and Starbucks stores, with some forecasts predicting that the car wash market could double by 2030.  Automation increases profits for the owners due to lower input costs such as lower water consumption, less manpower requirements, and more precise cleaning methods.  Higher profit margins explain the prolific growth of car washes as everyone would like to take a share of this profitable pie.

 

Another game changer was the industry’s shift to a subscription-based model. Subscribers typically pay for a basic service and then add additional services like polish or wax as they need.  Subscriptions provide car wash owners with a steady flow of income every month and a more predictable demand pattern.  This pricing model has been in existence for some time, and pretty much includes everything in our everyday lives from streaming services, books, and even meal subscriptions.

 

Moreover, tax reforms enacted in 2017 by Donald Trump, allowed car wash owners to depreciate new equipment at 100%, thereby increasing profits.

 

The convenience and quick turnaround time of car washes also explain the growth of the industry.  When taken into account, consumers are more willing to pay on average, 5% more for the convenience of a service. There are however, more exacting (and wealthy) customers who are willing to pay $10,000-$15,000 for a weeklong “car spa treatment.”


Monza, a car detailing company based in Dubai, offers weeklong car washes.
Monza, a car detailing company based in Dubai, offers weeklong car washes.

As I slowly drive our family car through the car wash, feeling that “fresh carwash feeling,” I can’t help feeling that I see why people like their cars having washed on a regular basis…it’s quick, convenient, and frankly very cathartic.  Maybe I could convince my parents to purchase a subscription after all.

 

 

 


































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