CHANDLER, Arizona— Heavy-duty diesel repair shops continue to face pressure on profitability as higher labor and parts costs, tighter customer scrutiny and changing freight conditions reshape the operating environment.

In May, during the Fullbay Diesel Connect conference, Jamie Irvine, a consultant at Heavy Duty Consulting Corp., noted that many of the external pressures affecting fleets were also impacting repair shops. Rising parts costs, increasing labor expenses and broader economic uncertainty were creating tighter margins throughout the service ecosystem.

“Your customers are under margin pressure. We’re all in this together,” Irvine told a crowd of heavy-duty shop owners and other stakeholders. At the time, many fleets were still dealing with weak freight conditions and were scrutinizing maintenance spending and repair approvals more closely.

“What I hear from many repair shop owners is how their customers at one time were just total high trust: Get the equipment fixed, get it done,” said Irvine, who hosts The Heavy-Duty Parts Report podcast. “Now there’s a level of scrutiny on the maintenance spending.”

The freight environment has been on the upswing since the conference. In May, the Cass Truckload Linehaul Index rose 6.9% YOY and crept up 5.5% higher in June. Freight expenditures increased 11.2% YOY in June, although shipment volumes were down 4.1%. This indicates the improvement in rates is due more to tightening capacity, a byproduct of the Department of Transportation cracking down on non-compliant carriers.

Even with those rates improving, money is still tight, and maintenance is always something fleets look to spend less on. But they have been paying more. From 2024 to 2025, maintenance and repair costs per mile rose 8.9%, according to ATRI’s latest operational cost report. It’s got fleet managers looking even closer at maintenance spend, Irvine offered.

He explained that fleets have increased reviewing repair estimates line by line, delaying nonessential repairs, and shopping larger quotes between service providers. As a result, shops have had to spend more time helping customers prioritize repairs and understand the operational consequences of delaying maintenance.

Disciplined spending

Hector Flores, director of warranty and equipment optimization at Knight-Swift, said large fleets are also becoming more disciplined about evaluating service providers on both pricing and process quality. While speaking as part of a panel at Diesel Connect, Flores said Knight-Swift weighs providers based on service quality, cost and adherence to industry-recommended practices.

“If you’re lacking parts pricing discipline, the market is now punishing that mistake,” Irvine said.

Irvine noted that many shops struggle to maintain consistent margins because landed parts costs have become less predictable. Shops that fail to adjust shelf pricing quickly enough can see margin erosion almost immediately as supplier costs rise.

Flores said fleets understand independent repair providers may have to pay more for parts and that those costs have to be passed along, but pricing still receives close scrutiny.

“We already know a part isn’t going to cost you the same because you don’t have the same buying power,” Flores said. “Everybody has to make money. If you have good service, you’re going to win over those ones.”

Large fleets frequently compare quotes from multiple service providers before authorizing repairs to ensure pricing remains competitive, Flores added. He also said fleets increasingly expect repair providers to include OEM part numbers, VMRS coding, photos and detailed repair documentation on invoices and work orders to support warranty claims and reduce billing disputes.

“If you list the part number, preferably by VMRS code, we know what the part is,” Flores said. “It helps us on the warranty side.”

Read more: AI & VMRS: The perfect combo for modern maintenance tracking

Labor costs also continue to climb, even as shops face ongoing technician shortages. Irvine said every inefficiency inside the shop now carries a larger financial impact.

“Every non-billable hour costs more than it did last year,” Irvine said.

Comeback repairs, delayed jobs, and poor workflow management are becoming increasingly expensive as labor rates and technician wages rise.

According to Irvine, many repair businesses lose profitability through operational inefficiencies rather than a lack of work. He encouraged owners to closely monitor technician utilization, labor efficiency, and workflow management before investing heavily in additional technology platforms or software tools.

Cash flow management

Cash flow management also has become a priority for shops given the current economic environment.

Robby Gilbert, vice president of finance for Fullbay, said many repair shops appear profitable on paper but still struggle financially because of delayed customer payments and growing accounts receivable balances.

“One of the uncomfortable truths about many of the businesses we see is that I look like I’m profitable, but there are still weeks when we can’t make payroll,” Gilbert said.

Peter Cooper, founder of Ascend Consulting and a shop owner, said many repair businesses underestimate the importance of cash flow management.

“Business isn’t about profit and loss,” he said. “Business is won with cash flow.”

Cooper said many shop owners focus too heavily on profitability metrics without paying enough attention to liquidity and working capital management.

“If you’re not taking down payments on a big job, start,” he said. “You need to learn to ask for what you want.”

Cooper encouraged shop owners to shorten invoicing cycles and avoid allowing completed work to sit unbilled for extended periods.

“If you’re in a cash crunch, the fastest and easiest thing you can do is to complete your [Work in Progress]," he explained. "As soon as you hit the invoice button, the sooner you can get paid."

The risks associated with extending customer payment terms during a period of economic uncertainty can increase.

“Giving people terms and not collecting up front can be a really good thing for a business, but it can also put you out of business,” Gilbert said.

Cooper also warned shops about tying up cash in excess inventory, particularly parts that move slowly or sit on shelves for extended periods.

“If you’re not a bank, don’t be a bank,” he said. “Inventory on the shelf is the lowest hanging fruit in a shop. Everything you have on the shelf costs you money.”

Gilbert added that inventory can carry costs equal to roughly 20% of its purchase price once storage, financing and handling expenses are considered.

Know your numbers

Speakers also encouraged operators to review their labor rates regularly. Irvine said many repair businesses remain hesitant to increase rates even as technician wages, benefits and operating expenses continue climbing.

“There are still shops charging labor rates based on what their costs looked like three or four years ago,” Irvine said. “The math just doesn’t work anymore.”

Shop owners often worry that increasing labor rates will drive customers away, but Irvine argued that failing to adjust pricing appropriately can create larger long-term financial problems.

He told attendees to ensure they have a good understanding of their true operating costs, technician productivity and overhead expenses when setting labor rates.

“You have to know your numbers,” Irvine said. “If you don’t understand what it actually costs to run your shop, you can’t price your labor correctly.”

For repair shops, the improving freight market could eventually provide some breathing room for customers. But the underlying cost structure of the service business has changed, and the pressure to demonstrate value is unlikely to disappear simply because freight rates are recovering.

The shops best positioned to benefit from an improving freight cycle may be those that can translate stronger customer revenue into disciplined maintenance spending—and maintain their own margins in the process.