If you are an old timer – or should I say an industry body shop survivor, perhaps in a golden glow moment you will recall the blissful days when a car damage estimate would run to 70% or 80% of the vehicle in question’s trade price value. This has now all changed. because insurers in Europe, who often have a major international foot print in the collision repair business, have in the last decade pushed ever lower repairs to vehicle value levels which are often now as low now as 42% to 45% of total value on a car’s ability to make it through to the salvage rush.
It’s a sad fact that at no level are body shops involved in consultations on these new, ever lower, write-off rates currently being experienced by South African repair concerns. It’s a top down mandate or the usual take-it-or-leave-it approach which the trade is all too familiar with from our insurance ‘partners’ .
Take a look at some of the other factors on a global scale in market disruptions currently in motion. There is little hope of current parts prices diminishing because China and America have locked horns on fair trade and this will drive component prices upwards. It is simply a bully-boy tactic on world trade issues. from the USA.
Secondly, the U.S. has a significant debt bubble that’s an alarming 250 trillion Dollars. That is four years of the world’s gross domestic product in total debt figures. The Federal Reserve and Administration continue to ignore that figure, while right now every single American owes $56 000 in debt. This really could impact the world as we know it. With import tariffs set to drastically increase with a 48% import duty in the U.S. on new vehicles, it’s all very scary in the automotive sector – as prices will escalate towards the end of 2020.
This, plus the Japanese and EU trade agreements are making British plants of production dance to a new tune of redundancy as Swindon (my old production factory) as well as Nissan in Sunderland and Toyota in Burnaston. It remains to be seen who will stop production in the UK as the Global market retracts for car manufacture. Porsche have already increased prices in the UK for vehicles and parts as the EU supply chain readjusts. The Brexit changes are all expected to lead to increased component prices. These increases will bite as overall the OEM’s are in a bad space right now. They forgot to downsize on capacity issues especially in Europe where costs have spiralled out of control. For example, Ford is now back at profit levels of 2004/5 – yet is almost bankrupt, reckon some industry pundits. JLR are also reaping in a zero profit performance and the VW Group are said to have raided their savings to re-boot the company to reach the sales levels before the emissions scandal rocked their automotive integrity. We are also feeling the pinch in South Africa. The market is set in every part of the car repair supply chain to experience a trading correction and it’s a given that OEM’s have used their parts prices to cross subsidise the cost of new vehicles with weakening new vehicle sales. This is set to continue, in all probability.
When you factor in all the variables and our current body shop charge out that is almost R150 less an hour than a motor mechanic it does not look too bright for anyone looking for a healthy, rosy, easy-go-lifestyle in this business. So I guess it’s off we all go again in an effort to gain some financial reward in full battle dress. It is clear to me that the write-off rates that currently operate in South Africa and denude your workshop of work flow will continue to drive down available repair volumes in the body shop business. It is going to be another ‘survival of the fittest’ in the turbulent year ahead in collision repair.
Thankfully, a bright spark of common sense is emerging. Some major insurers are now back at the talking table with some large trade body organisations to revert back to more realistic levels in the 50-60% range for salvage to save their clients’ vehicles. for it has suddenly dawned on them that their loss of premiums has been a catastrophe in monthly cash flow terms and often the customers simply cancel all dealings with them going forward. So it becomes a short term win situation backed up by a long-term loss for car insurance giants involved in local risk cover as low write off levels.
What’s in this issue?
Feast your eyes on some gorgeous new shapes and lines introduced at the Geneva Show (page 20) and take in the state of South African motoring (page 14). There are fun filled pages for petrol heads as we covered the Zwartkops historic meeting (page 46), a top shop, Rubicon Autobody Repairs (page 28) and many more new product introductions as well an local and international stories. Hope it’s as much fun to read as the Editor had testing the three wheel iRoad from Toyota recently (see pic above).
By Ian Groat