We’ve identified some of the biggest current influences on the world’s vehicle market. “Stat one is that the auto industry is in recession globally. There are consumer debt bubbles in North America, Europe and China which have dramatically reduced new vehicle sales. Opportunities. We were in a similar market to 2005 where most of the car companies are now struggling. There are very few manufacturers who are in great shape right now and we’re going to be seeing a continued global downturn in vehicle sales. Manufacturers are already cutting back production to match demand.
“In terms of collision repair that means we’re going to see a gradual shift to extending age in the vehicle parc. For us it should be ‘heads we win, tails they lose’ situation. It might be a bit painful at first, but collision repairers should benefit in the long run. “
Identifying the scale of the investment in the transition to electrification is another huge influence in how manufacturers are faring. “Pure electric vehicle sales will sit at half to one percent of new vehicle sales in almost every single market,” he says.
One of the big shifts in the global market is down to one of the biggest car markets – China. “China was a big buyer of new energy vehicles (NEVs) but the programme has been scaled back because China has simply said: “we can’t afford to subsidise new energy vehicles on the scale that we did,” and this in part, is what led to the reduction in demand for NEVs.
“All of this is set against the scene of ever more stringent vehicle emissions legislation – and then we have the ongoing scandal of ‘what the hell is an emission test’, along with how, as well as who complies with those tests,” he says. This has led to huge convulsions in vehicle manufacturers, especially in Europe, who have to rush to reach target introduction deadlines, together with new (more expensive) emission control systems.
Overall there’s a new increase in investment in product and the consumer is not necessarily being expected to pay for that and, in a softening market, margins are being squeezed further. These margins are skinny to start with. Porsche reports the biggest margin at 9% even though every single 991/992 (‘911’) sells at close to 100% margin, but the market average is around 3-6%. This is not attractive to financial investors when the sums required are circa €1 billion per model range, and faster as well as stronger returns are available in other sectors. In turn this means an end to vehicle manufacturer supported after-market services in the near future.
“The upshot of this for the global autobody repair industry is that it needs to get up to speed with how to handle high voltage as well as other ‘new’ systems – if you don’t do it other people will.
It’s a great route to market – although not something you need to go out and do tomorrow. Whilst it would be great to start today you do need to act in the next five years as there will be more high voltage cars coming to your shops. We’re not talking prestige but mass-market vehicles.”
Every car manufacturer is heading towards electrification – although this doesn’t necessarily mean pure electric – but more likely hybrids. These cars will be more complex to repair than their petrol or diesel forefathers. “Electric cars have two different cooling systems and repairers will need to learn a whole new language. In order to put the electrified car into collision repair you have to put the battery to sleep and then wake it up after the repair. The only way you can do this is by using diagnostics. This is the transition. The industry is heading towards a far greater emphasis on knowing how software works and interacting with software.”
“Currently most people think of diagnostics as an ‘ah give it to the dealer’ situation. Why? You’re giving away money. There’s so much more that repairers can do with their diagnostic equipment, but this means learning new skills.
“Meanwhile panel, which I would suggest is an undervalued commodity, which is losing technicians and so is losing shops too, the capacity is gradually wasting away before our very eyes. Primarily this is because of commerce. Commerce will eventually drive the hourly rate up, but we’re not there yet. When that happens its value to people like insurers will increase.”
“There is a bottom point as the downward price pressure continues and the consequences is that the only solution is to increase the labour rate, because there will be more repair demand than supply. That’s already happened – we’ve gone past that point.”
“Of course, if insurers can’t get the cars fixed, they will look at writing them off instead of paying for storage, then we’ll have an increase in loss. There comes a point where that will cost too much and the insurer decides they can pay a few bucks on hours and, hey presto, they move up the repair queue faster. That’s how the pricing mechanism works in the free market.”
“We’re not at the bottom on the curve in the UK, we are just coming up. The hourly rate has gone from about £23 towards £30 and it’s heading towards £35 or higher.”
“Of course, the industry has itself to blame for essentially spending two decades undercutting the competition, in the vehicle service sector that didn’t happen, and dealerships can charge over £100 per hour. There’s been a huge gap between collision repair and other parts of the servicing network – that will rebalance.”
“The current outlook may seem grim, but the trend is very positive,” he said.
Going on to outline the opportunities that diagnostics and recalibration offer to the enterprising repairer, Andrew spent some time proving that fully autonomous cars aren’t coming any time soon given the huge number of obstacles from lack of standardisation of wireless networks (autonomous cars will need a minimum of 5G which comes with its own implementation issues) and many other factors from infrastructure, technology and legislation.
Pointing out that while on the one hand manufacturers have simplified their builds by having fewer platforms, they’ve complicated this supply chain by having so many more body shapes. For instance, Audi, Mercedes-Benz and BMW increased the number of models from an average of 10 in 2010 to an average of 17 by 2018. The number of body shapes within each model range has proliferated, climbing from an average of 16 model/body shape variations in 2010 to around 27 by 2018. However, in most developed markets the volume of new car sales has remained relatively static, so all those extra body shapes are chasing the same market share after eight years.
This trend is right across the automotive market, there’s no significant volume increase per model, just fewer of each derivative.
On the platform from Audi, BMW and Mercedes-Benz have slimmed down from five or six platforms in 2010 to essentially, just two in 2018. While this perhaps simplifies the hands-on-regular vehicle service process it complicates collision repair and parts supply, because the unique body shape specific parts have greater variations across a model range than ever before.
Advanced Driver Assistance Systems (ADAS) which require cameras, radars or LIDAR have been entering the repair sphere in significant numbers since 2000 and demand different types of calibration, broadly speaking:
From 2000 onwards – Static calibration
From 2009 onwards – Dynamic calibration
From 2017 onwards – Self calibration.
The argument is that if a car has a service life of 10-15 years then there will be a huge legacy of vehicles which need re-calibrating in the future. Given the space and conditions needed to carry out these calibrations, dealerships are unlikely to be able to keep up with calibration demands, especially for older models. It’s also unlikely that remote calibration by the manufacturer will become commonplace before 2030, which makes the opportunity even greater.
Arguing that autobody repairers can know more about vehicles than the franchised dealer as they have to perform more complex interactions with the car. If repairers are prepared to embrace the opportunities that digital technology offers, then they will both raise the profile of the industry and increase both profits and continue to reduce cycle time. “We need to be awake and ready for change.”
Auto Industry Consulting is an independent provider of technical information to the global collision repair industry via EziMethods, our online collision repair methods system. For more information please visit the website: www. ezimethods.com or contact firstname.lastname@example.org
By Andrew Marsh