Every body shop has probably felt the force of inflationary pressures and rising repair costs, but what exactly are the trends driving up costs?
In recent conversations with CCC Intelligent Solutions and Mitchell International, Repairer Driven News found it wasn’t just about the obvious factors like parts shortages and supply chain issues. Mitchell International claims performance manager Ryan Mandell said overall trends include reduced repairability of major component panels, increased vehicle complexity, a shift in the fleet towards more vehicles, trucks and SUVs from luxury – all of which are more expensive to repair – and gradual change. towards higher use of OEM parts and higher labor rates.
Some of the component panels that cannot be repaired include the fenders, doors, hoods, and deck lids, as they are constructed of lighter materials and “don’t react to a crash the same way as the traditional mild steel,” Mandell said.
“In many cases, the damage on lighter panels is more severe, resulting in a higher replacement rate,” he said. “Additionally, bumper covers that have radar sensors mounted behind them may not be considered repairable (regardless of the extent of damage) by the OEM as there are potential issues with the application of body filler which may interfere with the functionality of the radar sensors.”
Mandell noted that “the 2022 numbers are far from fully mature,” and said he expects all of the numbers he provided except for the percentage of total work repaired , are higher by the end of the year, especially since the fourth quarter is generally the most severe quarter each year. year, he said.
As for the complexity of vehicle repairs, Mandell said the growing trend toward lightweighting is an example of how repairs can be more difficult. “Additionally, the presence of ADAS is becoming nearly ubiquitous on new vehicle models, which means that diagnostics are now a mandatory part of collision repairs and ADAS calibrations are also becoming a more frequent operation.”
Three-step paint jobs are also a factor, as their frequency of use by OEMs has increased over the past five years. “More than 10 percent of repairable estimates are for 3-stage painted vehicles, which can add about 6-8 percent to the overall repair cost,” Mandell said.
Additionally, over the past five years, OEMs have increasingly patented and branded their parts, making it impossible to manufacture aftermarket parts, especially ADAS sensors and cameras, which are almost entirely sold only by OEMs. according to Mandell.
In CCC Intelligent Solutions’ latest “CCC Trends” report, released in August, Susanna Gotsch, Senior Manager of Insights & Analytics, covers the factors contributing to rising repair costs, with the cost of spare parts being the ‘one of them. This cost has increased by 7.4% from 2020 to 2021 and by another 6% from last year to June 2022, according to Gotsch.
“Many industries, like the automotive industry, had moved to a ‘just-in-time’ inventory system prior to the pandemic,” Gotsch said in CCC’s August Trends video. “An approach that has been put to the test over the past two years with growing customer demand and a recovery in the number of motor vehicle accidents and claims. Inventories were pulled from factories closed at the start of COVID and operated at lower production levels due to shortages of needed components and labor. The industry has been affected by rising raw material prices and higher transportation costs due to rising wages and fuel prices. The by-product: the cost of spare parts has skyrocketed. »
She also found that the shortage of collision repair technicians is contributing to rising labor rates as more repairs are needed due to an increase in the frequency of auto accidents.
“The shortage of body repair technicians has been an issue for the industry for some time, but it has worsened over the past two years as the overall labor shortage still impacts the industry. ‘industry,” Gotsch wrote. “Even before the pandemic, the Universal Technical Institute predicted that a wave of retiring baby boomers would create 100,000 automotive technician jobs over the next decade, with the Bureau of Labor Statistics forecasting a 4% decline in employment in the global field of automotive technicians until 2029. .
“In fact, most repairers indicate that the shortage of technicians is the main reason for the growing backlog. … Many workshops have reported that they cannot repair as many vehicles at the same time as before the pandemic, because the productivity of repairers (measured in hours worked per workshop day) has dropped.
Competition among body shops to hire a smaller pool of trained technicians has also increased the labor rate, Gotsch said.
“Data from the Bureau of Labor [Statistics] shows that average weekly wages for body repair workers grew at a faster rate, with average weekly wages in Q4 2021 up 7.5% from Q4 2020, compared to a 6.1% increase between Q4 2019 and Q4 2020. Labor rates also increased, some of the largest increases in fifteen years. Higher labor rates combined with continued growth in average labor hours per repair with increased vehicle complexity is another key driver driving up repair costs.
Mandell also noted that shops need to pay technicians more to compete in today’s job market “where well-trained technicians are hard to come by.”
“The higher labor rates we’ve seen are more a function of the labor market as well as the inflation we’re experiencing right now,” he added.
And, of course, the continued shortage of technicians – as Gotsch pointed out, “has no quick fix”.
“Finding technicians with the right skills is also an increasing challenge as the complexity of vehicles increases. These factors combined suggest that labor costs will also continue to be the main driver of rising costs in the future, because like the cost of parts, if labor rate increases, like inflation, may have been lower in the past, they have never fallen historically. ”
In July, members of the Collision Industry Conference Parts and Materials Committee shared that due to supply chain issues, rising raw material costs and labor rates are not following. keep pace with inflation, forcing workshops to deal with rising costs. For example, paint and material reimbursements are now only 18.5% higher than they were in 2017, compared to the 43.9% increase in paint and material costs that body repair shops suffered during the same period, according to information shared in April. ICC meeting. And if 2017 labor rates had kept pace with inflation, the current average rate could now be $46.38 compared to the actual average rate of $34.60.
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