Noelle Simmons, General Manager from Car Craft sends this report on the state of the industry in WA.
Business in WA can only be described as difficult. Once again we thought that there would be smash repair businesses that would not re-open after the Christmas break; however as in past years most appear to be hanging on, perhaps in the hope that things will change.
Unfortunately the only thing that has changed is that the insurance companies are applying more and more pressure to reduce their cost of claims. This includes adjusting estimates to an unsustainable level and directing the use of parallel, non-genuine and second hand parts.
Many in the WA industry are very quiet for all the usual reasons, including safer vehicles resulting in fewer accidents with minor damage and a reduced number of claims. Added to that is the impact of work being re-directed to businesses that have arrangements with insurance companies and you have an industry in crisis.
Viability is at rock bottom, even businesses that have plenty of work report that they struggling to make a profit, particularly those businesses that are working to an agreed average cost of repairs. They fear that they cannot invest in their businesses, including training, updating equipment and building upgrades because of the lack of return.
The Suncorp companies are now becoming major players in the WA industry and their pursuit of ever lower repair costs is forcing prices down and the other insurance companies then respond by pushing their repair prices even lower.
Of course the obvious response to this pressure is that repairers may be tempted to take short cuts. This should be a major concern to all industry participants and consumers are the big losers, but may not be aware of it – at least in the short term.
The consolidators also play a major role in driving prices down with their very aggressive quoting techniques. Because they take a large percentage of the available work the rest of the market is squabbling over the remnants which in turn lowers prices.
Although originally seen as a positive move, the insurance companies’ insistence on using the manufacturer’s method of repair is costing more to repair vehicles which means more vehicles are being written off. In some cases the industry view is the extent of repair is not necessary.
The future is uncertain for many and in recent times we have seen long established repairers closing their businesses and selling the properties which are worth far more than the business. They make a wise decision and can invest the windfall for their retirement.
Small repairers can downsize by cutting their workforce but with a very low volume even those businesses will be unsustainable. Big operators need a huge amount of energy to cover their operating costs and it may be these that are the worst affected by the current climate. For the moment they are taking a positive approach and many are working on becoming more efficient in order to add to their bottom line.
Unfortunately this report is all gloom and doom, but the wheel will eventually turn. Hopefully the day will come when we see a more equitable relationship between body repairers and insurance companies.