Want to know how the US smash repair industry is trading? Here's what you need to know in this indepth report prepared by The Auto Body Repair Network (ABRN).
FACTS & FIGURES
Population: 323,377,272 (Worldometers.info March 2016)
GDP: $17,937.8 billion (US Chamber of Commerce Bureau of Economic Analysis 2015)
Number of people who hold a full driving licence: 210 million (Statista 2016)
Total vehicle parc: 253,000,000 (IHS Automotive 2014)
Total new road vehicle sales: 2013 – 15.6 million (International Business Times January/2014) 2014 – 16.5 million (Autodata January 2015) 2015 – 17.5 million (Autodata January 2016)
Number of reported road accidents per annum: 10.8 million (2009 US Census Bureau)
Number of accident repairs per annum: 13.8 million (2014 Romans Group)
Number of vehicle write-offs per annum: 2.9 million (2014 Romans Group)
Number of motor insurers: 199 (2012 CarInsurance.com)
Top three motor insurers by number of vehicles insured: (From Mitchell International 2015)
1 – State Farm
2 – GEICO
3 – Allstate
Average motor insurance premium and excess/deductible: Average premium – $907.38 (Quadrant Information Services 2014) / Average deductible $500 (CarInsurance.com 2013)
Annual cost of motor insurance fraud: $6-7 billion (CCC, 2013)
Insurance approved collision repair networks in operation: Yes
Insurance owned collision centres in operation: No
Vehicle manufacturer approved collision networks in operation: Yes
Accident management companies active within market: No
Accident management company approved collision repair networks in operation: No
Total number of bodyshops (all body repair facilities/types): 34,400 (CCC 2016)
Number of bodyshops (static sites dedicated to collision repair): 17,200 (CCC, 2016 – estimate based on statistics showing half of all shops also perform mechanical repairs. This translates into 17,200 shops performing only collision repair work.)
Types: Independents: Yes
Dealer: Yes
Networks: Yes
Group/multi-site operators (MSO): Yes
Franchise operators: Yes
Largest operators by number of sites: (ABRN, March 2015)
1. Boyd Group
2. Caliber
3. Service King Mobile
SMART repairers in operation (eg paintless dent removal specialists): Yes
Number of mobile SMART repair operators: Unknown. Insufficient data.
Other vehicle damage repair facilities/models in operation: The only other notable repair models are those that specialise in express repairs, notably repair of bumper covers.Unfortunately, statistics of this model are not available.
Average cost of repair: $3,004 (CCC, 2014) Average cycle time of repair (key-to-key): 11.9 days (Mitchell International, 2015)
Average labour rate: $46.12 (CCC, 2014)
Accident repair market value: $32.3 billion (The Romans Group, 2015)
MARKET OVERVIEW
The growth and popularity of multi-location organisations (or as they are referred to in the US, multi-site organisations – MSOs) continues to be the most significant trend and story in the US collision repair market.
Anecdotal evidence suggests a growing number of shop owners believe that operating multiple sites is the key to survival. MSOs bring in greater revenues, which shops need to purchase the tools, equipment, training and other significant investments required to compete and survive in the US market. Their size and ability to dominate regional markets allows them to offset labour rates that continue to stagnate with greater productivity.
Moreover, they often provide needed innovation to the industry. Repairers that create efficient, money-making operations often look to expand their repair models to other sites, either creating all-new locations that grab marketshare from less successful shops or buying up existing businesses and converting them to their model. National On the national stage, the largest and most successful MSOs continue to command growing sections of the collision industry (and often, the most lucrative areas).
According to statistics from The Romans Group, in 2014 81 MSOs that each generate over $20 million in annual revenues processed 19.2% of the industry's workload for insurance and customer pay collision repairs (shared amongst a total of circa 17,200 designated collision repair shops). Together, they accounted for $6.2 billion in annual revenue – a significant increase of $1.3 billion over 2013. On average, these MSOs process $3.3 million annually per location, over three times the average of $964,179 for all US repairers.
Notably, the largest US consolidators have been concentrating on buying up MSOs instead of single location shops. In 2014 and 2015, Boyd Group, Caliber and Service King concentrated heavily on purchasing large MSOs – those with 10 or more shops – to grow their businesses. When combined with the MSOs generating more than $20 million annually, the largest four consolidators and these MSOs represent nearly $7.4 billion or 22.6% of the collision repair market.
Since MSOs also represent a concentration of market and buying power, these businesses also have the potential to successfully pressure insurers to raise labour rates and change other practices unpopular with repairers. They too have the potential to impose other changes and direct new trends in repair technology. Apparent However, these changes have yet to materialise or become widely apparent. This may have to do with the fact that, regardless of their potential impact, large consolidators and MSOs still comprise less than a quarter of the industry, leaving plenty of available market to standalone shops and small MSOs. Further, repairers remain reluctant to work together or pool resources to push back against insurer influence. This means insurers still largely determine the source of most repair parts (OEM, aftermarket or salvage) and which management/estimating systems shops must invest in. They also heavily influence what repair procedures shops will employ.
Where large MSO and consolidators are failing, so far, to make wide-reaching changes to the industry, auto manufacturers are stepping in to exert influence in key areas such as training and part sourcing. Many manufacturers have begun creating OEM repair certification programs for their latest vehicle models. In order to repair these vehicles, shops must take this training and invest in equipment and tools to gain entry into these programmes (manufacturers will not sell parts for specific vehicles to shops that aren't certified.) For example, repairing the aluminum structure on the latest Ford F-150, the most popular selling vehicle in the US for more than a decade, requires shops to become Ford aluminum certified.
Further, OEM training has become the most highly prized training in the market. Training organisations like I-CAR now offer OEM repair courses, giving manufacturers even more contact with shops. Manufacturers also have become more aggressive in marketing their parts to shops in place of the lower-priced aftermarket versions many insurers and cost-conscious customers prefer. GM, for example, has begun updating part costs daily (to more accurately reflect their changing market value) and now has specially priced hundreds of popular replacement parts at rates comparable to aftermarket versions.
Quality
While many repairers say OEM training and access to manufacturer parts allows them to raise the quality of their work, shops still struggle in areas such as cycle times (which have largely stagnated) and in scheduling work. Information providers are hoping their investment in telematics will aid them in building products that help get vehicles scheduled for work and on track for repairs sooner. The great challenge here is dealing with what appears to be greater numbers of vehicles needing repairs. Vehicle manufacturers have invested heavily in active safety systems that help motorists avoid collisions. However, US drivers are often distracted by smart phones and other technology, causing them to make crucial driving errors that result in more accidents. Addressing this issue is becoming more challenging as shops struggle to find experienced, trained, competent workers who wish to remain in the industry. As the collision market workforce has aged, younger workers are showing some reluctance in joining or staying in the industry. Due to the complicated nature of modern collision repairs, owners report that few young techs leave vocational programs properly trained to handle much of this work or to operate modern repair equipment. According to many repairers, fewer still have a grasp on how shops function. Many young workers eventually decide the work is either too physically demanding or dirty and move over to mechanical repairs where they have greater opportunity to use computer-based repair solutions they may be more drawn to. These issues have left many shops continually competing with one another to hold onto their employees or attract workers from other shops. Some shops have begun apprentice or mentoring programs to train new workers (many of them leaving military service or coming from unrelated industries) with little or no experience. To date, this problem has not reached a crisis level, but many repairers express concerns over what the future holds.
Challenges
Despite these challenges, the US market remains healthy overall. The reduction in the number of shops over the past 15 years and increase in accidents translates into plenty of work for shops capable of creating a business model that generates substantial revenue even with ‘low’ insurance labour rates. Some analysts predict the consolidator and large MSO ‘bubble’ could eventually burst if these operations grow too large and unwieldy. For now, and in the next several years, MSOs look to remain strong and carry with them the potential to remake the US market as they respond to the ever-changing industry landscape.