The following report on the Russian collision repair industry has been prepared by Kuzov-Media director Marina Beloglyadova.
MARKET OVERVIEW
The changes in the body segment are determined by a number of factors.
Macroeconomics:
• The crisis associated with a sharp currency growth rate in 2015, lower purchasing power and consumer confidence. These conditions lead to the client's desire to save money, and to defer the repair if it is not critical. There is a redistribution of load between market segments: dealer repairers and independent, and independent is in favour in today’s situation. A number of dealers offer body business in the form of outsourcing.
• Now we see the transition from the ‘primary development of market’ stage - expansion and growth - to a more mature and conservative market. Niches are already occupied in one way or another, the competition has got tighter and the fight is not for a new client (as before) but for retention. In such circumstances, for many service and collision centers the ‘full cycle’ bodyshop becomes not only a source of profit, but a way to keep a client and a part of a service offering. It is important for the growth and stability of business, especially in certain regions, when faced with any problem the client turns to their ‘trusted technician’.
• We see the inevitable decline in the number of insurers. We had too many small local companies in the first stages of market development, which interfered with the formation of a stable, structured market. The remaining insurers are now specialising in certain types of insurance and methods of work.
• Now we have changes in conditions within the market for compulsory insurance cover for civil liability in connection with the introduction of a common price guide for parts and unified methodologies for calculating the price of work. In general, this situation makes the market more civilized and predictable, but like any change, it will be painful for the market during the process of change and will cause mistakes and complications for all market participants.
• We see the reduction in voluntary insurance. There is a decline in sales of insurance through the centres of automobile dealers, and this practice was fundamental for the Russian market. It was the case then the number of collision repairs for this dealer depended directly from the voluntary insurance sales.
• We see pressure on the market by insurance companies to reduce margins in the sale of spare parts. And this when conditions, due to the instability of exchange rates, are unpredictable due to the ‘slow’ channels of delivery.
• Change the concept of ‘luxury’ in the sense of paint and material supplies. Before the crisis, prestige auto brand service centres used the paint and the mixing-systems of premium level suppliers by definition. But now it evaluates such investments on the basis of load, the flow of orders and opportunities, which represents a particular opportunity to save on the purchase price or on time (drying for example, environmental payments, and so on)
• Traditionally the client in the Russian market expects a very high quality colour selection and has been used to such quality. For this market it's very common to have both a painter and colourist amongst the staff. Now the colorist is ‘under attack’. Sometimes the cost of its labour shall be assumed by the supplier of the paint or divides them with the body centre.
• Mutual acceptance for machinist and bodyshops was not typical of the auto centres of the country. Now, however, such models are trying to be implemented.
FACTS & FIGURES
Population: 146.5 million
GDP: In 2015 we had a -3.7% compared to 2014 resulting in RUB80,412.5 million (Rosstat)
It’s really hard to compare in US dollars because of currency rate fluctuations and the proportional price compensation of it. For example, prices for new cars have raised sometimes by only 30% while in US$ up to 70%. This means we are still in a very unstable and unpredictable zone. Also it means that behaviour of companies on the market now depend on the long and medium term prognoses and ideas (plans) in top-management about the future of this market.
For car paint and materials producers it means we have no united price policies in the country. While one brand ‘fix the losses’ or takes a ‘zero profit’ strategy to gain the marketshare another will try to keep the same line of behaviour as in stable years. It strongly influences on the distributors economic situation and their ability, and will, to continue long-time cooperation with global brands and suppliers.
The premium segment of paint and material business is underpressure because of the situation and there is also internal instability from authorities changing the system of calculation in obliged insurance – and this is the main market in money and quantity of contracts.
Total vehicle parc: 40.9 million (Avtostat)
We also have data for so called ‘moving parc’ calculated by global analytics agency GiPA with their own method. It is about 37 million.
Total new road vehicle sales:
2013 – 2.6 million passenger cars
2014 – 2.34 million
2015 – 1.48 million
Number of motor insurers: the Russia Autoinsurers’ Union includes 103 motor insurers, which covers 90% of total market operations volume
Top three motor insurers by number of vehicles insured:
(insurance of motor third-party liability, data by Expert RA)
1 – RosGosStrax;
2 – RESO-garantia;
3 – Ingosstrax
Insurance of motor third-party liability – average size of insurance payment: RUB61,000 and cost of insurance reward – RUB6,123.
It is complicated to speak about the dynamics in connection with the exchange fluctuations, however, the average payment on OSAGO in January – September 2015 was declared 1,895 million insurance cases, insurers regulated 1,870 million insurance cases.
Insurance approved collision repair networks in operation: No
Insurance owned collision centres in operation: No
Vehicle manufacturer approved collision networks in operation: No
Accident management companies active within market: No
Accident management company approved collision repair networks in operation: No