This report is from Christian Simmert of Germany's Twinmedia
What are the main challenges/opportunities facing your collision repair market?
Independent collision repair shops are currently seeing enormously high operating levels. According to a survey conducted by colornews.de | schaden.news, 73% of the body and paint shops are currently running at 80% of capacity or above (Jan 2018). One third of these shops even claim to be fully occupied. At the same time, many shops have big problems finding skilled workers as well as well as successors for their business.
What trends are evident within the market?
The German collision repair market is currently seeing a consolidation of repair facilities which will probably intensify within the next years. Access to repair information is an important topic in the German repair market. The industry association ZKF has created repair.pedia in order to make sure that independent body and paint shops are able to use the OEM repair instructions. The number of steered collision damages is increasing as well as the importance of accident management.
Accident ‘steerers’ and insurance companies are trying to increase their influence on the repair shops. The German insurance company HUK Coburg is the biggest accident ‘steerer’ with 500,000 steered collision and glass damages. HUK-Coburg is followed by Innovation Group (including its subsidiary Wintec Autoglas) which together direct more than 300,000 damaged vehicles. The effects of the European emergency call system (eCall) on the German collision repair market are not yet known.
Despite an overall positive development of the German economy, there is a growing number of insolvencies in the automotive service and collision repair market. This trend is especially impacting on the small companies with less than five employees. Over the past few years, some independent repair shops started to grow their own business and now have three to 10 locations. Some of these independent bodyshops are also starting to create buying groups. New repair companies and concepts like Fix Auto or Fixico are also entering the market.
Repair networks like IDENTICA (Axalta Coating Systems) are growing, whilst in the glass repair market, franchise systems like Wintec are looking for new partners to fulfil the growing demands and trend of orders.
How are insurers influencing the repair sector? What impact is this having on supply chain relationships?
The number of accidents steered by insurance companies, via work providers or directly, is constantly growing. Furthermore, accident management companies are also delivering spare parts and provide leased vehicles as replacement cars. Within the next few years the topic of spare parts will become more important, especially in the field of identical aftermarket parts. Insurance companies like Axa Insurance have delegated the distribution of spare parts in the German market to the company Alfascale, in order to reduce spare parts margins.
In what way are vehicle manufacturers increasing their involvement/influence in the collision repair sector?
With the introduction of the European eCall system German vehicle manufacturers are intensifying their focus on the collision repair segment. As maintenance and inspection intervals are becoming longer, the OEMs’ dealer networks are under increasing pressure. Furthermore, the margins in the repair business are becoming more financially attractive than selling vehicles. For these reasons, OEMs like VW, Ford, Opel and BMW have increased their activities in the German collision repair market.
The best established OEM network currently seems to be VW’s Unfallspezialist (‘Collision Specialist’), containing repair shops specialising in body and paint work for collision damages. VW established its own structures with the help of well-known industry suppliers such as WOLF (spraybooths) and Carbon (car body skin repair). Furthermore, these shops are qualified for smart and glass repairs. Industry experts have different opinions about their current operating grade but what’s clear is that Volkswagen will extend its activities within the collision repair market. Similar intentions can be observed at Opel and Ford, but with less intensity. With the concept Schönheitsreparatur (‘cosmetic repair’), BMW seems to focus more on the smart repair segment. But this concept does not seem to play a major role in the German aftersales market.
What 'standards' are currently in operation within the sector? How are they monitored?
The industry association ZKF is hosting two different standards, which are also displayed outside of every ‘qualifying’ shop: a qualified shop for body and paint repairs; and a qualified shop for classic and caravan.
What impact/influence is new vehicle technology having on the sector?
The growing number of cars with complex driver assistance systems is definitely challenging bodyshops in Germany as they need to invest into technology for calibration and diagnostics as well as having to train employees in the use of these systems. With this, access to repair information is becoming more and more important. Different materials in the car body require repairers to possess a wider range of bodyshop equipment from aluminium repair to skin repair methods.
Although the market penetration of electric vehicles is low, the example of German Post’s Street Scooter project demonstrates how quickly repair shops have to be ready for maintenance and repair of these cars. Right now, the repair network of Global Automotive Service (GAS), which includes 1,500 shops, is taking care of the electric fleet of Deutsche Post. In order to make sure this concept works, all shops had to be trained and equipped with the necessary tools.
What is the current status of the next generation/employee/skills market for the sector?
The job outline of a vehicle painter is currently being complemented with digital competence, like colour management via web, digital colour identification and so on. The profiles of a vehicle mechanic and body repairer are merging. The electronics competencies will become a more important part of vehicle repairs, which is also reflected in the profession of vehicle mechatronics.
What are the likely trends/developments that will impact the sector over the next three to five years?
The importance of accident management will increase further with vehicle insurers and accident steering companies raising the number of steered damages via comprehensive insurance. In the coming years, the steering of third party damages is likely to increase as well, due to soft steering via offering additional service (not via policies).
Purchasing of spare parts will change due to accident steering. Insurance companies will probably increase their influence via this distribution channel. Meanwhile, cost controlling via specialised companies will increase further, with discussions about invoice cutting and the growing influence on the repair process will intensify.
The consolidation process on the repair shop side will reduce repair capacities. This could lead to higher costs for vehicle insurers who are still seeking a quality repairs of service-oriented shops.
Market facts and figures
Population: 82.7 million
GDP: €3,263.35 billion
Number of people who hold a full driving licence: 55.86 million
Total vehicle parc: 110.2 million
Average vehicle age: 9.4 years
Total new road vehicle sales:
2015 – 3.21 million
2016 – 3.35 million
2017 – 3.44 million
Number of alternative fuel vehicles registered:
2015 – 25,502 electric, 130,365 hybrid
2016 – 34,022 electric, 165,405 hybrid
2017 – 53,861 electric, 236,100 hybrid
Top three motor manufacturer brands by volume sold (2017):
1. VW
2. BMW
3. Ford
Top three models sold (2017):
1. VW Golf
2. BMW 1
3. VW Tiguan
Number of motor insurers: 90
Top three motor insurers by number of vehicles insured:
1. HUK-Coburg (Allg & Verein)
2. Allianz
3. LVM
Average motor insurance premium and excess/deductible: €150-300
Number of collision repairs per annum: 11 million
Total accident repair market value: €6.5bn
Insurance approved collision repair networks operating: Yes
Insurance owned collision centres in operation: No
Vehicle manufacturer approved collision networks in operation: Yes
Vehicle manufacturer owned collision networks in operation: Yes