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This report on the New Zealand collision landscape was prepared by Rex Crowther of Panel Talk magazine, the journal of the New Zealand Collision Repair Association.

 

Challenges/opportunities facing collision repair market

 

The majority of facilities are continuing to enjoy solid work volumes, but most are struggling to produce a satisfactory net return. The key challenges are insurance domination and a severe shortage of qualified repair and refinish technicians. Insurers are placing more pressure on parts costs, but are placing this burden on the repairers through more administration and supply delays through multi-pricing of parts. To combat this a number of repairers are returning to repairing more parts to speed up their cycle times, however, they are surprisingly being met with some resistance from the insurance sector.

There has been an increase in the number of repairers who are investing heavily in expanding their facility’s size to improve their productivity efficiency.

 

Market trends

 

There are signs of more Australian based consolidators moving in with greater numbers than at present. Suncorp’s Capital SMART has recently opened in the two major cities of Auckland and

Christchurch, taking care of VERO and AA Insurance claims. They are mostly taking the small claims at present, but there is evidence that they are moving into the medium hits area as well, with the recent acquisition of the large Honda collision repair facility. This is a departure from the normal Capital SMART operation in that they are retaining all of the Honda business, which means dealing with other insurers and handling all forms of collision repair.

 

The Gemini Group, under the Accident Management NZ brand, still only has the one medium sized facility, although they are trying to obtain a large site to set up a dedicated IAG Insurance only facility. However, to date they have not been successful, and there seems to be very little activity from them.

There are now a number of multi-site operators but they are only two or three sites, with the largest having seven. A major factor in New Zealand is the large marketshare held by two insurers, which could be as high as 90%. This domination tends to keep repairers on the back foot, with a lot of them fearing retribution if they do not follow suit with insurer rules.

 

Manufacturer involvement is mainly around the European vehicles although a number of vehicle franchises will direct to a select few repairers if asked. Public awareness is still very low but the Collision Repair Association (CRA) has had some great media coverage lately, so maybe this will change in the future.

 

Specific bodyshop trends

 

There are definitely more MSOs as people struggle to come to terms with the current collision repair environment and are selling out to other owners who have a little more drive to make a go of it. Some shops that are changing hands have seen new owners from outside of the collision repair industry. Over the past year, there have been a number of repairers in the regional areas that have purchased a second or third site as their competitors exit the industry.

 

There are no signs of new shops opening at this stage, although as mentioned previously, there is some solid speculation around Australian consolidator AMA/Gemini doing a deal with IAG and opening a number of new facilities, but there is no proof of this at this stage.

 

A definite trend that has been gathering momentum over the last year has been the significant investment made by a large number of repairers in their facilities. A number are definitely setting themselves at a level way above what has been previously considered a good collision repair facility. The continually increasing cost of compliance is driving the more senior repairers from the market.

 

Insurer influence on the repair sector and impact on supply chain relationships

 

Most insurers have their own recommended repairer schemes to some extent. Repairers that are in the insurers networks have heavy work volumes at present, whilst most of those that are outside of the networks do not enjoy the same steady volumes. However, some in the networks are saying they are struggling for profitability, yet they are now very reliant on that relationship whilesome outside the networks are talking of better profits on less work.

 

There are rumblings from some repairers that they intend to leave an insurance network due to the demands made on them and the associated friction. Interestingly, this does not involve only one insurer; different repairers have different issues with each insurer.

 

 

Vehicle manufacturer involvement in the sector

The European vehicle sector has always been involved in influencing who repairs their vehicles, and this is showing no signs of changing. The CRA has been proactive in setting agreements with a number of manufacturers, and there are now five manufacturers using the CRA Structural Repair Centres. I-CAR NZ has developed a number of model specific courses, which repairers must attend to be part of any manufacturer preferred repairer network.

 

Standards

There is no national standard such as BS10125 in New Zealand. The CRA has several tiers of membership and these members are onsite audited to that tier annually. The industry is looking to self regulate and as an example, the CRA is looking at a Licensed Collision Repairer category.

 

Impact of new vehicle technology on the sector

The increasing complexity of motor vehicles is meaning more parts are required per repair and this is driving repair costs up. A number of repairers are carrying out pre- and post-repair scans as a matter of course, but this is meeting resistance from insurers as mostly they are only interested in post-repair scans after the repair of significant structural damage.

Any structural repairs have to follow manufacturer’s specific repair methods to the letter, in most cases with insurers not paying repairers unless proof that repair specs are acquired and followed.

This has led to a greater number of total losses and has lifted the parts content costs of repairs significantly. Access to data, while easier than before is still an issue, especially with one insurer only accepting manufacture specs. This issue is exacerbated by the large number of secondhand imports that feature in the country’s car parc.

 

Repair technology influence within the market

The ever-increasing complexity of motor vehicles is causing people to investigate so call Smart repairs, involving no structural repair element and so speeding up the repair process. A number

of repairers are setting up facilities dedicated to these nonstructural repairs, and are gaining the interest of the insurers.

 

Skills and employment

Like the rest of the world, New Zealand is suffering from a lack of apprentices. There are various initiatives being tried around the country to encourage people into the industry, and some are meeting with reasonable success, but the competition from a booming construction industry is fierce.

 

Trends/developments over the next three to five years?

The industry in New Zealand is still at a crossroads, with a definite split between those making a serious commitment to investing in their future and those that see no incentive to invest in what they see as an unprofitable industry. The pace of this latter group exiting the market is increasing to such an extent that capacity could be challenged in the near future.

 

All of the good shops are currently booked out a month to six weeks ahead and this pressure would in a normal market see an increase in return to the repairers, but with only two main players in the insurance sector costs are tightly controlled. This is leading to an untenable situation, but the insurance sector, while they preach sustainability are reluctant to address it.

 

FACTS & FIGURES

Population 4,749,598

GDP $265bn

Number of people who hold a full driving licence 2,950,000

Total vehicle parc 3,250,000

Average vehicle age 14.5

 

Total new road vehicle sales

 

2015 – 132,982

2016 – 146,939

2017 – 160,124

 

Number of alternative fuel vehicles registered

 

2015 – 1,409

2016 – 1,356

2017 – 2,216

 

Top three motor manufacturer brands by volume sold (2017)

 

1. Toyota

2. Ford

3. Holden

 

Top three models sold (2017)

1. Ford Ranger

2. Toyota HiLux

3. Toyota Corolla

 

Top three motor insurers by number of vehicles insured

 

1. IAG

2. AAI

3. VERO

 

Average motor insurance premium and excess/deductible $800/$500

Number of collision repairs per annum 440,000

Total accident repair market value $1.02bn

Insurance approved collision repair networks in operation Yes

Insurance owned collision centres in operation Yes

Vehicle manufacturer approved collision networks in operation Yes

Vehicle manufacturer owned collision networks operating No

Accident management companies active within market Yes

Accident management company approved collision repair networks in operation Yes

Total number of collision repair operators 658

Number of collision repair centres 680

 

Types of collision repair centres

 Independents: Yes

Dealer: Yes

Networks: No

Group/multi-site operators (MSO): Yes

Franchise operators: No but Fix Auto currently setting up in NZ

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