The following report has been prepared by PanelTalk magazine editor Rex Crowther on behalf of IBISWorld.
MARKET OVERVIEW
What are the main challenges/opportunities facing your collision repair market?
Most good quality repair facilities are enjoying relatively stable relationships with the insurance industry at present, and there appears to be some slight optimism as to a return to profitability by most, although the margins are very slim for all. A new development is the arrival from Australia of two vehicle rental companies specialising in supplying vehicles to those involved in an accident but not at fault. This could help repairers by taking the pressure off their ever-increasing loan vehicle fleets. The main challenge currently is the lack of skilled staff available for hire. Apprentice numbers are at all time lows as the industry competes with the likes of the construction sector for those entering the trades. The opportunity here is for those that train up semi-skilled workers, as most repairers only have either qualified people or apprentices on their payroll at present. This transition to a mix of skilled and semi-skilled is proving very slow in New Zealand. Bodyshop trends There is no MSO scene in the country at present, although one individual owns seven facilities located in the countries largest city, Auckland, and he is still actively seeking expansion opportunities. There are a number of people who own two or three facilities, but most are single site operators. Last year, the large Australian consolidator Gemini purchased its first shop in Auckland and they are expected to expand quite aggressively through 2016 and onwards. The only mobile operators are involved in the mobile paint touch sector, dealing mainly with the vehicle dealerships.
How are insurers influencing the repair sector? What impact is this having on supply chain relationships?
There is now an ever-increasing gap between those with insurance contracts and those without, and this is creating some friction between repairers. New Zealand’s health and safety laws have been rewritten and were effective from 1 April. The insurance companies have been quick to audit their repairer network facilities to ensure that they are totally compliant, and the thinking is that they may use this compliance to aid their steering effectiveness to their networks.
In what way are vehicle manufacturers increasing their involvement/influence in the collision repair sector? What signs are evident?
Most manufacturer representatives in New Zealand have embraced I-CAR as the means to getting their repair specifications out to the market. I-CAR NZ has developed a number of model specific courses that are then presented around the country. Any Collision Repair Association (CRA) member that holds structural repair status can upon completing a manufacturer’s model specific course, become part of that manufacturer’s repairer network. There can be no doubt, however, that the manufacturers will become major players in how and where their vehicles are repaired in the future.
What ‘standards’ are currently in operation within the sector? How are they monitored?
There are no formal standards in the New Zealand market although repair facility registration is currently being investigated by a cross party group, and so something may come from that. CRA members are subject to an annual audit inspection and they also have the CRA Quality Assured programme, which is based on ISO 9000, which requires a rigorous annual independent audit.
What impact/influence is new vehicle technology having on the sector?
New vehicle technology continues to have an impact on the sector, although improvements have been made regarding the availability of technical information that repairers have access to. There can be no doubt, however, that most repairers remain oblivious to the extent of change that is already occurring with the motor vehicle manufacturers.
What influence is computerised estimating/management systems/general technology connectivity having within your market?
Computerised estimating and management systems have been around for a long time. Unfortunately, a large number of repairers only use the basic information and fail to grasp the importance of the accurate information that these systems provide. This lack of understanding of operating costs holds the entire industry back, which is really frustrating as most have ready access to the information. The release of a completely new software package is about to be made and this will be the first new software in a decade and so is well overdue.
What is the current status of the next generation/employee/skills market for the sector?
There is currently a severe skill shortage, with many repairers recruiting from overseas. There is no solution at hand as the collision repair industry struggles to attract young people into the industry. There is currently no shortage of investment by the countries progressive repairers in either equipment or training, with I-CAR training numbers increasing year-on-year. As stated previously, repairers must employ or train-up semi skilled people to carry out the more basic operations, as this will allow them to pay the skilled operators at a higher rate that what they currently do.
What are the likely trends/developments that will impact the sector over the next three to five years?
Because very few dealerships own their own collision repair facilities, I believe that the dealerships will develop much closer relationships with repairers and will become the biggest drivers of business to those aligned facilities.
FACTS & FIGURES
Population: 4,672,641
GDP: $245 billion
Number of people who hold a full driving licence: 2,782,000
Total vehicle parc: 3,096,000
Total new road vehicle sales:
2013 – 113,297
2014 – 127,352
2015 – 132,982
Number of reported road accidents per annum: No data
Number of accident repairs per annum: 400,000
Number of vehicle write-offs per annum: No data
Number of motor insurers: 10
Top three motor insurers by number of vehicles insured:
1 – IAG
2 – AAI
3 – Vero
Average motor insurance premium and excess/deductible: Premium $750, deductible $500
Insurance owned collision centres in operation: Yes – one but rumoured soon to be four. All by AAI/Suncorp Australia – Capital SMART.
Total number of bodyshops: 780
Number of primary bodyshops: 765
Types:
Independents: 730
Dealer: 12
Group/multi-site operators (MSO): 15
Franchise operators: None
Mobile SMART repairers in operation: 12
Number of mobile SMART repair operators: Five – paint only
Other vehicle damage repair facilities/models in operation: None
Average cost of repair: $2,250
Average cycle time of repair (key-to-key): Not measured in New Zealand
Average labour rate: $95
Accident repair market value: $900,000,000