The following report on the UK collision repair market has been prepared by Bodyshop magazine editor Mark Hadaway. It's a long one but as the Australian market follows the UK one so closely, worth a read. We'll be publishing an edited version in the next issue of the magazine.
FACTS & FIGURES
Population: 64.6 million (ONS)
GDP: £2.1 trillion (World Bank)
Number of people who hold a full driving licence: 38.6 million (DVLA)
Total vehicle parc: 37 million (SMMT)
Total new road vehicle sales:
2013 – 2.26 million
2014 – 2.58 million
2015 – 2.63 million
Number of reported road accidents per annum: 5 million (ONS)
Number of accident repairs per annum: 4.2 million (Trend tracker)
Number of vehicle write-offs per annum: 16%
Number of motor insurers: 166 (defaqto)
Top three motor insurers by number of vehicles insured:
1 – Direct Line Group
2 – Aviva
3 – Ageas
Average motor insurance premium and excess/deductible: £403 (ABI)
Annual cost of motor insurance fraud: £2 billion (AA)
Insurance approved collision repair networks in operation: Yes
Insurance owned collision centres in operation: Yes
Vehicle manufacturer approved collision networks in operation: Yes
Accident management companies active within market: Yes
Accident management company approved collision repair networks in operation: Yes
Number of mobile SMART repairers: estimated circa 3,000 (bodyshop)
Total number of bodyshops (all body repair facilities/types): 4,763 (bodyshop)
Number of bodyshops (static sites dedicated to collision repair): 3,355 (bodyshop)
Group/multi-site operators: Yes
Franchise operators: Yes
Largest operators by number of sites:
1 – Nationwide (124 sites, £263.9m turnover 2015)
2 – Gemini (19 sites, £31.6m turnover 2015)
3 – Apollo Motor Group (11 sites, £27.5m turnover 2015)
Average cost of repair: £1,428 (Audatex)
Average cycle time of repair (key-to-key): 8.1 days (bodyshop)
Average labour rate: £32.02 (Audatex – 2015, H1)
Accident market value: £4.7 million
What are the main challenges/opportunities facing your collision repair market?
The approvals led UK collision repair sector is never without its challenges or political persuasions. It’s a claims system which continues to be disjointed, involves many vested interests and where trust is a major issue. But whilst some continue on a path of conflict and mistrust, the more progressive businesses take a proactive stance and create solutions founded on innovative thinking, partnerships and trust. The result of this is new business models, improved efficiencies and greater customer engagement. Consolidation has and continues to be one of the key themes within the UK collision repair sector at present with the big getting bigger and all indications that this will continue. What this has also served to encourage is the segmentation of the market, where businesses have been prompted to choose their ‘niche’ within the sector. This
has also been heavily influenced by the increasing role of advanced vehicle technology.
A growing skills gap continues to be evident within the UK sector although efforts are afoot to reverse the trend with initiatives such as AutoRaise proactively engaging with youngsters and giving them an insight into the business of automotive collision repair.
What trends are evident within the market?
As an industry there continues to be a hugely diverse range of businesses offering vehicle accident repair services within the UK – from those operators that offer national coverage, be it through a network, group or franchise operation, to ‘one man bands’ who specialise in mobile repairs on a local basis. It is estimated that circa 80% of the work volume with the vehicle accident repair market is absorbed by small, local, independent operators, whilst the remaining 20% is consumed by the larger, corporate organisations.
However, consolidation has been the name of the game for the past 18 months with the biggest moves coming via Nationwide Accident Repair Services (NARS) – acquired by private investors Carlyle Group back in early 2015. The NARS network now stands at 124 sites following its most recent acquisition (May 2016) of the UK’s second largest repair group DWS Automotive Repair Solutions and its 17 repair centres based largely around the Greater London area.
Prior to this, in July 2015, NARS acquired what was then the second largest repair group in the UK – Just Car Clinics and
its 28 sites. If unconfirmed industry reports are to be believed, Nationwide is nowhere near finished yet with its expansion plans. NARS was not the only investment Carlyle Group made within the UK during the past 18 months; the asset management fund also bought claims management operation, Innovation Group for £500m in December 2015.
Consolidation has also come in the form of the industry’s two trade associations – National Association of Bodyshops (NAB) and Vehicle Bodybuilders and Repairers Association (VBRA) – being bought together under the Retail Motor Industry (RMI) Bodyshops division.
We have also seen several suppliers come together: Valspar acquired Quest in June 2015, only to be acquired itself by Sherwin Williams in March this year; accident management company Redde acquired fellow support services operation FMG in August 2015, and International Applications (IAL) (coatings and consumables supply chain specialists and part of the DAC Group of companies) acquired of the Trade Group and Trade Automotive Supplies Ltd (May 2015). On a wider scale, Solera’s acquisition by Vista Equity Partners has continued its evolution towards assisting ‘every sphere of the vehicle owner ecosystem’ with technological developments a constant theme.
Aside from the major developments at NARS, many other multisite operators have been continuing to expand their footprint
throughout the UK. Gemini Accident Repairs UK took over mobile repair specialist AutoRestore’s eight static sites in August 2015, securing 17 outlets for the network. The recent (May 2016) addition of two new sites now takes its total footprint to 19 sites. For its part, AutoRestore opted to sell its static sites in order to devote its full attention back to its core offering of mobile repair.
We have also seen several of the regional groups gain traction within the market with additional sites added such as Alton Cars (now 10 sites), Motofix (now nine sites) and Rye Street Group (now seven sites).
Aside from group operators, the scale of franchise operator Fix Auto UK and predominantly vehicle manufacturer aligned, network operator Vizion continues to escalate. Fix Auto UK today boasts 75 franchisees, although now also operates a support tier network to provide a scalable, national solution. The Fix Auto UK network solution offering therefore stands at 103 repair facilities. The Vizion network lays claim to involvement with over 900 shops in total, around 650 of which it would class as core partners. Insurers also continue to operate their own repair operations such as Aviva’s Solus Accident Repair Centres and Direct Line Group’s UK Assistance Accident Repair Centres.
It is a common held perception by industry experts that there are circa 1,500 to 2,000 ‘Tier A’ bodyshops in operation within the UK today ie those who operate on approvals, typically via vehicle manufacturers, and/or are accredited to BS 10125 – the UK market standard. Another trend worthy of note is the evolving business models we now see within the market. ‘Traditional’ static site facilities are just one of several offerings now operational within the market. Mobile repair operators have been present for some time within the sector and, in some quarters, are now forging valuable partnerships with bodyshop and insurer partners as a means of enhancing claims processing. ‘Fast track’ centres (based on 24-48hr repair throughput) are also gradually becoming more commonplace in order to channel repairs via the most efficient route. Fix & Go, amongst others, is a prime example of this type of operation. Another relatively new phenomena is the roll-out of
‘bodyshops in a box’ or ‘pods’ – modular, moveable bodyshops predominantly targeted at dealerships without onsite repair
facilities. This area is gaining traction within the UK with a handful of offerings now available.
How are insurers influencing the repair sector? What impact is this having on supply chain relationships?
The market, at present, is dominated by insurers with circa 70% of accident repair work funded by this channel. Once again,
‘approvals’ are a crucial element within the market and often penetrate the entire supply chain with the ultimate aim of securing consistent quality and, of course, containing costs. A continued rise in insurance premiums sees much of the blame placed at the door of the UK’s systemic insurance fraud culture. To combat this insurers have allied with government to decree a clampdown on rogue accident management companies. The impact of this is yet to be realised but previous attempts to curtail the claims culture have fallen short. Rising insurance premiums, combined with high policy excesses have also served to create a market outside of the traditional claims environment. Instead, a consumer driven market has emerged where drivers seek repairs themselves rather than claim via their insurer. All of the above exacerbates the ill feeling towards the insurance sector as a whole and ultimately makes insurers more dependent
on their supply partners than ever before in order to enhance customer engagement. However, it also drives a cost-focused culture and service level agreements and squeezed commercial rewards are all part of the picture. One major focus through all of this has been a call for customer-centric behaviour with insurers seeking and securing capable triage processes, accelerated cycle times and high customer service index ratings. The continued reduction in bodyshop numbers has caused a levelling of repair capacity with supply and demand becoming a far more cohesive equation. This ‘levelling’ of the market is supported by the continuing rise in vehicle sales (SMMT 2015) and the increasing average age of the vehicle parc (SMMT 2014), both of which contribute towards a growing vehicle parc and therefore the potential for more repair work. There are even now anecdotal suggestions that demand (for accident repairs) could, at some stage in the near future, outstrip supply (bodyshop operations). Another major element in relation to insurers’ role within the market is being influenced by the movements of the vehicle manufacturers, namely the technology now present on modern day vehicles.
There have been very open discussions take place with insurers clearly stating their ‘need for change’ – moving closer to vehicle manufacturers is clearly a part of this process for some whilst pursuing telematics based policy offerings is for
others. Others have decided to withdraw from the motor market completely.
In what way are vehicle manufacturers increasing their involvement/influence in the collision repair sector? What signs are evident?
Vehicle manufacturers are becoming increasingly intertwined within the sector. Some vehicle manufacturers such as BMW,
Ford, Jaguar Land Rover, Nissan and Volvo have really shown a desire to capture their share of the market through own branded insurance, accident management programmes, approved repairer networks, training and education, and consumer marketing. Vehicle manufacturers are working hard to promote the benefits of using their first notification of loss (FNOL) solutions along with their approved networks. In some instances, data proves that such
efforts are reaping rewards. Many of the vehicle manufacturers now also offer ‘writeoff avoidance (WOA) programmes’ whereby they encourage ‘borderline’ cases to be referred to them to see if those vehicles can be repaired economically through discounted parts pricing. Technology and advanced materials are also playing a major role in shaping relationships within the sector and with increasing connectivity, and the need for correct repair, vehicle manufacturers
are becoming increasingly influential to the sector.
What ‘standards’ are currently in operation within the sector? How are they monitored?
The UK’s underlying market standard – Publicly AvailableSpecification – PAS 125 became obsolete at the end of 2015,
replaced by British Standard (BS) 10125. Founded on the same core principles, there were several amendments/updates made which, for a period, were strongly debated by industry. However, a transparent approach to the changes, along with guidance and support has seen what would appear a relatively smooth transition. In truth, little appears to be communicated regarding BS 10125 developments.
All vehicle manufacturers also have their own standards in place by which their approved networks operate. These operate
independently of BS 10125. Numerous ‘other’ standards are in place relating to work provider approvals and networks etc.
What impact/influence is new vehicle technology having on the sector?
Without doubt, much of the headline news in the past 12 months has been dedicated to the advancement of vehicle technology including Thatcham’s promotion of assisted emergency braking (AEB) technology with its #stopthecrash campaign. Both Volvo (2015) and VW (2015) have broadcast that AEB has proven, in real world test cases, to reduce accident rates by 28%. The advent of AEB has really only entered the mainstream in the past few years, and is already available as standard or an option on 75% of the UK’s new vehicle parc. Furthermore, by 2017 AEB will form part of the stringent Euro NCAP vehicle safety rating scheme, which will see mass uptake by vehicle manufacturers, accelerating
its implementation and, ultimately, its influence. AEB is just one of the many advanced driver assistance systems
(ADAS) technologies to be introduced as vehicles continue to evolve toward driverless capabilities.
So whilst safety is a core remit for insurers, Thatcham and vehicle manufacturers, all parties also very much acknowledge the need for committed and loyal aftermarket support services and therefore are continuing to work very closely with their bodyshop partners to ensure this is in place.
New materials of construction and increasingly complex technology has necessitated investment from bodyshops, both in equipment and upskilling. The result is, in many cases, vehicle manufacturer approvals require a sound business case for any bodyshop and we are seeing the creation of strong links between bodyshops and manufacturer brands. This is a trend likely to continue over the coming years as vehicle manufacturers increase their influence on the sector.
What influence is computerised estimating/management systems/general technology connectivity having within your market?
Computer technology has and continues to be key to the bodyshop of today – access to data and ‘live’ information has become the norm. Technicians constantly update jobs from the shopfloor via touchscreens, providing the business with a minute-by-minute view of operations. The focus on speed, efficiency and communication has seen ‘mobile’ estimating, with such devices as AudaMobile, become a prerequisite for some bodyshop businesses. Video appraisal is also showing an upward curve. Not only is it the practical element which is of benefit, but importantly these devices communicate
professionalism and trust with increasingly savvy vehicle owners. A key development within the field of management systems saw Enterprise-Rent-A-Car acquire Bodyshop Management Systems (BMS) and the CAPS Consortium Ltd communication platform at the start of 2016. Enterprise acquired BMS to ‘add value to its bodyshop and insurance partners’ whilst the acquisition of CAPS (the hub by which several management systems information flows) is to ‘ensure a secure and open data standard’. An issue often relayed with ‘approval necessary’ technology is the ‘link-up’ process and some bodyshops find themselves operating multiple systems to accommodate various work providers. However, there are various developments underway aimed at streamlining this process, Audatex being a main driver of this type of ‘link up’ capability.
What is the current status of the next generation/employee/skills market for the sector?
A continued lack of new blood entering the market is one of the issues faced by the industry. Apprentice numbers are low and, typically, those who do enter often opt out after the first year or two. It’s a Catch 22 situation because time, money and energy needs to be invested in apprentices, all of which is scarce resource, however there are certainly those that do it and many claim you ‘cannot afford not to’. To address the issue, government, training bodies and colleges are working hard to make apprenticeships more accessible and promoting the value of such young starters. A major revelation within the sector has been the advent of the AutoRaise/REALexperience initiative aimed at attracting and highlighting the career prospects for young people within the automotive accident repair sector. Its inaugural industry showcase event attracted over 100 young people and has sparked great support from industry. A new apprentice Trailblazer initiative introduced by government
has encouraged businesses within the sector to work together to create a framework for a national apprenticeship standard – to date a Multi-Skilled Accident Repair Technician (led by AutoRaise)along with Paint, Panel and Mechanical (developed by Collision repair Sector Trailblazer Group) standards have all been approved. A Vehicle Damage Assessor (VDA) proposal is now also under development, intiated by AutoRaise. These standards supersede previous apprentice standards. At the opposite end of the scale there also seems to be an increasing awareness of the need for management training and succession planning with the industry. Seven industry personnel have graduated through the bodyshop magazine led, and partnered by AkzoNobel, Fix Auto UK, LKQ Coatings and Mirka, postgraduate level seven diploma in strategic management and leadership. The intent is to now go on to MBA level and create a pathway for others
What are the likely trends/developments that will impact the sector over the next three to five years?
Some very interesting circumstances are yet to play out within the UK, namely Carlyle’s plans for NARS and the various other elements continuing to drive the consolidation of the sector. Many suspect Carlyle will continue to grow the proposition
through acquisition and take a commanding role and, ultimately, marketshare. This potentially could mean a great shake-up of the industry as work providers and other repairers move to counteract and/or embrace any such moves. It could also lead to contraction in the supply market. Vehicle technology and, therefore, vehicle manufacturers are also likely to be the major influencers in changes over the coming years. Already with increasing levels of ADAS within vehicles, a trend only set to accelerate, along with driverless car trials now live on UK roads, much of the focus for the sector as a whole is how this technology will impact. Accident numbers look set to decline but will it also prove that otherwise ‘written-off’ vehicles may now become repairable due to reduced impact speeds? Vehicle ownership is also an increasingly relevant consideration for the accident repair sector. Figures from the British Vehicle Rental and Leasing Association (BVRLA 2015) show that the rental and leasing sector grew by 30% between 2012 and 2014. Car clubs, shared ownership of vehicles, is also an increasing trend the world over especially within urban conurbations and cities. Research from Frost & Sullivan (2014) for a UK based car club found that around 140,000 Londoners were members of car clubs in late 2014, and that, by 2020, car sharing could remove around 120,000 cars from the road in the UK capital. Without doubt there will be a continued diversification of the bodyshop market as businesses continue to find their specific business ‘models’ – horizontal integration of automotive services could well be something we may well start to see occur within the market and, along with it, the continued evolution of supplier relationships.