The future of the crash repair business

Transcription

1 The future of the crash repair business Outlook to 2030 Steve Young and Alex Cunningham BVRLA Forum, Daventry June 7, 2018

2 ICDP is a unique cross-auto industry research and consulting organisation, with a range of activities around our collaborative not-for-profit research programme core 2

3 Our dedicated research team operates from offices in 5 markets, and strong partnerships help us to maintain coverage throughout Europe and beyond Birmingham Frankfurt Paris Venice Madrid 3

4 Today, we will present the first outputs from research into the future trends in the crash repair sector which we are now adding to the scope of our programme The crash repair market is key for a number of operators, but faces a number of pressures and lacks good data for strategic planning Looking at the various drivers of the market, there are many uncertainties related to volume, and new complexities On the basis of the modelling assumptions used, we project that the crash repair market will shrink in 2030 vs 2016 base Going forward, we are developing a research agenda which explores specific areas in more depth your input is welcome 4

5 Today, we will present the first outputs from research into the future trends in the crash repair sector which we are now adding to the scope of our programme The crash repair market is key for a number of operators, but faces a number of pressures and lacks good data for strategic planning Looking at the various drivers of the market, there are many uncertainties related to volume, and new complexities On the basis of the modelling assumptions used, we project that the crash repair market will shrink in 2030 vs 2016 base Going forward, we are developing a research agenda which explores specific areas in more depth your input is welcome 5

6 Crash repair business counts for 23% of the total EU aftermarket, within which parts represents almost half the revenue. OEM/Supplier margin % is significant Total aftermarket (at end-customer level excluding VAT) 195 bn Do-it-for-me (delegation) 175 bn DIY 20 bn Collision jobs 45 bn Mechanical jobs 130 bn Parts 27 bn Labour 18 bn Parts 72 bn Labour 58 bn Wholesale 22 bn 5 bn Wholesale 49 bn 23 bn Supplier 13 bn 9 bn Source: ICDP estimates, from interviews, ACEA Gross Margin Car parc in EU 27 + EFTA : 298 m PCs + LCVs 6

7 Despite this, there is a general lack of data and big variations between individual European markets we are looking to bring some clarity and consistency to this Different views on trends Different perspectives, varying by players Repairs managed by insurers Repairs self-paid by owners Self-insured fleets Cosmetic repairs Numerous submarkets Glass repairs Re-used (green) parts Different market structures, insurer roles There is no such thing as a typical crash repair market Source: ICDP 7

8 We have developed a projection model for the body repair market to 2030, taking into account the various drivers of the body repair market Top down approach (as we do for mechanical R&M) Scope for this research PCs only Warranty & internal jobs excluded Glass repairs excluded EU top 4 France, Germany, Italy, UK In volume & value Structural / non structural damage Value: split between parts / paint / labour ADAS penetration Total loss rates Diesel share Insurance claims Repair incidence rates New car market Distance driven Car parc composition Insurance paid / owner paid repairs Calibration with quantitative data from desk research and industry interviews Crash repair projection 8

9 Analysing different sets of data, and inputs from interviews, ICDP has defined a number of KPIs for the markets analysed, as starting points for the simulation Crash repair market value VAT excl. ( bn) Repair rate (%) Accidents / incidents p.a. (million) France Germany Italy UK 0 France Germany Italy UK Repair rate (%) Number of repairs (million) France Germany Italy UK Source: ICDP from existing data and interviews 16% 14% 12% 10% 8% 6% 4% 2% 0% Percentage of total losses (on claims) France Germany Italy UK Figures are for PCs only, glass, internal and warranty jobs excluded 9

10 Today, we will present the first outputs from research into the future trends in the crash repair sector which we are now adding to the scope of our programme The crash repair market is key for a number of operators, but faces a number of pressures and lacks good data for strategic planning Looking at the various drivers of the market, there are many uncertainties related to volume, and new complexities On the basis of the modelling assumptions used, we project that the crash repair market will shrink in 2030 vs 2016 base Going forward, we are developing a research agenda which explores specific areas in more depth your input is welcome 10

11 Overall, number of accidents involving injuries in Europe declined from 2000 to 2013, but with a slight increase since then, possibly linked to an improving economy Number of accidents (with injuries) in EU Source: ICDP from CARE 11

12 But the situation differs for the various markets in Europe, for different reasons... Annual crash repair volumes by market* Different 6 Road traffic volumes Million repairs p.a. 5 4 Road network structures Road conditions 3 Drivers behaviour France Germany Italy UK Insurer roles Source: ICDP from, Trend Tracker, Audatex, GIPA, ZKF. *Moderate and severe damage, glass repairs not included 12

13 In principle, ADAS systems should reduce the accident rate, but this will depend on penetration into the parc as a whole, and initial real world experience is no change Penetration of ADAS systems in car parc IIHS lab tests showed a reduction in speed of impact of 50% where the initial approach speed is 40 kph, reducing the repair costs from $28,131 to $5,715 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% We ve not seen any change yet in accident rates, though when we looked in detail we found that front end damage was being replaced by rear end. OEM Interviewee Source: ICDP interviews, Insurance Institute for Highway Safety (IIHS) and DAT 13

14 Vehicle complexity continues to increase, not only due to electronics, but also to changes in body architecture. Body repairers need to be better skilled Various aluminium components are the norm Due to technology content, the number of total losses is increasing and will continue to increase in the future Despite various OEM specific programmes... Audi A8 laser headlamp parts cost 4,000+ plus extensive calibrations Varied joining techniques welding, riveting, bonding body integrity is dependent on correct method being used New body structure technology will progressively be applied in more and cheaper models Cost of repairs are increasing: ADAS parts replacement, higher costs at body repairer level due to specific investments in tools, training Higher risk of legal claims involving personal injury, due to wrong repair processes (e.g. US market) 14

15 Embedded ADAS technology mean that damage will affect components with sensors or the sensors themselves parts cost increase, calibration becomes an issue Cost of the camera equals the cost of the bumper itself. OEM Interviewee ADAS calibration is a major downtime for the business. Independent bodyshop Calibration causes issues in relation to key to key time as process is outside of our control. Independent bodyshop Source: ICDP interviews, EE Times 15

16 Telematics also has the potential to positively influence accident rates through behavioural change and steer business to particular repairers through first response Source: Carrot Insurance, Internet of Things Inc., eco driving.info 16

17 There are indications that UK insurers are changing their attitudes although very different situations remain in the different European markets Control focus Approved repairer network Restrictions on customer choice Labour rate squeeze Directed parts sourcing (inc. non-oe) Customer focus More repairer choice, fewer penalties More delegated authority Reduced claims processing cost Some improvement in bodyshop profit 17

18 Today, we will present the first outputs from research into the future trends in the crash repair sector which we are now adding to the scope of our programme The crash repair market is key for a number of operators, but faces a number of pressures and lacks good data for strategic planning Looking at the various drivers of the market, there are many uncertainties related to volume, and new complexities On the basis of the modelling assumptions used, we project that the crash repair market will shrink in 2030 vs 2016 base Going forward, we are developing a research agenda which explores specific areas in more depth your input is welcome 18

19 Regarding the UK car parc, the simulation shows a lower proportion of cars of more than 10 y.o. at the 2030 horizon. The average mileage driven is expected to rise 100% 13,700 13,500 Annual mileage driven - total PC parc 13,500 13,300 13,100 12,900 13,197 12, % 19.4% 21.2% 23.4% 23.2% 22.4% 22.1% 21.9% 21.6% 21.7% 21.7% 15.2% 15.5% 21.7% 13.1% 14.8% 21.5% 11.8% 12.4% 19.9% 12.4% 11.3% 17.6% 14.6% 12.1% 15.6% 14.7% 14.1% 15.8% 14.0% 14.2% 18.3% 13.9% 13.5% 19.1% 13.7% 13.4% 18.1% 13.7% 13.4% 18.2% 13.8% 13.4% 18.2% 20.7% 23.9% 24.5% 21.9% 20.4% 18.1% 16.3% 17.3% 19.6% 20.0% 19.5% 6.8% 7.3% 10.2% 13.2% 14.2% 14.8% 15.0% 14.3% 13.6% 13.0% 13.4% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% PCs 0-2 y.o. 3-4 y.o. 5-6 y.o. 7-9 y.o y.o. 15 y.o. and + 12,500 Source: ICDP from national sources 19

20 In a UK parc 20% larger, total mileage of the parc will therefore increase by 29%, but if recent trends on accident rates continue, accidents will increase by only 8% 600, , ,000 Total mileage of the PC parc* (In million km) +29% Trends in total parc mileage and number of accidents* indexed to 2010= , , The number of accidents is decreasing, despite the higher total parc mileage 100, Total parc mileage Accidents *Parc as of 01/01/XX *With injuries Overall, it is estimated that net impact of the increased total parc mileage will generate c.8% more accidents / incidents at 2030 compared to 2016 before any technology effect Source: ICDP simulation model, 2018, CARE 20

21 Increasing penetration of ADAS systems by 2030, including some Level 4 autonomous cars, results in the overall accident numbers reducing by 10% Penetration of ADAS* & autonomous cars in the UK new PC market, in % Such hypothesis drive to the following figures, at 2030: Hypothesis: Mandatory in % of the cars in the parc have ADAS Given this penetration, the whole parc is impacted Hypothesis: -30% on the incidence rate 2% of autonomous cars in the parc Hypothesis: on these cars, the incidence rate is down by 60% These elements, plus the impact of the parc mileage ADAS Source: ICDP simulation model, 2018 Fully Autonomous *Based on emergency braking systems 4.0 m accidents, or c. 10% drop compared to

22 Based on available evidence, we also assume the mix of work will change, with higher % total losses (due to repair cost) and a shift from heavy to light damage Due to new technology features, heavy damage is less frequent In parallel, total losses are increasing due to repair cost We also assume a higher % of repair jobs managed by insurance companies, rather than client paid From 60% to 65% over the period Trends regarding the types of repair jobs and total losses (in %) Source: ICDP simulation model, m repairs, or c. 18% drop compared to 2016 Weight of repaired heavy damage down by 15% % of heavy damage in accidents % of total losses on insurance claims 22

23 In value, the cost per crash repair will increase due to car technology, but the change of damage mix eventually negatively impacts the market 150 Automotive repair and maintenance Price index trend Corrected for general inflation Average repair cost (heavy damage) Average repair cost (light damage) Evolution 2,040 2,180 +7% 1,340 1,440 +7% Total market for heavy damage 2,630 m 1,490 m -44% Total market for light damage 2,300 m 2,540 m +12% Total market value 4,930 m 4,030 m -18% Source: ICDP simulation model, 2018 Figures are corrected for inflation 23

24 Looking at split between parts, labour and paint, if past trends are applied without adjusting for parts value due to technology the parts market will drop by 27% 50% 45% 40% 35% Labour /parts / mix trend 46% 30% 25% 20% 15% 34% 20% We have assumed that heavy damages and other ones will be affected similarly by these trends 10% 5% 0% Source: ICDP simulation model, 2018 Parts Labour Paint Collision parts market : 1,370 m ( 1,870 m in 2016) Or a 27% drop Figures are corrected for inflation 24

25 Today, we will present the first outputs from research into the future trends in the crash repair sector which we are now adding to the scope of our programme The crash repair market is key for a number of operators, but faces a number of pressures and lacks good data for strategic planning Looking at the various drivers of the market, there are many uncertainties related to volume, and new complexities On the basis of the modelling assumptions used, we project that the crash repair market will shrink in 2030 vs 2016 base Going forward, we are developing a research agenda which explores specific areas in more depth your input is welcome 25

26 Looking ahead over the rest of this year, into 2019, we have a growing list of further research topics in the crash repair area Insurer attitudes and influence Bodyshop numbers, economics and future trends Glass repair channels in the context of embedded technologies Parts supply channels including green parts supply chain Technology impact (EV, ADAS, materials, telematics) and responses Technician recruitment, training and retention Source: Image from Rebecca Gill 26

27 We would welcome your thoughts and needs if you would like to join our research programme Dear ICDP, 27

28 Central Boulevard, Blythe Valley Business Park, Solihull B90 8AG, UK Limited company registered in the UK, no The Squaire West 12, Am Flughafen, Frankfurt am Main, Germany GmbH registered in Frankfurt am Main Web: All requests to reproduce this material should be directed to the addresses above