In this insightful piece, Barry Edney discusses a selection of the challenges and “hot topics” currently facing European collision repairers.
A few months ago, I wrote about the many challenges repairers face here in Europe. We all know that there has been a lot for all of us to deal with, especially the disruption from the pandemic and the impact of a volatile energy market.
In Europe, of course, we have the added friction of the new trading rules with Europe post-Brexit, which has also impacted supplies of parts and consumables.
All these disruption factors are common to a greater or lesser degree to many in our industry around the world, so this month, I am looking at the “hot topics” for repairers here in Europe.
This is not intended as an in-depth look at the challenges the industry faces but to raise awareness and show that, regardless of the country you operate in, we all face the same or similar business challenges.
Parts availability – the hottest of hot topics
This has been a global challenge as a high percentage of the replacement parts we need are made in China, and with China’s zero COVID policy, most of the factories were closed for an extended period.
Add to this the disruption of the Suez Canal closure and the low availability of ships and containers driving high shipping costs, and the results were long lead times and high prices.
In Europe, there are other factors around the changing distribution policies of the vehicle manufacturers’ parts organisations, which have also added to the disruption. Most are confident that the supply pressures will ease soon as manufacturing and shipping catch up with the COVID-induced backlog, but exactly when we will see “normal supplies” isn’t clear just yet.
To fill this void, there has been an uptick in interest in reclaimed or recycled parts. Of course, insurers are keen to encourage their use as it can reduce costs and lead times. There is also quite a focus on the environmental benefits of using reclaimed parts. As more parts are re-used, the less non- recyclable parts will be crushed and sent to landfill.
The challenge, of course, is to obtain the right parts, in suitable condition, at the right time to complete the repair to the right standard.
A late 2022 UK survey by e2e (formerly National Salvage Association) and the Auto Body Professionals Club (ABP) members revealed some interesting feedback.
For example, the majority of responses indicated that typically, reclaimed parts are only used on less than 10 per cent of repairs. Interestingly, 14 per cent of responses suggested reclaimed parts could be used on up to 100 per cent of repairs. Ease of sourcing was highlighted as a key challenge in the survey, and 74 per cent of repairers said they would use one seamless sourcing platform for reclaimed parts if one existed.
Not surprisingly, there was a big difference between the body shops’ and the insurers’ views on how advancing vehicle technology, such as ADAS, will affect the use of reclaimed parts. Increased usage due to technology is expected by 45 per cent of insurers but only by 8 per cent of body shops, whereas decreased use is expected by 52 per cent of body shops and 33 per cent of insurers.
Another aspect of the reduced availability of parts has been increasing reports of parts being stolen from cars when they are left parked up. This is not new, as high- cost parts such as catalytic converters, electronic components, etc., have been the target of thieves for several years.
A few years ago, a work colleague had his BMW 5 series broken into overnight and found the thieves had stolen the complete dashboard assembly! Although not new, we have seen a marked increase in the range of stolen parts and the number of incidents since new parts became harder to obtain.
Skills and skills training
This is a subject we hear repeatedly and, frustratingly, it seems to be getting worse, not better. There is a strong feeling amongst those I spoke to that the drive for efficiency by focusing on replacement rather than repair has made the situation worse.
“No one can repair anymore” was the complaint I heard recently.
A year or so ago, I reported that some initiatives had been taken to support youngsters joining our industry as apprentices. AutoRaise, a UK charitable organisation working to encourage and support new apprentices, is doing a fine job but cannot support enough newcomers to meet the needs at body shop level.
In the same report, I noted that industry-specific bodies were developing apprenticeships rather than government-awarding bodies. This led to a much more streamlined and focused apprenticeship, but unfortunately, the view now is that it is focused too much on efficiency (replacing parts) and not enough on the repair skills themselves.
Training places at local trade schools (TAFEs) are rarer than hen’s teeth at the moment. Most of the apprenticeships available are by national providers, with limited or no local physical training facilities.
The only real training available currently is provided by the vehicle manufacturers for their dealership technicians.
Independent repairers can send technicians on these courses for a fee, but, as you might expect, there are few spaces available as dealership staff have priority. Volvo supports apprenticeships in the independent sector, but again, there are too few per year to make a real difference across the whole industry.
Without the training provided by paint companies and equipment manufacturers, independent repairers would struggle to obtain any real skills development at all.
The bottom line is that there is no longer the time to develop those repair skills in the time available. There are just not enough apprentices being trained on repair techniques by experienced technicians.
Back in November, I reported that average key-to-key times had increased from one week to two weeks. That situation hasn’t changed, and there are long waiting times for drivers to book their cars in for repair. A shortage of work is not a problem for insurance- approved body shops.
This issue is mainly driven by the shortage of skilled and unskilled labour and the delays in finding parts. The resulting impact on work in progress, constrained output and cashflows continues to pressure most repairers.
This labour shortage, along with the extended period of inflation we are experiencing, is driving up labour costs. On top of that, we are still experiencing high energy costs. Although base energy cost is reducing, this is at the same time as governments across Europe are reducing business subsidies, so there is little relief from the pressure.
The extended key-to-key time ties up a loan car for far longer each repair, on average doubling the loan vehicle cost. These cost pressures, together with the extended lead times and increased work in progress, reduce cash flow and put pressure on a repairer’s finances.
Despite some work providers allowing £50–70 per repair as a cost offset, it is still a constant battle to justify costs. This extra focus on cost justification adds to the admin burden, which in turn adds to costs!
The number of body shops in the UK has also been falling in recent years, and we saw quite a few shut their doors during the pandemic. The estimated number of shops in the UK in 2020 was around 3,000. The most recent estimate is 2,800–2,900 at most, with around 1,000 receiving the majority of insurer-directed work.
This capacity crunch has led to an average four-month waiting period before a repairer can book the vehicle in for repair. Unfortunately, this capacity crunch will likely worsen as more independent shops sell up or close. As repairers near retirement age, they are opting to exit the industry rather than battle on.
Despite this environment, large multi-location repairers continue to focus on economies of scale and can spread costs over many more vehicles. Many, such as Gemini and Steer Automotive, also have their own training teams, partnerships with external providers and staff development programs to ensure they can staff their facilities and continue to repair vehicles in high volumes.
I was recently told that a body shop needs to be at least 130 per cent efficient to make a reasonable profit. That is, billing 30 per cent more hours than they use to repair cars.
What is interesting about that number is that it is the same efficiency target body shops had when I started in this industry way back in 1987! That tells me that while our industry seems to be permanently under pressure or in turmoil, the fundamentals stay the same.
The pressures may change and evolve over time, but we are a resilient bunch!