In or about the year 2030, a fully autonomous car will drive itself to a local auto body shop for repairs within minutes of being involved in a minor fender bender. Furthermore, the arrival of the vehicle will be anticipated because its onboard diagnostic (OBD) system and the shop’s computers belong to the same national network.Next, one or more human passengers will make their way into the repair shop office to touch bases with management, and if necessary, finalize repair authorizations or provide additional information.
Thus begins a scenario that will be played out in shops across the country, but what happens in the preceding 10 years will determine if those shops will survive “the cut” of an extremely dynamic marketplace. We offer the key moving parts followed by evidence supporting cause for optimism in this important segment of the auto aftermarket vertical.
Technology is rapidly changing the way vehicles are marketed and repaired, and will continue to do so between now and 2030. Vehicles, auto parts and repair services are all marketed and sold online — consider Carvana and Autotrader in sales; Amazon, eBay Motors and RockAuto in parts; and RepairPal and Autobody Alliance in repairs.
One approach to marketing repairs is to offer free consumer advice in conjunction with a list of recommended shops, a combination we discussed favorably in “Affordable Payments at the Transmission Shop.” Going forward, it will be critical for local shops to participate in one or more networks to maintain presence in the marketplace.
Multiple organizations are developing autonomous vehicles: BMW, Daimler, Fiat-Chrysler, Ford, GM, Honda, Hyundai, Tesla, Toyota, Volvo, and an alliance by Renault, Nissan and Microsoft.
Smart technologies built into autonomous vehicles such as crash avoidance systems and driverless pods will mean fewer vehicular accidents and translate to less demand for body shops. Both processes will avoid catastrophic collisions, but certainly not eliminate minor traffic accidents entirely because of technological “bugs” and human intervention.
The local auto body shop of the future will also need to invest in technology because vehicles already have dozens of onboard computer modules and sensors with some being connected to and monitored by manufacturers such as GM and Tesla. There are actually three related challenges for local shops:
- Investing in expensive diagnostic equipment
- Gaining access to vehicle data that manufacturers may one day store in the cloud and only offer to their franchised dealerships
- Data security measures which have involved bureaucracies including the FBI and National Highway Traffic Safety Administration because of the real and present danger that hackers could seize control of vehicles on the road
Solutions to secure access have not been finalized, but could take shape in the form of factory authorized repair shops or neutral bureaucracies offering licensed access. Either approach will translate to new fee categories and added expenses for the local auto body shop of the future.
The ongoing trend of mergers and acquisitions among collision repair centers — including those operated by franchise dealers as well as independent multi-shop operators (MSO) — has created added competition for local shops and will only intensify over the next 10 years. These larger organizations benefit from economies of scale, pooled management resources and powerful sales, marketing and advertising efforts.
ABRA Auto Body & Glass, Caliber Collision, Gerber Collision & Glass, and Service King are called the “Big Four Consolidators” of the US auto collision repair industry while the top 10 is rounded out by familiar names such as Auto Nation, Hendrick and Penske.
According to The Romans Group's annual report, “by 2021, the four consolidators could represent nearly a quarter of the market.” Furthermore, the combined market share of the Big Four Consolidators and other major segments (e.g. independent franchise organizations and large dealership groups) will represent “up to 50 percent of the collision repair industry by 2021.”
Another industry analyst predicts that big players will control 67 percent of the repair volume by 2025.
Direct repair programs (DRP) — contractual agreements between insurance carriers and multi-shop operators that reduce labor and administrative costs while accelerating the claims process — are also squeezing smaller shops. DRPs were introduced about 30 years ago, but more recent changes are having equal or greater impact on local shops as well as consumers.
For example, Allstate and Liberty Mutual now rely on photo estimating (aka photo appraisals) to determine repair estimates, a subject of such widespread proportion and controversy to warrant the attention of television’s Inside Edition on March 30, 2018. The photo estimating process itself does not harm local body shops, but when used in conjunction with direct repair programs, it encourages car owners to seek the faster resolution cycles offered by recommended providers.
Automakers also tell consumers that using factory-certified body shops at dealerships is the best way to enhance the residual value of their leased vehicles. This relationship means more work for dealership body shops and will only strengthen as smart cars become increasingly dependent on factory services and diagnostics.
Local collision centers must also maintain proper certification in order to compete with consolidators and dealership body shops. The I-CAR Professional Development Program is the benchmark standard of excellence across the entire industry, but local shops augmenting that level with factory certification from the likes of Audi, Ford, GM, Honda, Land Rover, Nissan, Toyota, Volvo and Volkswagen stand a better chance of competing on all makes and models. Certification is a huge undertaking because of its inherent investment in time and money.
Finally, local shops must compete with the timeliness of MSOs. For example, shops quickly responding to consumer queries are better equipped to compete against MSOs that receive pre-arranged assignments from insurance carriers via DRPs. At the back end, local shops should be committed to completing collision repairs 2 – 4 days faster than industry averages.
Advantages for the Local Auto Body Shop
While the above factors may seem daunting, there are many reasons for local collision centers to feel optimistic.
First, the number of miles driven on US roads has been trending up since 2009 after dipping slightly during the Great Recession. Also, multiple sources state that the average age of US cars as been increasing and is now at a record-high of 11.5 years old. Thus, older cars being driven for longer distances can only boost sales at local collision centers.
Other favorable statistics:
- 57 million of the cars on the road are 16 years or older.
- The average age of the U.S. vehicle fleet has increased 17 percent in the last 10 years.
- The average length of vehicle ownership for new and used vehicles has increased 60 percent in the last ten years.
- 75 percent of aftermarket auto repairs are performed by independent auto repair shops versus 25 percent by dealerships.
- According to Consumer Reports’ 2016 Annual Auto Survey, people feel more comfortable going to independent auto repair shops than to dealerships.
The cumulative effect of all of these trends will translate to a greater number of future repair orders as car owners look to maintain older vehicles that may warrant more body work over time.
The local auto body shop of the future as well as the present is best served by obtaining the latest certifications, offering the finest customer service, and maintaining a proper web presence to create maximum reach. Providing convenient payments is also important because sales can be won and lost depending on the options offered by the shop and consumers’ ability to pay. CrossCheck is an expert in this area.
For example, the Remote Deposit Capture service with the Multiple Check enhancement enables shops to process guaranteed checks without going to the bank, and simultaneously, provides consumers with a little extra time to pay for expensive repairs without lines of credit.
Download our free guide to learn more about Remote Deposit Capture with Multiple Check.