The Australian motor vehicle repair industry is facing some serious challenges. This perfect storm is being shaped by:
- Insurance companies having a greater focus on cost control and customer outcomes
- Advances in automotive technology which are making contemporary motor vehicles more complex
- An ageing labour force with a shortage of young apprentices
- And competitive pressures off the back of these trends, which are resulting in industry consolidation
In the context of this volatile business environment, ACA Research has conducted a major market mapping study for a leading automotive paint manufacturer. During the course of this research, we interviewed around 250 decision makers across a broad sample of paint and panel workshops to understand the challenges they face and how they are preparing for the future.
The research is particularly timely because the relationships that insurance companies have with the smash repair industry are being reviewed in NSW by a Parliamentary Inquiry which will deliver its findings in late July 2014.
In order to set and maintain quality standards for consumers and establish consistency around pricing and volumes of work, many insurance companies have gone through a procurement process to build a formal network of approved repairers that adhere to specified service level agreements. The Suncorp Group has even gone a step further and acquired majority shareholdings across some of its smash repair shops.
These new arrangements mean that insurance companies will be channelling more of their business to a smaller network of approved repairers. The rationale for these changes is that approved smash repairers have a greater incentive to invest in their businesses because of greater certainty over the value and volume of revenue they will derive from insurance. These arrangements also put greater pressure on smash repairers to manage their cost base and increase productivity.
For those workshops that are part of an insurers approved network, their performance is evaluated against a range of criteria, with the most common metrics relating to cost, productivity and quality.
Looking to the future, we asked our sample of smash repairers what they regard as the single biggest threat to business. Three in ten say relationships with insurers is the number one issue. This was mentioned by both larger and smaller businesses, including those that are part of an approved network.
Finally, workshops are deploying a range of strategies to secure their business in the future. Just over a half say they are investing in new technology, but worryingly one fifth say they are going to just keep on doing what they have always been doing.
ACA Research regularly conducts research with businesses and consumers in the automotive industry. If you have burning questions you’d like to ask of a particular audience, click the button below to download our 2015 omnibus calendar. Or, If you are interested in having a discussion to scope out research to address specific business objectives, please contact us by phone or email.