By Jeff Sanford
Toronto, Ontario — February 22, 2016 — Mitchell International recently published its quarterly Industry Trends Report. In the latest edition, Greg Horn, Vice President of Industry Relations at Mitchell, focused on the inflation rate driving car repair prices. The results reflect what any shop owner knows intimately—the costs of repair are rising faster than the general rate of inflation.
In the report, the company compares two popular passenger cars, the 2010 and 2015 Toyota Camry and the 2010 and 2015 Chevrolet Malibu. Taking the Consumer Price index rate into account (that is, the “overall” inflation rate) Horn found costs of repair are rising faster than prices overall in the economy. Crunching the numbers he found that, in the case of the Malibu, despite the number of labour hours staying the same costs of repair have doubled.
In an interview with Collision Repair magazine Horn discussed the report, the many changes coursing through the industry and had some suggestions for owners. He suggests the repair cost inflation is based in the deep and fundamental changes occurring in the industry around advances in new materials, new construction methods and tightening regulations.
“I think what is driving this is are these improved parts and technologies, that, while resulting in safer vehicles, come at a significant cost.” says Horn. “For example, when we look at a bumper system today there are probably fewer components. But to keep up with new CAFE standards we have to use high strength, low alloy steel. And that is going to drive up costs.”
A similar claim can be made about the need to invest in new and more expensive and complex technology to do repairs on aluminum auto bodies. Other materials also present challenges.
“It even comes down to plastic,” says Horn. “Another example: Mazda changed the plastic used in one part of a new car to keep up with weight reductions driven by upcoming CAFE Standards. They came up with a new plastic formula for the bumper covers that makes them lighter, but they had to work with 3M to develop a unique new repair adhesive.” That is, shop owners have to add another product to the shop shelf. Costs go up a bit more.
“It’s also a result of this combination of advanced technology and collision avoidance systems. We’re seeing an explosion in the use of LEDs in lights. Even a lost-cost KIA now has those LED eyebrows around the headlight,” says Horn. Another bit of complexity, and hence cost, to add to the repair bill.
“Cars cost more to repair than they used to,’ says Horn. It’s something every shop owner knows. It’s hard to say what, if anything, can be done about this.
“The manufacturer is in a tough spot. They have to answer to so many masters. There are the CAFE standards, emissions reductions and crash standards, while still trying to keep up with customer demands for the latest in technology,” says Horn.
What can shop owners do to manage the volatility? “For shop owners it’s a couple of things. The first thing is to educate the customer. The layperson is always the one most shocked by the cost of repair. They say, ‘I can’t believe it costs this much.’ But how do you get the mileage down if you don’t do this? You have to explain this to customers. Tell them about the Mazda example. Get them to understand there is a 3M adhesive that is that out there and has to be used now,” says Horn.
In the longer term, Horn notes that while the cost of repair is rising the cash value of a car is not rising as fast. That is, “We’re starting to see a softening of the value of a car. That means, we’re starting to see a rise in total loss frequency. That borderline car, it doesn’t make any sense to repair it anymore. That’s the long-term trend here,” says Horn.
Horn will provide a deeper look into the findings of the report during an upcoming webinar, “Industry Trends Live,” scheduled to take place February 23, 2016 at 11:30 a.m. EST. The webinar is scheduled to last approximately 60 minutes. To sign up for the webinar, please visit go.mitchell.com/register.