Multiple experts discussed how to tackle the issues facing our industry.
During Automechanika 2022 at the Messe Frankfurt, the International Body Shop Industry Symposium (IBIS), held a panel discussion to talk about current issues impacting the collision repair sector, and how global organizations are looking to tackle them.
The panel, hosted by IBIS CEO Jason Moseley, featured Arnaud Agostini, International Managing Director, Solera; Andrew P. Bennett, Vice President, 3M Automotive Aftermarket; Jim Muse, Vice President, Refinish Europe, Middle East, and Africa (EMEA) for Axalta Coating Systems and Philip Peace, Managing Director, International, Repairify.
Ten years in one
Jim Muse explained that prior to the COVID-19 pandemic, the automotive refinish space was generally considered recession resilient. “Economies went up and down, but as an industry, we remained fairly static,” he said. Then along came the pandemic which turned everything upside down, including refinish. Muse noted that a 25% decline in global business as a result of people not driving and collisions not occurring, represented a big hit to revenues, not to mention a significant ripple effect that spread outward into the collision repair space and the broader economy.
If anything, the COVID-19 pandemic, forced organizations like Axalta to take a good look at their business and look for ways where things could be done better and more efficiently. He also noted that additionally, the “professionalization” of the body shop industry (which we’ve really seen over the last decade or so), has also led to improved communication and relationships between collision centres and vendors like Axalta.
Andrew Bennett explained that from 3M’s perspective the global pandemic caused everything to move so quickly, the progress of change amounted to “10 years in one year.” With the need to emphasize remote working, corporate practices changed. The pandemic was also very significant for 3M as a whole since it is the company credited with making the face mask and respirator that so many of us came to rely on during COVID-19. That being said, Bennett noted that the collision repair space is still very much a “heavy touch” business, with sales representatives frequently out in the field talking to and working with customers. And while the human touch is still very much an important part of the overall business, the ability to be more efficient in terms of connectivity, whether it’s in-person or virtually, has become [and will continue to be], essential going forward.
Philip Peace noted that from Repairify’s perspective, rapid growth has been a key driver for the company over the last few years. Remote diagnostics and ADAS is still in their early stages and therefore, an accelerated growth curve with the proliferation of new products and services is currently being witnessed in this sector. Alignment with OEMs and the technology they’re employing in modern vehicles is essential for success in the ADAS space. That being said, the pandemic did impact the ability to conduct diagnostic repairs and calibrations, particularly early on during government-mandated lockdowns. Since then, however [and while claims are still below pre-pandemic levels], business has ramped up and Repairify has continued to grow its footprint, not only organically through growth in demand for collision diagnostics and ADAS calibrations, but also via the acquisition of additional software platforms. This strategy has added diversification to the company’s offerings, in addition to improving the capability of the diagnostic services it provides.
The speed and pace of technological advancement during the pandemic from an ADAS perspective has also driven the need to ensure collision centres are equipped to handle the required calibrations and repairs on modern vehicles.
At Solera, Arnaud Agostini mentioned that the pandemic represented an opportunity to adapt to a new reality, but the key to making business operate in a lockdown environment was effective connection and communication among all key stakeholders including shops, insurers, vendors, and refinish partners. A key trend that emerged was the digitalization of the claims process between the insurer and collision centre to facilitate a “touchless” operating model.
Solera was able to introduce a VI (Virtual Intelligence) tool that was able to define the cost of the repair based on an area of the vehicle to which clamps were fixed. This is next-level technology and although Agostini noted that there are times when the culture of the shop and the industry isn’t always ready to adopt such bleeding-edge solutions, in this case, there was an international groundswell with collision repairers in different countries recognizing the need for this kind of technology.
The COVID pandemic also allowed Solera—like other large vendors operating in the collision repair industry—to grow its business and expand its offerings beyond the traditional claims space. “We were able to complete six acquisitions during that period and double our revenue,” Agostini explained. “The end result has been an interconnected organization with an expanded suite of solutions, that improve both versatility and profitability.
Andrew Bennett concurred, noting that while 3M isn’t a digital company, the COVID-19 pandemic presented a need to move quickly and seize new opportunities, which it did through acquisitions and introducing new processes, resulting in that decade of advancement in just a single year.
The next topic for the panel centred around ongoing global supply chain issues. While things are improving, for many companies, including those in the collision repair space, parts shortages still remain a key issue. Jason Moseley explained that there are still many instances of shops having to contend with delayed vehicle repairs due to ongoing parts shortages. In fact, in many cases, collision repairs that would traditionally take 4-5 days, are now taking 20 days or more to complete.
On the refinish side, Jim Muse noted that each year that comes brings with it new and additional challenges and 2023 will be no exception. Besides ongoing supply chain issues and backlogs at ports around the globe, economic instability is also top of mind for many executives and CEOs, given inflation issues and the rapid rise we’ve seen in raw material prices. “We’re hitting some unprecedented raw material costs, which causes prices to rise to sustain profitability,” he said.
Muse explained that one of the biggest challenges facing refinish and coatings organizations like Axalta is not necessarily the ability to source the raw material (because it can be acquired locally), but rather the technology that enables that material to be turned into a product that is just as good or better than what customers traditionally expect. Ultimately, a product has to get into the hands of the end user, and while at present it may be harder and more costly to do so, Muse explained that as far as refinish coatings go, having them available in sufficient quantity to spray those vehicles in the booth of a collision shop is essential. “From a logistics standpoint, you really need to think farther ahead,” Muse remarked.
Even 3M, which traditionally tends to have multiple regional supply points for raw materials, found conditions challenging when it came to sourcing, and often, solving these issues came down to asking some tough questions, such as whether 50 different types of masking tape were required when perhaps just five would suffice. “We’ve started to become very thoughtful about portfolio simplification,” Andrew Bennett explained.
Onto the “tsunami of technology,” a topic that Jason Moseley also covered in different presentations— highlighting six key trends influencing collision repair, Philip Peace noted that COVID-19 provided collision centres with the opportunity to take a long hard look at the repair process and which aspects of it they could control by conducting it in-house to minimize disruptions. Peace explained that a big factor was the ability to leverage technology and integrate it directly into the repair process instead of relying on third parties to perform work such as diagnostics and ADAS calibration. By doing so, he said that collision centres can not only exert more direct control over the repair process, but they can also reduce cycle times, improve quality control and deliver more consistent results for their customers and stakeholders.
On the diagnostics front, Peace noted that more and more OEMs are placing secure gateways on vehicle diagnostic ports, so, in order to access the required data and perform diagnostics, and conduct calibrations, collision centres need access to those secured gateways. “That’s where one of our propositions [which is remote services] absolutely comes to the fore because the technician can plug into that vehicle in the body shop and can calibrate, program, and diagnose the problem with OEM equipment over the air.”
The result means that repairs can take less time to perform, and the collision centre doesn’t need to send the vehicle to a franchised dealer to have the calibrations or programming performed.
On the subject of electric vehicles (another hot topic at present), Peace noted that it was important for collision centres to understand that working on these represents a very different proposition compared with traditional internal combustion engine vehicles. “Body shops are asking; how do we go through that process as EVs are starting to come through in terms of registrations? How do we train people—do we train one person; do we train two?” stated Peace. He also stressed the implications related to working on EVs, such as a technician getting a high voltage shock because the vehicle is live and hasn’t been powered down.
To really make it effective, Peace stated that, training to repair these vehicles should be emphasized for the entire workforce within the shop, otherwise, implementing proper repair processes and procedures could prove hugely challenging at the individual shop level.
Feeding into that, recruiting and training collision repair technicians in adequate numbers continues to be a worldwide issue, exacerbated by capacity issues many shops are currently facing. Therefore, any initiatives that provide investment in people; training, and career development are critical to the success of the collision industry going forward.
In many cases the investments required to repair modern vehicles and prepare for the growth in EVs are significant, meaning that larger economies of scale are required, which continue to drive consolidation in the body shop sector.
Jim Muse noted that globally, the U.S. and Canada are both heavily consolidated markets, while consolidation is really gaining momentum in the UK and continental European countries such as the Netherlands. Plus, worldwide, other markets are starting to see similar trends emerging. “Consolidation is coming,” he explained “and that’s not a bad thing.” For large, multi-national industry suppliers and stakeholders like Axalta, Repairify, Solera, and 3M, this consolidation represents an opportunity, though the trick comes in identifying where those opportunities are and when to pursue them.
Andrew Bennett noted that for companies like 3M, consolidation in the collision repair space provides a significant amount of leverage, especially when you’re dealing with a large network that provides centralized planning and operating procedures for a multitude of shop locations. And while he said that consolidation has been slower to take off in the UK than in some other markets such as North America; more private equity flowing into the collision industry will cause consolidation to accelerate and the industry needs to be prepared for that.
Another issue, intertwined with consolidation is succession planning as it relates to existing collision repair businesses, particularly smaller operators. Bennett noted for example, that smaller MSOs, which have two or three locations might find themselves in a situation where the next generation of family members don’t want to take the reins of the business, especially given the level of investment required to keep pace with changes in the industry. As a result, such businesses tend to be prime targets for consolidators, particularly if those consolidators see significant value in acquiring the business and adding it to their portfolio.
Arnaud Agostini noted that in France, the body shop count has shrunk from 20,000 to around 6,000 locations in the last 20 years, and today, insurers are looking for the right body shops to perform the right repairs, so they can provide the right solution for the customer.
Value chain contraction
Besides the shops themselves, there is also contraction happening within the entire value chain, including vendors and other key stakeholders. Companies like Axalta, GPC, LKQ and 3M continue to expand their global footprint via growth into new markets and strategic acquisitions.
Distribution efficiency and reduction in the complexity of the global supply chain are also other key factors that are driving change in the global collision repair space. Citing the refinish side of the business as an example, Jim Muse explained that looking for ways to reduce the complexity of getting the product from vats in Axalta’s manufacturing facilities, into a painter’s spray gun at the collision centre is going to be critical. And the same principles apply, whether it’s claims, manufacturing, parts distribution, training, equipment, or the repair process itself. “We need to find a way to solve [these issues]” he stated, “and if we do, I think body shops [and all stakeholders] will benefit because it will lead to a better, more profitable industry.”