At the start of each year, news stories begin prognosticating what the new year will bring. Simply tossed out, random predictions don’t help anyone. What you and your business need is an informed, insightful look at the trends that will dictate how you’ll drive your operation.
Information provider Mitchell International regularly compiles and analyzes collision industry data for a predictive look at how the market landscape is shifting and in what directions. Jack Rozint, Vice President of Sales and Service for Auto Physical Damage at Mitchell, recently sat down with GM Repair Insights for a detailed examination of the trends shops need to be watching as 2018 unfolds.
Q: What trends do you see with parts acquisitions, especially with OE parts?
ROZINT: The overarching trend is the increasing complexity of vehicles. The number of electronic components increases each year. Vehicles are basically complicated computer networks on wheels. With a 5-year-old vehicle with a minor hit, you could request a bumper cover, order the part, paint it and be done later in the afternoon.
Today, that same cover might have lidar built in. It might have sensors for lane departure systems. In some cases, the OE instructions say that part can’t be repaired since it could interfere with how it functions, so some parts just can’t be repaired anymore and must be replaced.
In other cases, you need to take a special look at safety-related systems if you’re considering aftermarket parts. Some folks are pointing out that aftermarket versions may not have gone through the same level of rigorous testing as a factory part and therefore can’t guarantee they’ll function the same in a crash. Both of these factors are leading to an increase in the use of OE parts.
Q: Are OE conquest price matching programs having an impact on where shops order their parts?
ROZINT: There’s no question that those programs are successful. These programs and the parts they cover have grown. Essentially, with an electronic estimate, a program will see where an aftermarket part is being targeted and will price match it with an OE or give a more competitive price. These programs are allowing OEs to take back market share so you’ll see more of them.
Look at it from the repairer perspective. They might have an estimate with 15 parts, with 11 of the parts OE. If I’m a shop and can get the other four parts as OE versions, it just makes everything
easier. Now you make one parts order. You work with one vendor and process one invoice.
Q: You’ve already mentioned vehicle complexity. Are there any other ways it’s affecting the repair market?
ROZINT: There’s a need for everyone to improve their capabilities by expanding their training. For example, five years ago, you weren’t hearing much about diagnostics for collision repair. Today you can’t pick up a trade journal without seeing three articles on the subject. At Mitchell, we recently partnered with Bosch, which manufacturers diagnostic tools for GM, to create a system that helps shops to perform all their diagnostics.
Shops are going to need to look at diagnostic solutions as opposed to scan tools. You can go to a department store and buy a $49.95 scan tool, but that tool isn’t going to work effectively with modern vehicles because it won’t be able to read or access all modules.
Another area where complexity is having an impact is with data, especially the ability to access multiple sources of data [repair information] and share them with multiple repair partners. For years, shops have been free to share their repair information with whatever partner they wanted. All this data exchange has occurred openly and with no costs associated with it. One information provider has announced a program where they will require users’ data to be shared only in their portal. Anyone wanting this information will have to sign an agreement and pay for it. They’re essentially cutting off the free flow of data that helps repairers deal with issues like vehicle complexity and perform proper safe repairs. Many members of the repair industry have expressed concern with how this will influence repairs.
Currently, the largest MSOs process 20–22 percent of the repairs in the industry.
Q: How should independent repairers respond to the growth of Multi-Site Organizations (MSOs)? Should they be concerned?
ROZINT: Absolutely. Currently, the largest MSOs process 20-22 percent of the repairs in the industry. They appear to have both very clear plans and the financing to move that number to over 50 percent in the next 3-5 years. If you’re operating in a major metropolitan industry, you’re probably already competing with one and possibly with another two or three in the area.
If you’re an independent operator, to compete more effectively you need to up your game. You might program, improve your capabilities and improve the look of your facility to make sure it’s clean and attractive. What independents need to look at is being a specialist. Taking part in manufacturer certification programs is a great way to compete. With the right investment in training and equipment, you can get a new source of business.
Q: Are there other trends that might be under the radar right now that shops should keep an eye on?
ROZINT: The shortage of technicians is a big deal. As vehicles are getting more complex, there are fewer people to repair them. Shops need to make a business plan for this—fill empty positions or create a bench where you can pull employees as others retire.
A good place to start is with the Collision Repair Education Foundation. The next generation will look more like computer technicians than a body and panel guy. Five years from now, you’re going to need at least a few employees who can do computer work, who can perform diagnostics and reset modules. This is something shops have to prepare for.