Crash Repair – Different or Delayed?

All sectors have experienced their own varying levels of downturn as the result of the Covid pandemic lockdowns.  The crash repair sector was hit worse than most in automotive as the accidents that they depend on to drive their business just didn’t happen.  It is not a question of delayed purchases of cars or a routine service – traffic levels were down by up to 80% depending on market, so there was less opportunity for drivers, however careless or reckless, to run into one another.  They will not therefore see any catchback of business.  However, my question in the title does not relate to the short term effect of the pandemic – that’s a question that is easily answered – the crash repair sector is different.

The more challenging question relates to how the different markets operate, across Europe and beyond.  In broad terms the new or used car sales markets or the repair and maintenance markets operate in fairly similar ways across any developed market.  There are oddities like Chinese used car markets or the US practice of oil changes far more frequently than the engineers back at HQ in Europe or Asia ever deemed necessary, but basically the markets work in a similar way.  It is also likely that some of these oddities will disappear over time.  Dealers will become more directly involved in used cars in China and BEVs will make the question of the 6,000 mile oil change a historic irrelevancy.

But in our research in the crash repair sector, we feel that the European markets may differ for more fundamental reasons, and there is no natural path of convergence that will bring the markets together to a broadly similar model in three years, five years, ten or necessarily at any future point in time.  Just to cite a few examples of these differences that may be locked-in, in Spain drivers can be paid out in cash for their claims, in Italy customers can be directed to specific repairers with no choice under their policy conditions, in Germany many body repairers do not do their own paint but sub-contract to standalone paint shops, in France OE body parts are subject to specific IPR protection limiting the use of non-OE parts, in Sweden manufacturers, insurers, repairers and dismantlers operate a unique collaborative system that supports high usage of green (reused) parts, and in the UK increasing volumes of repair parts are sourced not by the repairer, but by the insurer or their agent.

A common denominator across all these examples is the influence of insurance companies.  In some recent work we have looked at a range of factors that define the insurance market structure and others that define the repairer market structure.  Interestingly, there is a subjective correlation between how the insurance market is structured and that of the repairer market.  It is too early in our research to draw a conclusion that they work in lockstep – that changes in one will result in changes in the other – but we are looking to understand this better.

The ability of an insurer to steer work to a particular repairer, and then dictate terms in respect of labour rates, parts sourcing, paint supplier and customer service features such as courtesy cars is logically influenced by their relative strength compared to that of the repairers.  The converse would also be true, that if the insurers are relatively weak compared to the repairers, then the repairers should be able to set profitable labour rates, and make free commercial decisions on sourcing and customer care.  In practice, we do not see such a correlation, at least when looking at market power in traditional competition law terms.  Also, currently missing from this equation is where a manufacturer or a fleet operator sets the agenda because they provided the insurance (directly or indirectly) for the car as part of a managed aftersales strategy.  Such examples exist, but in relatively insignificant numbers.

The question of whether we will continue to see differences in structure between markets which drives related complexity and challenges for any transnational operator, or whether there will be convergence, depends on understanding what drives the original differences, and how influential different factors are.  We’re working on trying to answer these questions, I’d welcome your input if you think you have the answers!