There has been significant (and many would say detrimental) aggregation in the car insurance sector recently, both in NZ and globally. This has resulted in an extreme concentration of power and control affecting both customers and suppliers. As a natural response there has also been an accelerating trend to consolidation within the car accident repair industry (panelbeating sector). The volumes available to the consolidators could help re-balance (to a degree) the very one-sided power and influence, and provide an advantage in securing improved terms & conditions in supply contracts to those aggregated insurance groups. This of course will be to the further detriment of the vast majority of owner/operated businesses, and may further threaten their on-going viability particularly those that are highly reliant on car insurers directing work to them.
We’ve written on this subject before so it’s gratifying to see the subject discussed openly in the car accident repair industry magazine PanelTalk recently. See also http://crashmanagement.nz/bloody-aussies-not-car-insurance-fleet-fit/
PanelTalk reports that a ‘transition’ is underway. They cite the new Vero SMART car accident repair facilities in Auckland and Christchurch, and the first Gemini Group car accident repair facility in NZ. Gemini is an Australian owned consolidator that has been known to be interested in dominating the NZ sector. PanelTalk confirms that their first NZ facility was recently rebranded Repair Management NZ, and that they have senior staff actively scoping expansion plans in NZ now.
PanelTalk also references global car accident repair consolidator group Fix Auto World, they appear to be growing quickly in Australia so NZ would seem just a small extra step for them. The trends are clear and will result in a very different car accident repair market in New Zealand in the short to medium term.
These changing market dynamics were a common topic of discussion at the recent IBIS conference in Madrid, along with the global difficulty in attracting both qualified car accident repair technicians and apprentices. Fortunately, in NZ the Collision Repair Assoc has been actively lobbying the government to recognise the local staffing crisis, the Skills Shortage submission should be of serious concern to anyone reading it – we hope government is listening and does add the car accident repair sector to the recognised labour shortage list. Some skilled technicians have been brought in to help address the crisis, and in general have integrated well and are highly valued – but the current process and bureaucracy is far too slow and cumbersome – urgent action is required.
PanelTalk also mentions the amount of private equity funding that is pouring into the car accident repair sector globally. They say the funding is driving the massive growth of the consolidators, some of which operate up to 500 car accident repair facilities. Clearly this scale of corporate business will have significant operational, financial, and power advantages over the traditional individual owner/operator in the NZ market. As unprofitable as some car insurance company contracts are, most car accident repairers have subscribed to them in the hope of achieving profitability based on volume. They would now seem to be very vulnerable to losing even that small advantage to the large-scale consolidators.
These trends aren’t new but they are accelerating. Margins have been reducing for years, resulting in pressure on sustainability. This has affected the ability of business to reinvest both in training/apprenticeships and resources/equipment/technology. Few new owner/operated business are entering the sector, and a significant number of existing businesses have simply given up and closed the doors due to the combined pressure of lack of profitability and the skilled labour shortage crisis. This has now led to a service under supply at a time when the vehicle population is exploding. Unfortunately, customers suffer. There is clear evidence in the market of extended service response times of over 90 days in many areas, in addition to a reduction in customer service levels – as an example, pick-up & deliver was once a reasonable expectation but now very rarely available. Courtesy car stock too is suffering from ageing/lack of investment and availability constraints.
In short, collision repair has been under increasing margin pressure to the extent that some are questioning the trade’s on-going sustainability – but we suspect that it’s about to get a lot worse before it gets better. We’re sure much more on this subject will be covered in the media, but for now one thing has become clear – the car accident repair sector in New Zealand will probably change more in the next few years that it has over the past few decades. watch this space.