Short-term trends, future projections far from gloomy for collision repair industry
Between the growth of large collision repair chains, the increased implementation of crash avoidance technology, and the seeming lack of interest among young people in car-ownership and driving, it can be discouraging for independent collision repair shop owners to think about where their business might be in a decade or two.
Those shop owners might be heartened, however, by recent data and projections that make the future of the industry appear significantly less bleak.
Speaking at an international collision repair event in February, for example, Neale Phillips of the European research firm Thatcham said collision avoidance technology and even autonomous vehicles are not likely to spell doom-and-gloom for collision repairers. Phillips said such technology is likely to curtail the severity of accidents, but vehicles in the worst accidents are usually declared total losses and are not repaired. So the technology might help keep more of what would have otherwise been “harder-hits” in shops rather than in the total loss category.
In his presentation at the International Body Shop Industry Symposium, Phillips is quoted as saying the technology also offers new opportunities for shops trained and equipped to recalibrate and retest sensors and other electronic components of the systems.
Despite the hype about the Google car and other like technology, fully autonomous vehicles aren’t likely to become commonplace for quite some time, according to projections released earlier this year by consulting firm McKinsey & Co.
Based on that firm’s research, commercial introduction of conditionally autonomous vehicles – those which allow the driver to take occasional control – won’t begin before 2020 and perhaps not even for five to seven years further out.
Fully-autonomous vehicles won’t be sold before 2025, McKinsey predicts – and maybe not until after 2030. Only in its most optimistic “high-disruption scenario” does McKinsey project fully autonomous vehicles accounting for even just 15 percent of new-car sales before 2030.
The Department of Labor (DOL) is also bullish on the growth of employment in the collision repair industry over the coming decade. In its latest projections released earlier this year, the DOL estimates that the total number of "automotive body and related repairers" working in the United States will grow 9.2 percent from 149,700 in 2014 to 163,500 technicians by 2024.
The DOL breaks out the current and projected employment demand by industries, with 79.3 percent of all body repairers accounted for by traditional autobody and glass shops and car dealers. The government figures also include self-employed autobody workers, which currently make up 6.8 percent of all working body techs. (The remaining 13.9 percent are employed in more than 25 other industries such as mechanical shops, car racing, parts vendors, limousine companies, trucking fleets and colleges.)
There was good news for the industry in even the shorter-term data in the latest DOL numbers. That report shows that the autobody and glass repair industry increased the number of working technicians by 1.1 percent since the last projection was published in 2012. That means the industry added about 500 technicians in each of those two years. Looking ahead, the DOL sees even faster growth, an increase of 760 technicians per year over the next decade.
More of that growth is expected to be enjoyed by shops than technicians going out on their own, the DOL projects. The DOL reported a dramatic drop of 6,600 self-employed body technicians from 2012 to 2014, a decline of 39 percent, leading the DOL to project that the number of self-employed technicians will remain between 10,000 and 11,000 until 2024.
Technician jobs aren’t the only category of worker in the collision repair industry where the DOL foresees growth. The agency believes the total number of people working industry – including estimators, bookkeepers and managers – will grow an estimated 18.9 percent over the next decade. That will take the industry from 252,000 total employees in 2014 to more than 271,000 employees by 2024. That’s an average increase of 1,900 new jobs in the industry per year.
There are several other trends that also bode well for collision repairers for the short term. First, new car sales are always good news for collision repairers because those cars tend to be insured – and are more likely to be repaired after a collision – while they are leased or financed. They also have higher value and are less likely to become total losses. New-car sales hit 17.4 million last year, up 5.8 percent from 2014. The National Automotive Dealers Association is projecting another 2 percent increase this year, and for the total number of new-car sales to hit 18 million in 2017.
Second, the percentage of new-cars being leased had dropped to 16.3 percent in 2009, but has rebounded strongly, hitting 28.7 percent in 2015. And for those new vehicles being purchased, the average loan term has risen to 67 months.
Another trend that helps shops is when states crack down on uninsured drivers, something that often declines during a tough economy. But efforts in Tennessee this year may be a sign that states are once again taking more of an interest in ensuring drivers are insured. One in every five Tennessee drivers lacks insurance, according 2012 numbers from the Insurance Research Council, the sixth-highest percentage among all 50 states. But by early 2017, a new verification system in Tennessee will run vehicle registrations periodically to check for insurance. Owners of uninsured vehicles will have 15 days to provide proof of insurance or face fees that start at $25 but jump to $100 (along with a suspension of registration) for a second notice. Those caught driving without insurance also will face fines of $100 to $300, and police will have the authority to have uninsured vehicles towed.
Similar efforts to increase the percentage of drivers carrying insurance have also been made in the last three years in Indiana, Oklahoma and Missouri.
Perhaps the most important positive trend for collision repairers is that Americans are driving again. The Federal Highway Administration reported a 4.3 percent increase in the number of miles traveled in November 2105 (the latest month for which data has been released) over November 2014. The total was, in fact, the highest ever recorded for November in any previous year. And that wasn’t a one-month blip - for the 12 months ending last November, driving totaled 3.14 trillion miles, up 3.6 percent from the previous 12 months.
With gasoline prices dropping still further since then and expected to stay low throughout 2016, vehicle travel – and the number of collisions that result – should rise over the coming year, adding to the potential good news –short- and long-term – for the collision repair industry.