More than a dozen industry experts took part in the third ARC360 Breakfast Think Tank last week, when attention turned to the sudden and dramatic fall in repair volumes in the last few months.
Voices from repairers, insurers, suppliers and data experts were heard, when it was agreed that there has been a ‘sharp and noticeable fall’ in volumes since mid-February, with no obvious single factor responsible for the drop off.
Recent figures from the Society of Motor Manufacturers and Traders revealed that the UK car parc reached its highest point last year, so it is not a case there are fewer cars on the road.
Costs
However, although frequency of incidents was back to pre-pandemic levels, the cost of repairs escalated throughout the year as a result of general inflation and more expensive repairs – in some part influenced by more EVs on the road. In combination with strong salvage values, the number of total losses increased proportionally but not exceptionally.
Further, the continued cost-of-living crisis saw many consumers adjusting policies with increased excesses (£750 average) to lower motor premiums as well as an uplift in third party fire and theft policies being reported. Meanwhile, the number of cash in lieu settlements is suggested to have also gradually increased implicated in part by capacity and parts challenges, meaning those driveable damage repairs have ‘gone’ from the market. The ‘over 10-year-old’ vehicle parc also appears to have reduced in claims numbers.
All these factors have played a part in falling demand, while at the same time significant investment in the market over the last three to six months has seen repair capacity increase.
Sudden
But while all this might go some way to explaining a gradual decline in volume, the sudden fall that has been experienced by many has left the industry scratching its head.
One attendee said volumes fell by between 10-15% in mid-February, with no data suggesting the slump was regional or brand-specific. However, reports on the volume reduction vary significantly dependent it seems on the book mix and partnership dynamics.
A milder winter could be a factor, with less newer vehicle work in progress (WIP) coming through the system, and it was also suggested that the repair sector became far more efficient during Covid and is now able to move jobs through the workshop quicker; this is backed up by Trend Tracker data revealing that key-to-key times in the first quarter of 2024 were 25% down on the same period last year.
Segments
Interestingly though, the fall in volumes does not appear to extend to all segments of the market. Fleets and commercial vehicles are tracking positively, and the purported reduction in direct repairers is potentially driving an uplift in the retail repair market. Various anecdotal suggestions pointed to an increase in direct customer enquiries with repairers, a rise in dealer activities and an increase in visibility of mobile solutions.
“It’s only private lines,” said one repairer.
Whilst all these macro factors are squeezing volumes at one end, at the opposite end the increase in market value over the past few years has seen a marked increase in investment in the sector. More technology has been deployed at the front end of claims by insurers to support customers and assist decision making whilst, of course, at the same time significant investment in the repair sector – not only across the major groups but also with the opening of numerous new regional sites – has created more market capacity.
The supply/demand dynamic has always trended one way and then another, but traditionally it has been a slow-moving pendulum over a number of years. It appears a raft of factors brought about by extreme economic circumstances have now combined to move the dial much quicker than usual. It was reported that the UK is not alone either, similar reductions have been felt in the US.
With all the factors in mind, the point was raised: is this decline in repairs going to “really hurt” some bodyshops who not too long ago were hit by the challenges of the pandemic. As one panellist concluded, the market will undoubtedly “require more dynamic decision-making” in the near future.
