Repair industry’s ‘perfect storm’
New Zealand’s billion-dollar collision repair industry is set to lose up to 15 per cent of its revenue to offshore-owned operations in the coming year, according to the Collision Repair Association (CRA).
The projected loss of revenue comes with the industry facing a “perfect financial storm” of economic and environmental factors that will adversely affect its long-term viability, including the coronavirus pandemic, skills shortages and inflation.
Latest industry figures show demand for parts and repairs are down 31 per cent on pre-Covid levels with significantly fewer Kiwis driving. Rising petrol prices are also contributing to an up to 20 per cent drop in traffic volumes in major city centres.
The reduction in collisions on New Zealand’s roads has boosted profitability in the motor-vehicle insurance sector to a six-year-high.
In contrast, panel-repair industry research shows that cost pressures on repairers are growing rapidly.
Wages in the industry have increased by more than 10 per cent over the past year with other inputs including paint, consumables and services also up by as much as 15 per cent over the same period.
Australian-owned IAG insurers AMI, State, NZI and Lumley, which collectively have more than a 60 per cent share of the local market, are vertically integrating across New Zealand, opening high-volume panel-repair shops in Auckland, Wellington, Hamilton and Christchurch.
The CRA says each of the 11 facilities, which will operate under the Repairhub brand, are capable of processing up to 5,000 jobs annually – four times the amount of work an average panel repairer can process and about 15 per cent of the industry’s total volume.
Neil Pritchard, general manager of the CRA, believes the insurers can now channel more profitable, cosmetic work through their claims process directly into their own repair network.
He says prior to 2019, almost all 500 collision-repair shops in New Zealand were locally owned and the extra competition faced by the new insurer model could not have come at a worse time for the industry.
“Since its inception, the local collision-repair industry has been made up of hundreds of New Zealand-owned panel repair shops,” adds Pritchard, pictured.
“With prices dictated by insurers, the industry does not operate under the same competitive forces most other service providers do.
“The absence of these forces creates a high level of vulnerability to external cost changes for businesses.
“When this is coupled with the introduction of an insurer network, which can capture high volumes of work from lucrative jobs, it places our ability to develop infrastructure for more complex, structural repairs in jeopardy.
“What we’re seeing is the culmination of several economic factors threatening the long-term viability of the industry and could see the reduction in services for Kiwis.
“Reduced consumer access to repair facilities capable of carrying out structural repairs could see more cars being written off and higher insurance costs for motorists.”
