beauty machine

Tag Archives: collision repair industry

What cars will you repair by 2050? Or will we repair any?

Collision repair industry has always been affected in a direct way by what vehicles people drive on the streets of the modern cities. Repair processes are dependent on the colors, type of metal parts used, and, beyond a reasonable doubt, on the safety technology employed.

It is obvious that color shades and various types of special effects influence the refinishing jobs, and the type of steel or, ever-growing usage of aluminum and composites, in car bodies, dictate the panel beating processes. However, I strongly believe that it will be the new technology on collision avoidance that will change our industry the most.

Collision avoidance systems

The opinions about the extent of the technology and its effectiveness vary. Similarly, the automotive experts do not have the same vision on how the collision avoidance technology will affect the repair sector. A number of advanced collision avoidance systems are already introduced, primarily on the luxury vehicles. For example, forward and reverse collision warning, adaptive cruise control, collision mitigation and lane-keeping devices, are all present to certain extant in many car models.

Autonomous vehicles

I have recently read the KPMG report on the auto insurance market. It claimed that automotive insurance, and, hence repair market, will almost disappear by 2050. The reason for that is the prediction that there will be no accidents on the roads, mainly because of autonomous technology, which will reduce accidents frequency by 90%!  Another research though, from the American Automobile Association revealed that 75% of American drivers are reluctant to use self-driving cars. I think people will not like the idea of being helpless passanger in their own vehicles. Additional aspect to consider is the cyber security. We do not want the possibility of hacked car in the hands of terrorists or criminals. Many issues to consider before removing steering wheel from our cars, don’t you agree?

From my point of view, the reality will be somewhere in the middle. Just like ABS brake technology and ESC (electronic stability system) didn’t prevent the vehicles to crash.Of course, electric vehicles with a sophisticated safety features will hit the roads in the very near future. Buy personally, I doubt that the impact on the everyday number of the road accidents will be that decisive. Growing population and increasing urbanization (by 2030 more than 60% of the population will live in the cities) in combination of the increasing need for commuting, will require more vehicles at affordable price.

The majority of car body repairs will take place in Asia

Most of the automotive sales growth will come from the developing regions of Asia-Pacific and Africa, where the vehicles price will remain a decisive parameter. The cost of the new technology is always high, so probably we won’t see much of it on the millions of cars driven in India or Vietnam. On the flip-side , in Europe and the North America governments already push the legislation towards safer vehicles. Therefore, safety technology will be compulsory in order to get the vehicles on the roads of the Western world.

Sum up

It is probably all too soon to assume that our industry will disappear within coming decade or two. Yet business will definitely be different. Already main automotive coating companies target the Asia-Pacific regions as the future source for the much needed for the shareholders growth. Vehicles in the not-so-distant future will be full of various sensors, and this will affect the repair process, including the paint film thickness. Increasing use of the aluminum, other non-ferrous alloys and composite materials will cause massive change in body works processes. So, if we get back to the initial question, from this point on, we will repair very sophisticated vehicles made of light-weight materials, powered by the electric engines, and … probably driverless. Let’s wait and see!

 

What force is the ultimate drive for change in the collision repair industry?

Insurance companies’ role.

I admit that it is a tricky question without an obvious answer for everyone. However, I believe that insurance companies – the main payers of the repair bills – push the collision repair industry forward. Some of you may disagree, claiming, not without a good reason, that insurers often prevent bodyshops from having healthy margins and nourish unhealthy competition and excessive consolidation. In fact, these statements are also true. On the contrary, insurance companies are probably the most efficient businesses as to calculating risks and optimizing costs. And yes, repair bills are just costs for them. Being themselves in a very competitive market, insurers push the collision repair industry towards costs optimization, starting from the accident itself all the way to the repaired vehicle delivery to the customer. The repair process must be safe (they hate law suits), smooth (extra communication and claims handling is expensive), and, above all else, fast! Hours billed by bodyshops is the key component of each invoice to be paid, therefore it ought to be as low as possible. This immense pressure from the insurance companies inevitably cause rates cutting, so only the strongest and fine-tuned bodyshops survive. One could feel a victim and cries over it, but the rest of us will think of how to cope with this harsh reality and turn lemons into lemonade.

Conflict of interests?

For the bodyshops though, at first glance, the math is working just the opposite. A bodyshop is earning money according to the hours billed. The more, the better. So, is it a never ending conflict of interests? Not necessarily. A truly productive bodyshop usually has much shorter vehicle repair cycles and substantially more hours billed per day. This idea is extensively covered in the book «The secrets of America’s greatest body shops» by Dave Luehr and Stacey Phillips, which I strongly recommend you to read. Yet, how to achieve the desired productivity? It is easier said than done. In one sentence, productivity depends on each and every person, who is involved even remotely in the repair process. But this is the subject of the next articles.

Economies of scale in a bodyshop.

Coming back to the initial question, I want to stress once again that insurers are not necessarily on the other side. In order to get more business from them, you need to understand their way of thinking and their goals. Faster and cost-efficient repairs mean happier customers, less costs on the curtesy vehicles and better profits. If your bodyshop provides that, then workflow will be continuous, and you will never have to worry about new customers. More work will trigger economies of scale and empower you with greater bargaining power in relations with your suppliers. The last, but not the least, the business with strong relationships with insurance companies will always have much higher price tag in case you desire to sell it! A potential buyer always evaluate the customers base, prior to evaluating premises, equipment, personnel and other financial figures. For me, being able to sell your business at a good price is a recognition of your lifelong effort and success. Keep this in mind…

Is “buying” bodyshops business by paint companies sustainable?

After rubbing the shoulders with businesses involved in car refinishing for more than 15 years, I can surely state that certain paint companies implement aggressive market share acquisition as their main growth strategy. In practice, a paint supplier invests in the potential customer -bodyshop- by offering equipment, tools, spray booths and even cash money against the long term binding supply contracts. This is a very common practice in many countries, especially in developed and mature markets, where the growth in organic way is difficult.

Acquisitions, aggressive growth strategies and buyouts are not new in our business environment. In fact, it is very common in some industries. However, I would like to elaborate on this subject in the light of the automotive refinishing industry.

How does it work?

If you are not familiar with the above-mentioned contracts, let me describe them in a few words. Imagine a bodyshop with good or growing business, or even, a new, but promising collision repair shop. Any bodyshop needs primarily two groups of suppliers: spare parts supplier(s) and paint related materials supplier(s). If you are a potential supplier of paint materials, you have a lengthy road to go through in order to get the desired account. You have to prove that you have better product, prices that are more competitive, superior service and unmatchable technical support.  Sounds like very hard thing to do, and it is very hard indeed. There is another way though. If your company has plenty of “free” cash, you can offer the potential customer very tangible, benefits upfront. The size of the investment depends largely on the perceived amount of sales a soon-to-be paint supplier projects. From my experience, the investment may comprise from free spray guns, sanders, polishers, free load of toners to the mixing machine to brand new spray booth and a lump sum of cash into account. Looks very promising indeed.

Possible pitfalls.

I do not want to criticize the paint companies.  Not at all. In fact, this strategy though might hide certain risks and pays off. Otherwise, highly skilled managers wouldn’t proceed with this. The risks are definitely well calculated. On the other hand, if I were a bodyshop owner, I would have considered a number of risks for my business.

Firstly, everyone should understand that multinational companies, and big automotive paint manufacturers are no exemption, are businesses with very well-tuned profit generating machines. Every investment, big or small, is planned to deliver cash to its stakeholders. Therefore, initial cash infusion in any form will be certainly calculated into the prices charged in the future.

Secondly, binding contracts limit a bodyshop owner in the choice of suppliers, thus new products and technologies from other brands would be beyond your reach. Some of those contracts are very strict, meaning that you must buy everything through a given channel, appointed by that paint company.

Third, in case you would like to sell business, any binding contract would be considered as a liability, which will decrease significantly the sales price.

In any case, any decision of undertaking restrictive obligations must be very carefully analyzed. Remember, sweetness of free stuff will be gone quickly, but bitter taste of obligations burden will stay for a long time.

 

Car refinishing business across Atlantic. 7 remarkable differences.

These days in Las Vegas the annual SEMA Show takes place. This is one of the most prominent events in the collision repair business. Please pay attention, it is not just an exhibition or fair, but a Show! And it has all the attributes of a show with grand happenings, industry and TV celebrities, vintage luxurious cars and glamorous stands. The idea of this post was born during my last trip to the U.S. last month, where I realized that there are some interesting differences between U.S. and Europe in respect of products and overall business operations. So, below I bring to your attention some of those differences:

 

  1. The first thing I noticed during my visits to the American auto body repair centers was the different way a surface dents and scratches are filled. Actually, the fillers are poles apart on their own. Unlike Europe, American panel beater or painter uses lightweight fillers (not to be confused with European term for filling primer), which gives quite rough surface with plenty of pinholes. What really surprised me is that to level down the surface after this filler application, often a cheese grater is used. After that, a very aggressive abrasive paper like P40 is used to level down the surface. Finally, a finishing glaze is applied to cover pinholes and scratches from abrasives. Fillers are quite inexpensive, but glazes are well very costly. In Europe, we usually use one universal product to fill up the dents on a panel, while finishing putty is rarely used, only locally to cover up small imperfections and if needed. In addition, American fillers are usually less viscose, plus occasionally polyester filler reducer or else “honey” is added to thin down the product even further. European putties (putty in Europe, apart from the UK, is actually what Americans call “filler”) are of high viscosity with much smoother, from my point of view, end result, and easier sanding procedure with abrasives start as fine as P120 or even P180.

cheese graterputty surface

  1. Another difference in preparation process I noticed is that abrasive discs and strips on self-adhesive “Stick-it” type are preferred in the U.S., while in Europe only Velcro (velour) type abrasives are manufactured. Even though there is no tremendous difference between those two types of attachment, Velcro abrasives are easier to re-attach and re-use.

 

  1. In the United States, apart from the state of California, there is no mandatory directive to use waterborne paints. On the other hands, California rules are even stricter with regard to VOC content than the EU laws. Whether it is useful or not I leave at your discretion. I have my doubts about the benefits of waterborne paints in respect to the ecology, which I already expressed in one of my previous blog posts.

 

  1. In polishing and paint rectification process, I noticed that wool pads are well used by the great majority US bodyshop professionals I have seen. As we know wool pads are much more aggressive in cut and thus faster in work, but on dark colors swirls and holograms will be inevitable. Foam pads of different hardness are the preferred pads in Europe. To summarize, both types of pads have pros and cons though. Have a glance on this infographics.

 

Foam vs wool pads

 

  1. Another interesting difference between two continents is in the distribution channels. Big groups, sometimes called warehouses, dominate American market. These groups are either regional, covering a few states in one geographical area or nationwide corporations with millions of dollars in revenue. They in turn supply local jobbers (a term for paint supply shop or else factor in the UK). The size and influence of warehouses are astounding. Some of them even expend to Europe. See LKQ.

 

  1. Another striking difference in distribution channels lie in fact that even very sizable distributors of paint supplies are quite reluctant to import products from abroad. In Europe, we see even small paint stores, whose owners travel, visit trade fairs and dare to import new brands and products without any hesitations. By doing this they actually increase their profitability and competitive edge. I wonder why our American colleagues hesitate to benefit from the global market and information availability on Internet and even social media, like LinkedIn?

 

  1. Finally, I found out that the U.S. collision repair market, perhaps due to its enormous size, has its own TV shows and … celebrities. I can’t recall any name in Europe, who can be described as celebrity. Industry influencers-yes, but not celebrities from whom people would want to queue to take an autograph. Some examples of celebrities are Chip Foose from “Overhaulin” show on Discovery channel, Mike Phillips from Autogeek, “Horny” Mike from History’s channel show “Counting cars”, Richard Rawlings and Aaron Kaufman from “Fast n’ Loud” on Discovery channel and quite a few more.

 

To conclude, I would like to say that we all could learn from each other. The more we travel, exchange ideas, the better for the industry overall.

Europe and US

 

Translate »