With 2015 coming to a close, the most significant trends in the U.S. collision repair market continue to be the impact of new materials, the increasing importance of OEM certifications and the continuing growth of Multi-Site Operation (MSO) businesses--especially the largest MSOs.
The most significant "new" material is aluminum, particularly because of its extensive use in the 2015 Ford F-150 pickup truck. The F-150 has been the top selling vehicle in the U.S. for the past 32 years. With millions already on the road and thousands of the latest F-150 model hitting the market (and with other OEMs looking to follow suit with their own aluminum-intensive vehicles), repairers have begun investing en masse in the equipment necessary to perform aluminum work.
These purchases come with significant costs. To perform structural work on the new F-150, repairers must earn Ford aluminum certification, which requires an isolated repair area, special aluminum hand tools, a rivet gun and MIG welder. Total investment can run from $20,000 to $70,000 and sometimes higher if the shop needs to construct additional space.
Repairers complain that recouping these costs could take considerable time since few new F-150's are expected to need work this year or anytime in the near future. Indeed, many shops have delayed plans to add aluminum work until they see more work opportunities.
U.S. collision industry experts warn that such delays carry significant downsides, including the deleterious affect on relationships with insurers looking to make these repairs as available as possible. Delays can potentially impact shop standings in a DRP. Waiting to invest also can prevent repairers from earning other OEM certifications.
One of the side benefits of Ford aluminum certification is that the equipment requirements often meet other manufacturers' demands. Start up costs, then, can be absorbed by multiple OEM lines. Repairers are finding that holding multiple OEM certifications can pay off handsomely since they provide a competitive advantage. Some repairers report seeking as many certifications as possible since doing so gives them a more direct line to the repair of newer cars that often produce higher ticket, more profitable work.
Currently, U.S. shops are putting a higher premium on OEM training due to the greater complexity of new cars. This training can be expensive. Recouping those costs and maximizing their benefits is made more difficult if a repairer misses a repair opportunity because it cannot perform the certified work as well (OEMs typically restrict sales of certain structural parts to certified shops).
Losing this work can prove costly, especially to MSOs, who need to attract as much steady work as possible to both cover their greater overhead and provide the funds to continue growing the business. This is significant since MSOs are grabbing up ever greater chunks of the U.S. market as this business model proves to best capable of managing rising market costs.
In fact, to a greater number of repairers, MSOs appear to be the only viable survival option. This has led to an increasing number of regional MSO operators. Many of these businesses, notably, now are being purchased by large consolidators. Last year, the four largest--Service King, Gerber, ABRA and Caliber--added more than 314 locations and together own more than 930 shops.
As these organizations look to grow, so do other MSOs (including the market's largest MSO, CARSTAR) who increasingly aim for a nationwide presence. That puts them in direct competition for a shrinking number of available locations.
Together, this makes standalone shops a dying breed whose outlook could become a significant issue for 2016 as the U.S. repair landscape continues to shift.
