THE 2023 COLLISION-REPAIR and REFINISH MARKET

Among the sectors of the specialty-equipment market to have been impacted by advances in OE design and manufacturing technologies, few have been more dramatically affected than the collision-repair and refinish industry. Lighter-weight body panels, tri-coat paint applications and advanced driver assist systems (ADAS) have all become commonplace, if not mandated, on OE production platforms, and these advancements have posed fresh challenges to the market.

While advances in vehicle safety technologies have helped to make cars safer, collision repair and refinish remains a growth industry for the near term, with global revenues forecast to surpass $338 billion by 2028, with a 1.9% combined annual growth rate (CAGR), according to a 2023 survey from MarketWatch.

For this report, we contacted some dozen industry leaders. Their views follow, edited for clarity and length.

The State of the Industry

As with many industries, the collision and repair market took a hit in the early days of the COVID pandemic as vehicle miles traveled plummeted and millions of cars and trucks sat idle in their owners' garages. For the roughly 35,000 independent bodyshops in the United States, business declined by an estimated 10%–15% in 2020, according to a report from Collision Week. Exiting from the pandemic, supply-chain-related parts shortages made their presence felt in the shop, resulting in lengthier repair times.

Increased vehicle complexity has also impacted the sector. "Complexity is rising at an extraordinary rate, and that is forcing a lot of change in the industry," said Jack Rozint, senior vice president of sales and service, repair at Mitchell International. "The amount of equipment, training for technicians and just technology in general to fix the vehicles today has grown so much that the investment in the size of collision-
repair facilities is growing larger, and as a result, it's getting harder for the two- and three-man shop to survive and specialize in today's industry."

Aaron Schulenburg, executive director for the Society of Collision Repair Specialists (SCRS), agrees on the increased need for technical data. "Collision repairers are often some of the first repair entities to interact with newly released models, sometimes just weeks after a new model's release," he notes. "The key to providing appropriate service to the customer is based on the ability to access necessary information to diagnose and repair a vehicle, and access to training and tooling."

In addition, "there are a lot of safety requirements right now that the industry is not necessarily educated on because we're getting too much pushback from the insurance carriers regarding pay for the actual estimate," added Alex Torres, regional manager for Alldata, "so what we do for the industry is to keep our partners educated."

Still, some of our industry experts see opportunities for near-term growth. "We plan to more than double our U.S. footprint this year and expand our partnerships with several of our industry partners," said Scott Bridges, senior vice president for Fix Network.

Challenges: ADAS and Electrification

Advances in OE safety technologies, though, present multiple challenges. For one, the proliferation of onboard cameras and sensors, and the time needed to install and test them, result in cost increases ranging between 2% and 3% annually, according to CCC Information Services. Additionally, industry members must acquire new technical skills, which requires extensive employee retraining. Finally, as safety technologies—particularly
self-driving AI systems—become more
foolproof, the number of collision repairs is expected to decline over time; the CCC Information Services report forecasts a decline of as much as 35% by 2050.

For the near term, however, repair shops of all types will keep busy, if for no other reason than to install replacement catalytic converters for unlucky motorists. According to recent data from Carfax, thieves stole the emissions-control devices from more than 150,000 vehicles—including vehicles located on dealer lots—in 2022. That's more than 400 a day nationwide. And looking at the big picture, market productivity remains robust. According to data from the U.S. Bureau of Labor Statistics, the industry set a new year-over-year production record in 2022, with repair industry employment up nearly 5% and production employment up nearly 10%.

"Five years ago, people were saying that ADAS was going to cut accident severity and frequency so much that the collision industry is going to be dead in a few years," noted Rozint. "Of course, that hasn't happened. The industry is making more money this year than it ever has."

Rozint admits, however, that "a point in the future is coming when enough vehicles on the road will have ADAS equipment, and this will significantly bring down the number of collisions and industry revenue will top off. But given the fact that people are holding onto their used (non-ADAS-equipped) vehicles for longer periods of time, "that inflection point is still at least five years out."

While the proliferation of ADAS should reduce the number and severity of future accidents, it won't necessarily drive down the costs of collision repair. "It's increasing the cost to repair the vehicle," Rozint notes, "because the front bumper now has sensors, LIDAR, cameras and other equipment that needs to be fixed and recalibrated."

ADAS has also highlighted the necessity for companies to expand their educational outreach. "The ongoing evolution of ADAS brings a growing need for repair shops to recognize the opportunity of offering reset functions and calibrations," said Bridges. "The days of just turning a wrench are gone."

As mentioned earlier, increased repair costs can cause friction with insurers, which can lead to friction with repair shops. "As insurers focus on shareholder value, they are seeking any and all methods to reduce their costs, and collision-repair facilities bear the brunt of this," said Darryl Simmons, publisher of Collision Repair Magazine. "In addition, collision-repair facilities have to train staff and equip shops to meet the myriad of OEM requirements for safe and proper repairs."

Electrification also poses potential challenges.

"Apart from the obvious fact that an EV can kill you if you don't properly disconnect and disable the electrical systems before you get working on it, it's a completely different animal in terms of repair," Rozint explains. "The platform itself is different. There is a lot more structural componentry that is designed to reduce the weight of the vehicle. That requires special repair techniques as well—everything from personal protective equipment to gloves to the repair process itself. It's very different."

Still, Torres adds, "growth for the industry going forward is going to be on the electrical side with EVs."

Another change impacting the industry has been the spread of OE certification programs, which can provide added resources to independent facilities.

"The collision-repair industry is actually quite varied and competitive," Schulenburg says. "Collision-repair businesses have opportunities to participate in a variety of networks. including certified collision-
repair networks offered by automakers and Direct Repair Program networks offered by insurance companies.

"The vehicle and our relationship to it has changed," Schulenburg adds, "but it has also presented us with an opportunity to distinguish our businesses within the community and to our customer."

"The good thing is that you can't legislate stupidity out of existence," Simmons concludes, "so as long as there are shopping carts in malls, drivers who ignore warnings and trees that fall on cars, the collision-repair industry will be viable."