Collision Repair Industry To Be Influenced By Supply Chain, Vehicle Complexity In 2024

The collision repair industry is poised for another year of change in 2024, according to Ryan Mandell, director of claims performance for Mitchell International.

Mandell was the featured guest for CIECA’s first webinar of the year, “Top Collision Industry Trends to Watch in 2024,” held Jan. 25 and available for viewing on CIECA’s YouTube channel

Mandell said the four biggest factors affecting the industry this year will be the used vehicle market dynamics, increased vehicle complexity driving up repair costs, supply chain volatility and continued growth of electric vehicles’ share of the car parc.

USED VEHICLE MARKET

Mandell said the used vehicle market is being affected by inflation and high interest rates.

“There was a spike in inflation in 2022,” Mandell said “It has come down, but it is still predicted at 2.4% in 2024, on top of what we’ve already experienced.”

There is little chance of interest rates declining in 2024, Mandell said, and if they do, it won’t be until the summer at the earliest. That affects customers’ ability to finance all types of loans, but especially ones to buy vehicles.

In 2023, total loss frequency was 19.2%, Mandell said. As vehicle values rose, repairers had more room to fix crash-damaged vehicles instead of writing them off.

As vehicle values stabilize, Mandell said, total loss frequency will start to increase again.

“2024 is most likely going to be less volatile than recent years,” Mandell said, adding there are “so many variables at play here, we could see an increase in volatility if other things change.”

INCREASED COMPLEXITY

The increased complexity of vehicles – including more technology like ADAS features in every vehicle, and a shift in materials used – is the biggest item driving changes in the industry.

Mandell said while data from 2023 is not yet complete, it has already shown a 6% increase in average severity in the U.S. and 9% in Canada compared to 2022.

“That’s very significant,” he said. Before the pandemic, the industry typically saw a 3.5% to 5% increase in average severity every year. But there was a 10% increase in the first six months of 2023 alone compared to the same period the year before.

As repairs get more complex, they average more labor hours to complete – while the average labor rate also increases, showing a one-year 6% increase in the U.S. in 2023, after remaining static sometimes for years at a time.

The cost of parts is also going up – in 2022, the cost of aftermarket parts rose 17%, while OEM parts rose 10% -- as is the average number of replacement parts per repair, up almost one full part in a single year as more systems require being brought back to pre-accident condition.

“It’s a perfect storm in terms of cost drivers that are contributing,” Mandell said.

In 2024, the average severity is forecast to be around $5,300 in the U.S. and $5,700 in Canada, in line with increases seen over the last couple of years.

Automakers are using more lightweight materials like aluminum, carbon fiber and magnesium to absorb crash energy and provide more range in EVs and better fuel economy in ICE vehicles. Those materials can be repairable, but they are more likely to crack than dent, requiring replacement instead.

Mandell said currently 54% of lightweight metal parts are repaired, compared to 58% of mild steel.

“The newer the vehicle, the more likely they are to have these materials,” he said.

Scanning is also on the rise. In 2023, 76% of vehicles repaired in the U.S. and 85% in Canada required a pre- and post-scan. In 2016, only 10% of vehicles did.

“In less than a decade we have added a compulsory operation to almost every single repair,” Mandell said.

In addition, he said, about 35% of repaired vehicles in 2024 will require calibrations of certain systems.

“How do you bring this into your business?” Mandell said. “You have to decide to make the investment to do it in house or partner with a third party, considering cost, cycle time and throughput.”

THE SUPPLY CHAIN

After seeing some improvement in supply chain woes in 2022, recent events, including the six-week UAW strike in late 2023 and current geopolitical conflicts in the Red Sea, could “really put a wrench in those trends,” Mandell said.

About 12% of global cargo goes through the Red Sea. Attacks on cargo ships has led some companies to use longer routes to avoid it, or bring in naval ships to escort them through.

“This will affect shipping times and cost,” Mandell said. “The rest of the network is going to be stressed. It has a snowball effect, and I think we will be grappling with it for some time.”

Mandell said he expects to see the downstream impacts on parts availability halfway through 2024.

End user costs will likely rise as well as the average cost to move a shipping container increases.

Aftermarket parts are more exposed to the effects than OEM parts because they are largely produced on the island of Taiwan.

“This new wave of supply chain disruption’s overall impact remains to be seen,” Mandell said. “Look at an action plan -- repairing more parts, finding different sources. We need to have those conversations.”

EV GROWTH WILL CONTINUE

As the number of EVs on the roads grows, so too is the number coming into repair shops.

“These vehicles are just different,” Mandell said. “We need to look at what that means for financial forecasting, and for setting workflows for insurance companies and repairers.” 

Mandell said the average cost of repair of an EV is 37% higher compared to ICE vehicles, but there is a caveat -- the average EV is only 3 years old, compared to 6.5 years for ICE vehicles. The average cost is only 14.5% higher when compared to ICE vehicles that are model year 2020 or newer.

A lack of moving parts make EVs less likely to be determined non-drivable after a crash -- 10.5% of EVs vs. 14.1% of ICE vehicles -- but the likelihood of air bag deployment in an EV higher.

“My hypothesis is the different design and weight dynamics leads to potential for a more severe accident in which air bags are more likely to deploy,” Mandell said.

Mandell showed the results of a study conducted by Mitchell to compare repair costs for a 2022 Ford F-150 Lightning and a 2022 Ford F-150 XLT that had each suffered a moderate front end impact.

Both trucks needed a new bumper assembly, grille assembly, headlamps and a hood panel, and the left and right fenders blended.

The Lightning had a more expensive front upper cover and grille assembly, an additional grille reinforcement and a bumper isolator, not present on the XLT. The Lightning also required the battery to be removed before the bake cycle in the paint booth, which added 3.5 labor hours. In all, the Lightning cost $3,500 more to repair than the XLT.

“EVs have less moving parts but more crash parts,” Mandell said. “The internal combustion engine in the XLT is integral in crash energy absorption, so they need to find other ways to absorb that in EVs. Adding these parts closer to exterior parts of EVs makes them more susceptible to damage.

“There is a cost delta and a process difference [between repairing EVs and ICE],” Mandell said. “It is absolutely critical to be aware of that to make sure a proper and safe repair is the outcome.”