Inaugural ARC360 Hub reveals scale of uncertainty
5th May 2020Tweet
ARC360’s growing reputation for innovation took another leap forward on Friday (1 May) when, in association with I Love Claims, it hosted its inaugural ARC360 Hub event which centred on live polling to assess the current and future ramifications of the Covid-19 crisis on the sector.
Taking part in the 23-scenario based question event were 29 key influencers (see below) from across the UK automotive aftermarket sector including insurers, repairers, and a host of supply chain representatives.
All feedback during the event was anonymous.
The broad range of questions considered everything from business growth, supply and demand, shifting relationships and new technologies – but what the survey revealed as clearly as anything else was that the industry knows it is will be transformed but doesn’t yet know into what.
Not surprisingly, more than three quarters of respondents expected the industry to be ‘significantly’ changed following the Covid-19 crisis. Drilling deeper into that figure, the survey found that most respondents expected the key change to be around repair capacity as a result of bodyshop closures.
Between 10% and 15% of bodyshops will shut down because of this crisis, according to 75% of respondents, with a lack of cash flow cited by most as the telling factor.
One respondent said, ‘The Coronavirus Job Retention Scheme finishes at the end of June; when the payroll hits profit and loss again on 1 July it will be devastating. The issue is that this will be around for a year and the length of the pandemic will drain the life out of many companies; if they don’t close, they will be working on hugely reduced volumes.’
Even bodyshops that survive the immediate crisis might fall as they try to emerge out the other side.
‘Most repairers’ margins are so tight they have no cash reserves,’ said another respondent. ‘The real challenge will be in about four to six months as more cash is required to rebuild rather than lay in hibernation.’
That explains why 43% of respondents said their focus was the next three months whilst 36% are planning for the next three to six months.
Another reason suggested for fewer bodyshops post Covid-19 is that some owners might prefer to sell up rather than continue the struggle.
However, 79% of respondents said that fewer bodyshops to meet demand would change market dynamics, with some suggesting it would be an opportunity to shift the balance more in favour of repairers. This could be achieved by using this trading reset to introduce new business models that were not so reliant on volume, while negotiating new contracts that removed certain costs. However, this would only be achievable if bodyshops acted together.
‘Repairers need to stay strong and not land-grab volume,’ one respondent warned.
But these opportunities might not present themselves immediately with nearly half (46%) expecting volumes to remain down 21%-40% through the third quarter of the year.
Greater consolidation (mergers and acquisitions) was also predicted by 71% of respondents, while some of the more challenging impacts of the crisis put forward included fewer claims as people drive less and work from home more, mass redundancies following business closures, and less cash for investment.
The view was also expressed that permanent change for the better would be considered too difficult and the industry would gradually revert back to pre-coronavirus practices, and that was certainly the case with regards the approved repairer model, with 64% of respondents expecting no major change.
‘Expect changes,’ said one, ‘but not a root and branch overhaul, just greater focus on partnership and less on meaningless service level agreements.’
Another comment said, ‘We have seen growth in network sizes, and I think we will see that contract again as people look to maintain meaningful relationships with a smaller volume of claims.’
However, other respondents were less optimistic and said insurers would continue to control rates, while repairers could find themselves in a ‘race to the bottom’ as they undercut each other in the fight for reduced volume.
However, countering that, one positive area of change could come in the relationship between repairer and claims managers. An encouraging 86% thought it would improve because of a greater ‘mutual understanding’ and the need to work together to develop solutions and plan more strategically.
Interestingly, some thought the crisis would also be a good indicator of those companies prepared to work with repairers, and post Covid-19 the industry would see ‘a greater differentiation between those insurers that do and the large number that don’t.’
‘I hope insurers will be more focused on partnership value as opposed to unit cost.’
But what this survey revealed more clearly than almost anything else is that no one knows for sure how these extraordinary circumstances will play out in the future. In most cases, every argument for was mirrored by an equally valid argument against.
Respondents were largely split (54%-46%) on whether supply chains would be significantly impacted, they were totally split on whether this would accelerate or hinder the uptake of alternative vehicle ownership models (46%-46% with eight per cent unsure), while another issue that underlined the uncertainty was total losses, with 39% expecting them to increase, 29% saying the opposite, and 32% predicting no change.
‘As we move into a financial crisis people will own their cars for longer and therefore residual values will decrease, impacting against increased repair costs.’
‘Hopefully, a decrease in total loss and an increase in the threshold will give the repairer community an opportunity to repair more vehicles and make up for some of the losses sustained.’
The full survey report will be published on the ARC360 section of I Love Claims website this week with various findings discussed during the weekly ARC360 webinar.
ARC360, in association with I Love Claims, would like to thank its corporate partners ACIS, BMS, EMACS, Entegral, Enterprise Rent-a-Car, Nationwide Vehicle Recovery Assistance, S&G Response and CAPS; partners The Green Parts Specialists, Indasa, and Innovation Group; and strategic partners AutoRaise, NBRA, RepairTalks and TrendTracker. And extend a special thank you to all those who took part.
Chris Ashworth, AVP, Enterprise Holdings
Neil Atherton, Commercial Director, Autoglass
Graeme Bennett, ARC Director, Devonshire Motors
Phil Blowers, Commercial Director, Abrasives (UK) Ltd
Greg Cole, Claims Director, Aioi Nissay Dowa
Kate Goodwin, Director – Networks & Engineering, Innovation Group
Ian Hill, Managing Director, Hills Salvage
Brian Hodge, Director of Motor Customer Claims, LV=
Marc Holding, Managing Director, The Vella Group
Richard Howe, Head of Engineering, Markerstudy Insurance
Franco Iannotta, Bodyshop Development Manager, Volkswagen Group UK
Neil Joslin, Chief Operating Officer, e2e Total Loss Vehicle Management
Miles Keeble, Head of Sales, Nationwide Vehicle Recovery
Paul Llewellyn, Head of Motor Claims, Ageas
Andrew Mackenzie, Sales Manager, Entegral
Joe March, Head of Commercial and Network Management, Hills Salvage & Recycling Ltd
Brian Moore, Head of Claims Procurement, Aviva
Chris Mortimer, Head of Operations, Entegral
Jon Parker, Special Projects, Pennings Group
Steve Plunkett, Volvo Body & Paint Development Manager, Volvo Cars UK
David Sargeant, Managing DIrector, Gemini
Peter Smith, Claims Director, ERS
Richard Steer, Chief Executive, Steer Automotive Group Ltd
Kevern Thompson, Commercial Manager, CAPS
Victoria Turner, Commercial Director Accidental Damage, Hastings Direct
Trevor Webb, Claims Director, Sabre
Chris Weeks, Executive Director, NBRA
Andy Whatmough, Managing Director, S&G Response
Sue Whyte, Director, Action 365Tweet