Industry Outlook, Continued Growth In 2022
The impacts of the pandemic, supply chain and materials availability issues, industry consolidation, and a growing technician shortage have all contributed to new business challenges. And, during it all, we see that although the number of collision repair estimates dropped in the past year, wholesale collision parts sales increased!
In this article, we look at the factors influencing this evolution and discuss how Lexus dealers can position themselves for success as we move into recovery.
COST PER REPAIR — THE DRIVING FORCE
Advanced Driver Assist Systems (ADAS) are prevalent on newer Lexus vehicles. These systems can help prevent some low-speed collisions and reduce crash severity in others. Claim severity can quickly rise with the replacement of these components, resulting in an increase in repair costs. The result—fewer collisions but higher cost per repair.
The future of automotive collision repair has arrived. The combination of ADAS technologies and an increase in electric vehicle launches make OEM collision certification even more important than in the past. With these changes, collision repair shops are compelled to make major investments in tooling, training, and information to ensure that they are equipped to return vehicles to pre-accident condition.
SHIFTING PARTS TO LABOR RATIO
Auto parts sales are increasing year over year. According to industry expert Frank Terlep, Founder and CEO of Auto Techcelerators, the parts to labor ratio is typically 40% parts and 60% labor. He predicts that it will even out to 50/50 or parts will become the larger percentage in 2022.[1]
The number of parts on an estimate is increasing because many parts are now built to be replaced rather than repaired. “Over the last five years, we have seen a solid trend in the number of replacement parts used in repairs,” explains Steve Olson, Managing Partner – Louisville Collision Center[2] in Louisville, Kentucky. “We used to see an average of ten parts used in a repair; now, we are seeing up to over 40 replacement parts on an invoice due to the advanced technology in the vehicles. It’s night and day from just a few years ago!”
PARTS AVAILABILITY
Current supply chain challenges have led to shops repairing parts rather than replacing them. But OEMs do not allow repair of some parts and Lexus is no exception. While replacing these parts does drive up the cost of repair, replacement is essential to returning the vehicle to its pre-accident condition. This is where parts availability can present a challenge, impacting cycle times, profitability, and customer satisfaction.
“Lexus has many one-time use parts, which adds to the cost of repair. But in my shop, we believe that the only way to repair a Lexus is to follow the Lexus recommended repair procedures,” states Olson. “Lexus has done an excellent job in trying to not let the backorder of major parts be an issue…of minimizing the number of parts that present a challenge.”
GET READY TO MOVE FORWARD
While business volume may have declined over the past few years, last year’s increase in wholesale parts sales is a boon to your business that will continue as vehicle technology advances. As a Lexus dealer, you are in a position to become your wholesale parts customer’s partner and mentor—their go-to resource for Lexus Genuine Parts, repair information, and support. Recognizing this is the first step to moving forward.
Refine Your Processes — Take a look at your parts ordering and delivery processes to ensure accuracy and efficiency.
Join Lexus Partner Programs — Achieve greater efficiencies in your wholesale parts business by joining a Lexus Partner Program. Collision wholesale parts programs include OPS™, Microcat Partsbridge®, and CollisionLink®.
Build Relationships — Don’t wait—build relationships now! You are in a unique position to provide Lexus-specific support to your wholesale parts customers and help them conquer some of their current business challenges. Here is how you might help:
Calibration Assistance
Proper training and equipment, coupled with current skilled technician shortages, may be an obstacle for some shops to complete required calibration after the replacement of system parts.
- Refer your wholesale customers to resources such as the Lexus Technical Information System
- Advise them how to use TechStream
- Remind your smaller shops that your highly skilled technicians can complete the calibration as a sublet.
Parts Pricing
Remind your wholesale customers that Lexus has reduced pricing in over 14 replacement parts categories, making Lexus Genuine Parts competitive with the aftermarket. Invite them to order parts through your Lexus partner parts ordering system to access Lexus sponsored discounts and to expedite order processing.
Parts Availability
- Remind your wholesale customers that, as a Lexus dealer, you are part of a distribution network that is dedicated to minimizing backorder issues. You have efficient processes in place to get that part to your customer when they need it. And, you have the expertise to ensure that they receive not only the requested part but also any ancillary parts required to complete the repair.
- It is in your best interest to help your independent collision repair shop customers return their customers’ Lexus vehicles to pre-accident condition. The better the quality of repair, the greater the odds of complete customer satisfaction and retention. A satisfied customer is more likely to return for future service after an accident.
[1] https://www.repairerdrivennews.com/2022/01/03/2022-predictions-more-adas-collision-center-consolidations-less-independent-shops/
[2] Louisville Collision Center was awarded the distinction of 2021 – #1 Lexus Collision Center in the U.S
