Industry Segmentation Could Give Some Repairers a Boost
In the weeks leading up to its Summit this December in Nashville, ADAPT Automotive will talk with several keynote speakers and other presenters who will be at the conference about pressing topics and trends facing the industry.
This week, Mike Anderson of Collision Advice spoke with ADAPT about how diversification and segmentation in the industry due to emerging technologies such as EVs and ADAS can help will provide significant opportunities for repairers that are quick to adopt those technologies.
As told to Digital Multimedia Editor Noah Brown:
When we talk about technology, we can't just limit it to vehicle technology such as calibrations, ADAS and EV vehicles. We also have to think about technology and our day-to-day job duties.
Three to four years ago, the average shop was fitting about 10 percent of their sales on administrative costs, and today that's closer to 14 percent. Every time that our administrative wages as a percentage of sales grows, it erodes our bottom line. We have to utilize technology to understand how we can eliminate human disruption and work more effectively and more efficiently and to have our business utilizing technology.
COVID jump-started some of that. Our industry has always been behind in regards to use of technology, but I think COVID kind of jumped-started that and we're going to see a lot of good, positive trends come out of that and help shops be more profitable.
On the flip side, as far as the technology of the vehicles, I think that a lot of shops probably would've gone out of business during COVID had it not been for the PPP loans.
I think that it's really important that shops understand that the continued increase of investing in training and equipment is going to continue to rise in regards to EV vehicles and maybe even newer substrates that are developed or ADAS features. We've got to position ourselves to be profitable so we can invest in that technology equipment and training.
I also think that maybe that's going to separate the herd a little bit. With the new developments in technology, EVs and ADAS, it's going to kind of do what aluminum started to do. When aluminum first came out, some of the OEMs had very specific certifications that started to separate the pack a little bit. Only a small number of people were invested into that segment of the industry of repair and those types of vehicles, and I think you're going to continue to see some more segmentation in our industry because of these advances in technology. You see a lot of that segmentation happening at the OEM level.
How does that segmentation emphasize the need for up-to-date training on these emerging technologies?
It is even more important today than ever before. If we make the decision to invest in the equipment and training to repair the vehicles in the future, then we've got to figure out how we determine how to get that ROI, whether it's our labor rates or the tight labor hours we charge, because it’s a huge investment. We’ve really got to understand the financial side to invest in that. The other thing, too, is that we have to look at it as continuing education. It's not like you just train on it one time because it's happening so fast.
At the end of the day, it's not going anywhere. We don’t need to be ostriches with a head in our sand. We need to be educated so we can be aware and make wise business decisions. There's a lot of opportunity that will come out of this rate. It gives you the ability to differentiate yourself from your competitors.
There are strategies that can be employed to help drive more work to your door, too. Diversification is going to be the key. I work with a lot of dealership shops and they have a term that's called absorption rate, which is the service and parts. The body shop can absorb the overhead costs and it doesn't impact their pricing on new or used car sales rates. So I think that we need to kind of think about that diversification. With ADAS, you know claims counts are going to continue to decline. It will be very small: maybe 2 to 3 percent a year. But I think at the end of the day, we've got to position ourselves to be diversified and maybe offer other services. This opens up some doors for that.
I heard a cliché statement one time that said obstacles are opportunities dressed in work clothes. That's what you have to do: not look at it as an obstacle, but view it as an opportunity. You have to put some financial investment into it. You have to put some blood, sweat and tears in, roll up your sleeves and get dirty to make it happen. But at the end of the day, I think it opens up a lot of opportunities for shops.