Wednesday, 25 May 2011 19:43

Industry Trends and Changes in Future Vehicles at WIN Conference

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Current industry trends—and a look ahead at the electric, fuel-efficient and Chinese vehicles that could be showing up in collision shops in the coming years—were the focus of one speaker’s presentation at the recent Women’s Industry Network (WIN) conference.

Greg Horn, vice president of industry relations for Mitchell International, told about 160 attendees at the WIN event in San Diego, that one positive trend for collision repairers had been the rebound through early this year in the total miles driven by U.S. motorists.

“But we’re starting to see the effect of gas prices impact the miles we drive,” Horn cautioned.

He said that MasterCard SpendingPulse, which tracks gas purchases at hundreds of U.S. locations, reported in early May that the 4-week average of retail gas demand had dropped for the sixth consecutive time.

“So we’re potentially in for a pretty significant impact as we get to early summer in the reduction of accidents and repairable cars,” Horn said.

He said insurer data indicated an uptick in claims in the third- and fourth-quarters of last year, boosted in part by some extensive hail and storm damage in several regions of the country.

Shops also have benefited from a sizable rise in the value of used vehicles, which allows for higher repair costs before a vehicle reaches the total loss threshold. Horn said the average vehicle appraised in the first quarter of 2011, for example, had an actual cash value of $12,772, up from the same quarter a year earlier even though the average age of the vehicles appraised in 2011 was almost a year older than that in 2010.

“So a car is older but worth more in value,” Horn said. “That’s a good thing for us in the collision repair business because that means we have more opportunity to repair the cars. We’ll put more in the repair column than we will the total loss column.”

The percentage of vehicles declared a total loss dipped slightly in 2010, and Horn and others expect that trend to continue this year. Higher gas prices and the vehicle production disruption caused by the earthquake and tsunami in Japan continue to buoy demand and prices for used vehicles, he pointed out.

“That 3-year-old Honda Accord is 20 percent more valuable than it was last September, and the 3-year-old (Nissan) Sentra is up 12 percent,” Horn cited as examples.

Horn also discussed the impact that increases to federal fuel economy standards are having on automakers. In late 2009, the Corporate Average Fuel Economy (CAFE) requirements were changed to require each automaker by 2016 (rather than by 2020, as earlier established) to sell a fleet that averages 35.5 miles per gallon.

“That is an ambitious goal,” Horn said. “A lot of auto manufacturers for whom it takes four years to get from the drawing board to the showroom floor, are in a state of panic.”

Global automakers, Horn said, are looking at the most fuel-efficient cars they sell elsewhere in order to bring those vehicles into the U.S. market. Though its late summer debut has been delayed indefinitely by the situation in Japan, the Scion IQ is one example of new micro-cars coming to U.S. streets. The tiny vehicle, powered by a 90-horsepower, 1.3-liter 4-cylinder engine, will be sold as a 4-passenger vehicle even though the headrests for those in the backseats butt up against the back glass. Horn said to help the vehicle meet federal safety standards, it has nine airbags.

“The good news is you’re going to survive the crash. You’ll suffocate afterwards, but you’ll survive the crash,” Horn joked.

Similarly, Chevrolet is introducing the Sonic, a less-well-equipped version of the Aveo, Horn said, and Nissan is introducing the $9,000 Micra (on which the radio and air conditioning are options). Chrysler will bring in the Fiat 500, which is four inches shorter than a Mini Cooper, and Mini is showing a concept vehicle that is a foot shorter than its existing vehicles.

The problem with many such vehicles for collision repairers, Horn said, is their low values will tend to put them into the total loss category even with only minor damage.

The Ford Fiesta is coming back into the U.S. market at about $14,000, Horn cited as one example. One of the vehicle’s distinctive features are its long Xenon headlights, which stretch much of the length of the fender and, as Horn said, “are about half an inch from the edge of the front bumper cover.” Replacements sell for $480 each.

“In a couple years when those cars are valued at about $10,000, rear-ending someone and having the bags blow and the windshield and both of those headlights go? You’re not going to be fixing a lot of those Ford Fiestas,” Horn told the audience at the WIN conference.

Automakers also will continue to try to shed weight from vehicles in an effort to meet tougher fuel economy standards, Horn said. That’s why shops are already seeing increased use of exotic alloys, titanium and aluminum. BMW cut 50 pounds from its 5-series by making the engine cradle out of plastic, Horn said.

“This is going to change how we put cars back together,” Horn cautioned. “The B-pillar for the Volkswagen Passat comes from the factory laser-welded in. Most techs would open the doors, look at the number of welds, drill out the welds and try to weld it back in. Volkswagen does not allow for that. In the collision repair environment, their requirement is that you use adhesive bonding to put the two pieces, the inner and outer B-pillar, back together. Because it’s a boron-alloy steel, if you weld it back in and you apply too much heat to it in the MIG welding process, you can actually weaken the structure of that metal, throw off the pillar airbag sensors, and potentially cause some severe harm to the passengers in a subsequent collision.”

Horn closed his presentation with a look at some of the vehicles that Chinese automakers—a number of which have plans to enter the U.S. market—currently produce. Horn said Great Wall Motors is predicting a U.S. launch in 2015, following the model used by Kia some years ago, with sales in several states and entry into the rental fleet. The company will use feedback from that limited launch to make improvements before selling on a broader scale.

Horn said the expected low cost of early Chinese vehicles in this country will likely lead to more totals than repaired vehicles. But the success of any of the Chinese automakers here will largely be dependent on their ability to set up the replacement parts infrastructure that is needed, Horn said. Sterling Motors and Daihatsu, he said, failed largely because a lack of parts availability led to repair delays and total losses.

“The folks that have the best infrastructure for supporting their brand will be the Chinese brands that survive going forward,” Horn said.

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