fbpx

Twitter You Tube Facebook Autobodynews Linked In

Ed Attanasio

Ed Attanasio is an automotive journalist based in San Francisco. Ed enjoys sports of all kinds and is a part time stand-up comedian.

 

He can be reached at era39@aol.com.

Wednesday, 08 April 2020 23:00

CCC Analyst Forecasts Impact of COVID-19 on Collision Repair Industry

Written by
Director/Industry Analyst Susanna Gotsch from CCC Informational Services forecasts a rocky road that will drive up claim and repair cycle times for the rest of the year. Director/Industry Analyst Susanna Gotsch from CCC Informational Services forecasts a rocky road that will drive up claim and repair cycle times for the rest of the year.

Index

Trying to figure out what the long-term impact of COVID-19 will be to the automotive, insurance and collision repair industries is literally impossible.

Everyone is speculating and relying on news stories that change hourly, so unless you trust psychics like Sylvia Browne or Carnac The Magnificent, you’re only guessing.

 

Director/Industry Analyst Susanna Gotsch from CCC Information Services Inc. is a 28-year veteran, so she’s been there and done that when it comes to interpreting numbers and hoping to predict what’s going to happen next.

 

Her job is to eliminate guesswork to ferret out the facts. No one knows when we will all get back to our “normal” lives, but Gotsch’s historical perspective supported by data is invaluable for anyone who works in the automotive industry within any capacity.

 

Gotsch has written the "Crash Course," CCC’s annual publication on trends affecting collision repair and total loss costs, since 1995. This publication has become a key resource for the industry in understanding how broader trends within the economy, new and used vehicle marketplaces and collision industry are affecting auto claim frequency and costs.

 

Gotsch also consults with the development of CCC’s industry-leading data warehouse and reporting products.

 

What we are facing now is unprecedented as it affects both our livelihoods and our health, Gotsch said, meaning that it’s hard to compare to anything else that has happened in our lives.

 

“We’ve obviously never been here before, so we are comparing this to prior epidemics or major economic disruptions and right now we’re seeing the worst of both," Gotsch said. "When the SARS epidemic hit the Far East in 2002-2003, car sales plummeted. But what’s interesting is that after the epidemic was over, auto sales went up significantly. We don’t know the reasons for that specifically, but we suspect that people living in urban populations didn’t want to use public transportation anymore.”

 

History shows us the U.S. has seen overall miles driven in this country fall during recessionary periods, Gotsch said.


“During the Great Recession that ran from December 2007 to June 2009, total miles driven fell over 3% from its pre-recession peak in November 2007 to its lowest point in February 2010 during the post-recovery,” she said.

 

Logically, fewer drivers mean fewer potential accidents, Gotsch said.

 

“Countries, states and communities worldwide are on lockdown, asking residents to go out only for food and other essential needs. Businesses have begun to close for an unspecified amount of time, and many are having workers work remotely," she said. "This will most certainly lead to significant declines in miles driven, particularly at peak driving times, where congestion has been shown to drive auto accident and claim frequency.

 

“There was a steep decline in the frequency of auto claims during and after the Great Recession,” she said. “The number of claims per 100 insured vehicles for collision and liability coverages combined was 4.79 for the rolling four quarters ending Q1 2008, and fell nearly 12% to 4.22 claims per 100 insured vehicles for the rolling four quarters ending Q3 2008.

 

"Collision claim coverage alone fell nearly 16% from 6.29 claims per 100 insured vehicles for the four quarters ending Q1 2008 to a low of 5.3 claims per 100 insured vehicles for the four quarters ending Q2 2011. Independently, liability claims experienced a nearly 10 percentage decline during that same period.”

 

As more individuals are forced to work from home and discontinue all trips except those to stock up on essential items, it’s clear we can expect miles driven to plummet, and auto claim frequency to follow suit.

 

If we want to get a look at what U.S. auto sales will be doing this summer, China can give you a glimpse into our future. Auto sales in China fell 33% in January 2020, and fell another 79% in February 2020.

 

The car sales numbers in China are significant because they can forecast what is coming next in the U.S.

 

“We will really watch these numbers, because a full recovery later in the year is unlikely,” she said. “Auto sales in China had already fallen over the last two years, and analysts are projecting that sales will be down between 3-5% versus 2019 sales.”

 

In Gotsch’s detailed report, it states in the U.S., analysts are predicting CY 2020 auto sales will fall by as much as 20%, as opposed to previous forecasts of a 1-2% decline for the year. The largest decline in sales are anticipated in March and April.

 

Mid-March, the UAW and the Detroit automakers agreed to shutdowns of plants to stop the spread of COVID-19. Other automakers are continuing to halt production due to the shortage of parts, identification of employees testing positive for COVID-19, as part of broader community/state quarantine efforts or in anticipation of fewer sales in CY 2020.

 

COVID-19 will likely impact parts availability through the summer and possibly longer, Gotsch said.


“The disruptions in auto parts manufacturing that occurred in China in January and February is expected to result in supply shortages beginning in late March through April and June,” Gotsch said. “If miles driven fall, this could lessen or delay that impact.

 

"Automakers looking for components for use in production had begun shipping at-risk components via cargo plane, and where necessary, looking for alternative suppliers or manufacturing locales for affected parts. As automakers come to grips with the real possibility that auto sales will fall, more will look to slow production even more.”

 

Gotsch’s report states the car manufacturers in the U.S. will do more to keep their customers from going broke in 2020.

 

“Numerous automakers are already offering consumers the ability to delay payments, purchase vehicles with zero-interest loans stretched out over many years or offering to pay monthly payments should a customer lose their job after purchase,” she wrote.

 

Gotsch forecasts a larger decline in new auto insurance premiums related to new car sales.

 

“During the Great Recession, private passenger vehicle net premiums declined, as auto sales in the country fell, and consumers opted to drop all but the coverage mandated by law,” the CCC report stated. “The biggest drop occurred within private passenger auto physical damage in CY 2009: -2.2%. If car sales fall as precipitously as we saw back in 2009, private passenger auto premium growth will also be impacted.”

 

Body shops will also have to deal with longer fulfillment times for certain replacement parts driving up claim and repair cycle times within the next few months or longer, Gotsch explained.

 

“As COVID-19 continues to spread, people will drive less due to quarantines and to limit overall exposure, so our industry can expect a drop in auto accidents and claims as well,” Gotsch said. “With the epicenter of COVID-19 now having moved out of China to Europe and the U.S., the overall impact to the global economy will be significant.

 

"All of us at CCC will continue to monitor this situation closely and provide additional updates during this unprecedented time as we return to normalcy.”

Read 3678 times