Finding Some Hopeful Bits of Good News Amid the Pandemic Fallout

Finding Some Hopeful Bits of Good News Amid the Pandemic Fallout

It was a bleak spring for many shops, but there have been some glimmers of hope for a better summer ahead.

Here are some potential bits of good news for collision repairers.

States are opening back up. Eighteen states began reopening their economies and public life in early May, and about another half dozen doing so in mid-May leaves fewer than half of states still shut down or severely restricted. Life and business won’t completely be returning to “normal” anywhere for a bit, but with businesses reopening and more people getting out and about, the need for collision repair work should begin to rebound.

Traffic levels are growing since bottoming out in early April. Passenger vehicle traffic nationwide ticked up slightly April 18-24, the third week-over-week rise in a row. Though it remained just 59% of what it was in February, it was more than an 11% improvement from a month earlier, when it bottomed out at just 53% of “normal,” according to the traffic analyst firm INRIX.

Traffic was up in all 50 states; Rhode Island saw the smallest increase (less than 1%), but seven states (Wyoming, South Dakota, Montana, Nebraska, Iowa, Minnesota and Colorado) all saw week-over-week increases of 10% or more April 18-24. Personal vehicle traffic also was up that week in all 98 of the metropolitan areas INRIX is tracking. The metro areas with the largest week-over-week improvements April 18-24 were Omaha, NE (up 12%), Denver, CO, and Des Moines, IA (each up 11%), Colorado Springs, CO (up 10%), and Minneapolis, MN (up 9%.)

Many insurers are paying for COVID-19 cleaning. Added efforts to clean vehicles as they come in for repairs, and before they are returned to customers, to reduce the risk of COVID-19 transmission has become a routine "repair operation" for most shops, and it's a procedure more and more shops are now successfully billing for as a line item. A survey of more than 650 shops found almost 3 out of 4 (73%) shops are performing and charging for the added vehicle cleaning process.

“Most insurance companies have sent out a very nice 'stay healthy' bulletin authorizing a charge for disinfecting customers' vehicles on arrival and before return to the customer," a shop manager in an Idaho suburb said.

Nationwide sent a memo to its direct repair shops at the end of March, saying it would pay for one labor hour and $25 in materials for “sanitizing the vehicle when it arrives and prior to delivery to the customer.” No additional documentation would be necessary unless charges exceed this amount, Nationwide told its direct repair shops.

CARSTAR’s corporate staff told its franchise shops in mid-April that State Farm had agreed to pay its direct repair shops a similar amount for added vehicle cleaning.

USAA on April 10 also said it would pay a “sanitize vehicle” estimate line item, but the amount it said it would pay---one-half of a labor hour and $15 in materials---was about half of what State Farm and Nationwide had agreed to pay shops.

Shops’ fears about business survival seem to be easing. One industry survey in early April found that almost 1 in 4 (23%) said they were very (or extremely) concerned about still being in business even just 30 days in the future, but by the second half of April that level of concern was expressed by just 14% of shops.

The percentage of shops that were not very (or not at all) concerned about their businesses surviving the next 30 days increased from 52% in early April to 63% by the end of the month.

“We are strong financially due to 20 years of conservative practices and paying off debt,” the owner of a shop in Lubbock, TX, said, for example.

Government financial assistance may well have played a role in easing some shops’ short-term concerns. Surveys indicate about 70% of shops that said they had applied for the Small Business Administration's pandemic assistance have already received the funds.

“The Paycheck Protection Program loan will make it possible to survive,” the office manager of a shop in Tulsa, OK, said.

Many shops still voice concerns about their ability to stay in business when asked about longer time frames. But a majority in late April said they had little or no concern about being in business in 90 days or even over the next 12 months.

The growth in the number of ADAS-equipped vehicles has slowed. The pandemic’s expected effect on sales of new vehicles could have one minor silver lining for collision repairers: a slow-down in the growth within the vehicle population of vehicles with crash-reducing advanced driver assistance systems.

At the start of the year, the National Automobile Dealers Association (NADA) was projecting about 16.8 million new vehicles would be sold this year, down somewhat from 17.1 million last year, the fifth year in a row when sales topped 17 million. NADA this spring slashed its projection for how many vehicles dealers will move this year, to between 13 million and 13.5 million. That would make it the slowest year for new car sales since 2011.

New vehicle sales benefit collision repairers in that newer cars are generally insured and repaired after accidents, and are less likely to be total losses. On the other hand, robust new car sales also accelerate the percentage of ADAS-equipped vehicles in the U.S. fleet, something that appears to be slowly eroding accident frequency.

The Independent Statistical Service (ISS) shows collision claim frequency was down 1.5% in 2018 and then down another 1.8% last year. CCC Information Services points to the growth of ADAS-equipped vehicles as a likely cause of the decline.

Earlier this year, CCC stepped up its forecast for the rate of decline in accidents likely attributable to ADAS. CCC said that change was in part because of automakers’ ramped-up adoption of ADAS. Twenty major automakers, for example, had committed in 2016 to equip all new vehicles with frontal crash warning and automatic emergency braking by 2022, but many have done so well ahead of that deadline.

“As a result, our projection this year shows a slightly faster increase in the reduction of vehicles in accidents annually,” a CCC report from earlier this year states.

Whereas CCC had previously projected about a 5% drop in accidents by 2022, its subsequent forecast was for a decline more than 10%. The 10% decline CCC had projected for 2024 was upped to 15%.

But now that decline in claims could become less steep if the significant drop in new car sales during the expected recession ahead slows the pace of ADAS growth in the U.S. vehicle population.

John Yoswick

John Yoswick is a freelance writer and Autobody News columnist who has been covering the collision industry since 1988, and the editor of the CRASH Network... Read More

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