Review of past industry predictions shows wide range in their accuracy
By John Yoswick
Pick up this or any trade journal, or attend any industry event or webinar, and you’re unlikely not to come across someone—a vendor, consultant, trainer, shop owner or other pundit—making a prediction about something that the industry will see at some given point down the road. How accurate are these prognostications? Take a look at this handful of forecasts expected to have happened by now to see how accurate—or how far off the mark—they were.
Former association exec goes 1-for-3
Three years ago this month, Dan Risley shared three predictions about ways he thought the industry would look different three years ahead—or now, in mid-2020. At the time, Risley was the executive director of the Automotive Service Association (ASA), though he left the association a year later for his current position at CCC Information Services.
Risley in 2017 predicted that three of the five largest auto insurers would by now be requiring welding certification as part of their direct repair programs, a mandate that State Farm had just added earlier that year. That proved prescient; while Geico is the only other Top 5 insurer to specifically require I-CAR welding certification for shops that are part of its DRP, Allstate and USAA require their DRP shops to hold the Gold Class designation, which itself requires welding certification.
But Risley didn’t have a perfect track record on his 2017 predictions.
“I predict that at least two insurance companies will have a requirement of pre- and post-scanning,” said Risley, who had spent five years as a project manager for Allstate before taking the top job at ASA in 2013. “They will come up with a flat-fee amount they pay for that, but they will allow and require that as part of their DRP.”
Although some insurers have pushed for flat-fee pricing for scans, they generally aren’t pressing shops to conduct scans.
And interestingly, Risley’s prediction related to information providers—like the company he now works for—has not come to pass.
“At least one estimating system provider is going to add a new labor category,” Risley predicted would happen by now. “So you will have body, refinish, mechanical and then ‘advanced diagnostic labor.’ The work that’s being done now will not fall under the ‘mechanical’ labor category. It’s a completely different skill set.”
Slower rise to vehicle electrification
Speaking at the International Bodyshop Industry Symposium (IBIS) in London in 2010, Prof. David Bailey, an automotive analyst with the Coventry Business School in the United Kingdom, said collision repairers could expect to deal with a mix of automotive powertrains for the foreseeable future. Bailey predicted that despite the growing interest in electric-powered vehicles at that time, even by 2020 only about one-third of new cars would have electric powertrains.
How accurate was Bailey’s projection? Not very. Looking solely at the U.S. market, about 245,000 electric vehicles were sold last year; that jumps to 726,500 when you add in sales of hybrid electric vehicles as well. But that’s just 4.2 percent of new car sales, far from the 33 percent Bailey predicted.
He was a little closer—but still not close—when you look at new vehicle sales worldwide. A report published in June by the International Energy Agency indicates global sales of electric cars hit a record-high 2.1 million last year, or about 2.6 percent of global car sales. When you add in hybrid vehicles, the total jumps to about 10 percent, according to BCG analytics, but that’s still less than a third of what Bailey predicted it would be by now.
OEM patents haven’t killed off non-OEM parts
A recent court ruling upholding a $2.5 million judgement against a non-OEM parts distributor found to be selling parts infringing on Ford design patents brought to mind a prediction related to parts patents made more than a dozen years ago.
In January 2008, Eileen Sottile was the vice president of government affairs for LKQ Corporation, and a founder and board member of the Quality Parts Coalition (QPC). The QPC, funded primarily by auto insurers and the non-OEM parts industry, was established in 2007 to lobby for changes that would limit automakers’ ability to use design patents to stifle the development and sale of non-OEM crash parts.
Speaking at a Collision Industry Conference (CIC) in 2008, Sottile warned that increased use of design patents would lead to increased parts prices and more vehicles being declared total losses. Never one to shy away from the dramatic, Sottile told the CIC audience that could lead “to the extinction of not only the independent parts industry, but also of the independent repairer.”
The recent ruling in the Ford lawsuit against the non-OEM parts distributor demonstrates that design patents can indeed work in automakers’ favor. But a dozen years after Sottile’s dire warning, the non-OEM parts industry (like independent collision repairers) are far from extinct. OEM parts accounted for just over 68 percent of the total dollars spent on collision repair parts in 2008, according to CCC Information Services. That had dropped to 61.8 percent last year. Conversely, non-OEM parts accounted for more than 38 percent of total parts dollars last year compared to less than 11 percent in 2008.
Predicted changes in business population haven’t proven out
Anticipated change in the number of dealerships or body shops is a common subject of predictions. In January 2014, for example, a study by Roland Berger Strategy Consultants projected that as automakers restructured their retail operations, 3,800 dealerships—about one of every five at that time—could close by 2020. Automakers could get stronger retail performance from fewer, bigger partners, the study argued.
The study’s assessment in one way proved wrong. There were 16,396 dealerships in 2014, according to the National Automobile Dealers Association; today, there are actually slightly more (16,682), not fewer.
But the Roland Berger study did hedge its projection, saying the automakers were more interested in fewer dealership owners, not necessarily fewer dealership locations. Like an insurance company thinking there is benefit in partnering with a large multi-shop operation, automakers would prefer that dealer ownership be consolidated, the study argued. That has happened to some extent. In 2014, just 5 percent of owners operated six or more dealerships. Today, 6.2 percent do, including jumps in the percentage owning 11 or more dealerships.
Similar predictions of significant declines ahead in the total number of U.S. body shops—independent and dealer-owned—have been circulating since at least the late 1980s. A speaker at many trade association events back then shared projections that 15,000 body shops were all that was needed to handle all collision repair work in the country, arguing that the days of a shop population of 40,000 or more would quickly be coming to an end.
Most recently, Dave Roberts of Focus Advisors, a merger and acquisitions firm specializing in the automotive aftermarket, this year has been making presentations similarly projecting a 15,000-shop population in the United States by 2030.
In between, a 2009 study produced by consultant Vince Romans of The Romans Group predicted that the total number of U.S. shops would decline from his estimate of 41,500 that year to just 30,000 by this year. Late last year at an industry event, Romans said there were 32,000 shops, not too far off from his projection a decade earlier.
But Romans doesn’t go into much detail about how he arrives at his shop population figure. One analysis indicates his 2009 figure was accurate—but that in actuality there has been very little change in shop count since then.
CRASH Network uses a consistent measure over time to come to its shop population count, arguing that is the best way to get a valid gauge of upward or downward trends. Its figure is derived by combining data on independent collision repair businesses from the U.S. Census Bureau with the estimated number of dealership shops published annually by the National Automobile Dealers Association. That shows that the number of independent shops was 35,359 in 2017 (the latest year for which government data is available). Add in the 6,289 dealership shops NADA reported last year, and you get a total of about 41,600.
That’s almost exactly the number Romans said there was in 2009, but the CRASH Network analysis shows remarkable consistency in shop count before and since then. Forty years of this data shows that, since 1977, there has been between 40,000 and 45,000 total shops, with periods of both minor expansion and contraction within that range. Dealership shops in the 1970s accounted for nearly half that population, but as their numbers dwindled in the decades that followed, the independent shop population grew equally fast.
Although the number of shop owners has no doubt shrunk with the rise of multi-shop operations, the number of actual body shops (rooftops) has actually been quite stable over the past 40 years. Most forecasts call for varying degrees of decline moving forward, but decades of sometimes wildly dramatic projections just haven’t come to pass.
Beware of the ‘unforeseen’
Predictions sometime prove themselves to be inaccurate in a matter of weeks, not years. In the final week of 2019, Elainna Sachire saw good things ahead for collision repairers this year. After all, of the roughly 450 shops in the nearly two dozen 20-groups (including the Coyote Vision Group) that her company, Square One Systems, Inc., manages, sales were up an average of 7 percent last year. It’s understandable why she would say, “Unless there’s some catastrophe or devastation that we can’t foresee, 2020 is going to be a very strong year for the collision industry.”
There was no way for her to know the magnitude of the catastrophe that would hit the industry and the country as a whole just three months later. •
John Yoswick, a freelance writer based in Portland, Ore., who has been writing about the automotive industry since 1988, is also the editor of the weekly CRASH Network bulletin (www.CrashNetwork.com). He can be contacted by email at john@CrashNetwork.com