Shop revenue and technician pay among positive stats and trends for collision repairers
By John Yoswick
There’s a fair amount of good news for collision repairers in some recent data and projections. Many of the key “vital signs” indicating the “health” of the industry appear positive.
Vehicles are more likely to be repaired following a collision, for example, if they are newer and insured — and they are more likely to be insured if they are leased or the owner is still making loan payments.
Statistics indicate more vehicles are fitting that description. New-car sales cooled a bit in March, according to Autodata Corp., and automakers are stepping up purchase incentives, another sign that the year-to-year growth in new-car sales may have peaked. But no one is predicting this will be a down year in terms of new cars hitting U.S. roads. Forecast analysts at LMC Automotive expect 17.6 million vehicles to leave dealership showrooms this year, up only slightly from 2016, but still the third year in a row that sales topped 17 million, and the eighth straight year of growth.
Edmunds.com reported that leasing rates have also continued to grow each of the past seven years, hitting 31 percent last year, up from 29 percent the prior year. For those buying versus leasing, the average loan term is now 67 months, virtually ensuring those vehicles are insured for their first six years.
The odds that those vehicles will be in an accident also go up the more they are driven, and total vehicle miles traveled in the United States hit a record high in 2016, and continued to rise in early 2017, according to the Federal Highway Administration. That’s good news for collision repairers, who may have begun to wonder if the 2008–2014 slump in American’s driving had become the “new normal.”
Shop backlogs lower, but still there
Those trends may be reflected in the backlog of work collision repair shops have been saying they have this year. Just over 40 percent of shops nationwide were experiencing scheduling backlogs of two weeks or more in January, according to a survey conducted by Collision Advice and CRASH Network. Of those reporting backlogs of two weeks or more, a quarter of them were scheduling more than one month out.
That had eased somewhat by April, when only 28.8 percent reported scheduling work two or more weeks out. The backlog was lower in nearly every U.S. region, with an average drop of about three days. States in the Mid-Atlantic region (Kentucky, Tennessee, Virginia, North Carolina, Maryland) experienced about this average decline in backlog, to below two weeks.
States in the southern portion of the U.S. tended to face steeper reductions in their backlog of work. Texas and surrounding states reported the lowest backlogs in the country, averaging just barely over one week. The Southern states (Louisiana, Alabama, Mississippi, Florida, Georgia and South Carolina) also saw backlogs fall from more than two weeks to an average of a week-and-a-half.
The biggest declines, however, came in the Mountain region states (Montana, Wyoming, Utah and Colorado), where shops reported the scheduling backlog eased by a full week, from 3.5 weeks in January to 2.5 weeks in April. Shops in the West (California, Nevada, Arizona), however, continued to average a 1.4 week backlog, virtually unchanged from January.
Overall, a majority of shops nationally as of April (71.2 percent) were getting cars into the shop within two weeks, compared to just 59.5 percent back in January. The percentage of shops with very long backlogs of work, those scheduling four weeks or more in advance, dropped from 9.9 percent in January to 7.3 percent in April.
Of the reasons given for their backlog, a little more than one-third of shops (35.9 percent) said they are understaffed and need to hire more technicians; another third (35.1 percent) said their production space is filled to capacity. Only 8.5 percent said their current backlog is due to unusual weather events.
“These are interesting industry trends we’re going to be following over time to look for changes,” Mike Anderson of Collision Advice said.
Used car prices holding steady
There’s also good news in terms of used car price stability. Higher used-vehicle prices reduce total losses. Prices had peaked in early 2011, according to Manheim Consulting, and have bounced up and down since, hitting the most recent peak in mid-2016. Although prices have fallen in most months since then, “stable” best describes used-vehicle values, because all of the monthly declines have been small and largely offset by minor increases in a couple of months.
Government data is generally not as timely as the above statistics but still offer some good indications of trends within the industry as well. The Department of Labor (DOL) reports the number of technicians employed in the collision repair industry topped more than 143,000 in 2015, up 5,900 from the previous year (and the largest year-to-year jump since 2011). In its latest projections released last year, the DOL forecasts more growth ahead, estimating the industry will add 20,000 more jobs, a 14.3 percent increase, by 2024.
Those employees are also making more money, according to DOL data, which shows that the high-end of the range for wages for painters in the industry has risen to more than $116,000 per year in 2016 in the states of Oregon and Colorado. For body technicians, the high-end of the range was found in Maryland in 2016, where wages top out above $101,000 per year.
Of course, not all body techs and painters are making six-figure wages. Those making over $100,000 per year are in the 90th percentile in their respective states, meaning they are earning more than 90 percent of all the other technicians in that state.
The DOL data also presents median annual wages, which is the annual salary at which half of the industry’s technicians earn more and half earn less. The state with the highest median wage for body techs was Alaska, with median annual earnings of $54,980. North Dakota had the highest median annual pay for painters, at $60,960.
States with the lowest median wages for body techs include Arkansas ($33,910), Mississippi ($33,580) and West Virginia ($32,980). The lowest median wages for painters were found in Nebraska ($30,770), Oklahoma ($34,680), South Carolina ($35,380) and Tennessee ($36,010).
These types of numbers definitely show that the range of wages is quite large across the country for these two professions. Oregon, for example, in addition to having some of the highest-paid painters in the nation, also has painters (in the 10th percentile) making $31,150 per year; Colorado’s 10th percentile wage for painters is even lower, just $21,260 per year, though this means that nine out of 10 painters in that state make more than that.
Another employment statistic also doesn’t bode well for the industry: The Collision Repair Education Foundation reports that the average age of technicians in the industry is now nearly 41, up from 38.7 in 2007, and 35.5 in 1995. The industry will need to develop more ways to bring young people into the industry to halt or reverse that trend.
Total industry revenue is up
But government data shows that total collision repair industry revenue is growing, jumping by almost $2 billion in 2015, according to the most recent data available from the U.S. Census Bureau. The Bureau estimated that revenue rose 6.4 percent from the prior year to a total of $32 billion dollars, after having just crossed the $30 billion mark for the first time in 2014. The industry’s revenue growth lagged behind inflation from 2007 to 2013, but now is growing faster than inflation, good news for the industry.
One way to add meaning to total industry revenue numbers is to compare them to the average repairable vehicle estimate over the same time period. CCC Information Services data shows the average repairable estimate was $2,240 in 2004. Dividing the total industry revenue for that year ($24.25 billion) by that average repair amount would indicate there were 10.8 million cars repaired that year. Doing the same calculation for 2015 ($32 billion total revenue divided by an average repair amount of $2,766) indicates there were 11.5 million vehicles repaired that year, a healthy increase. (Although this is not likely the actual total number of repair jobs, just measuring the relative change over time offers some measure of the industry’s growth.)
That same Census Bureau revenue report also estimates expenses for the industry. In 2004, total expenses accounted for 78.4 percent of revenue. That improved somewhat in 2015 when expenses dropped slightly to 77.3 percent of revenue.
Keep in mind this is not an indication that collision repairers are pocketing 20+ percent net profit. The Census Bureau survey of business expenses include many but not all expense categories. It includes, for example, annual payroll; employee benefits, interest, rent, supplies used for operating, and depreciation expenses. Excluded expenses, however, include: outlays for the purchase of real estate; major alterations and improvements to existing facilities; capital expenditures and income taxes.
And for comparison, the same survey found that expenses averaged 83.6 percent of revenue for car wash businesses, and 81.9 percent of revenue for transmission repair shops but below 50 percent for insurance or credit card companies. So it is more the relative difference between the revenue and expenses within an industry that provides some indication of changes in profitability over time.
Autonomous vehicles still a ways out
As for those concerned that autonomous vehicles will soon start putting a dent in collision repairers’ business, some new data offers an indication that motorists are not going to be free from driving duties anytime soon. California’s DMV, which requires regular updates from those testing autonomous vehicles on that state’s roads reports that cars operated by Waymo (the self-driving car project started by Google) are driving about 5,200 miles in between “disengagements,” defined as the need for a human driver to take control of the vehicle. That’s impressive, but it’s far from consistent among all those testing self-driving technology. Tesla is experiencing disengagements once every three miles, for example. And even that’s better than Mercedes-Benz (once every two miles) or Uber or Bosch (about once per mile).
Those kind of numbers seem to indicate that self-driving vehicles aren’t going to be widely available in showrooms any time soon.
One last bit of likely good news for collision repairers: All that talk about Millennials not being into cars or driving may have been overblown, according to Automotive News. As the largest age demographic since the Baby Boomers, Millennials now are the fastest-growing segment among vehicle buyers, purchasing 4.1 million vehicles last year (29 percent of the total market). The Great Recession may have delayed their vehicle ownership, but now as more of them have jobs and families, they appear to have just as much interest in owning and driving vehicles. •
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.
