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Replacement Parts Showing Promise By Ryan Mandell - Report from Mitchell International
T
he explosion of complexity in the automotive industry has led to myriad changes for collision repairers as it relates to technology and vehicle construction. The same explosion also represents addi- tional revenue opportunities for recyclers. The average cost of repair has increased by 3.5% per year since 2015 with the majority of additional costs being asso- ciated with parts replacement. Car parc changes, supply chain disruptions, and the increasing frequency of parts replacement all serve to benefit recyclers.
Parts Replacement Frequency Complexity is an all-encompassing term that many use to refer to the rapid pace of change in the design, construction, and technology of new vehicles. Each of these factors contributes to the trend toward higher frequency of parts replacement. Pre- vious articles have focused on lightweight materials and the lower rates of reparability associated with the metallurgical properties of each material type. The technology and design of modern vehicles have a tremen- dous impact on repair vs replace decisions. A prime example is the change in bumper design from the 2013-17 Toyota Camry to the 2018-Current Toyota Camry. The 2017 model year front bumper assembly was comprised of only 18 components with a gross OEM MSRP of under $1,000. How- ever, the 2018 model year saw a marked change with a front bumper assembly that consists of 43 components with more than double the gross OEM MSRP (Figure 1). The average number of parts replaced on a repairable estimate continues to rise year over year in addition to the average replacement parts cost (Figure 2). Recycled parts utilization continues to hold close to 10% of total replacement parts cost, yet the average recycled parts spend is rising only nominally (2.5% in 2021YTD com- pared to 2020 YTD) when compared to
24 // September-October 2021 Figure 1: 2017 Camry Front Bumper Assembly vs 2018 Camry Front Bumper Assembly
the increase in OEM spend (6.4% over the same time period) as well as aftermarket spend (9.8% increase)1
that recyclers have an opportunity to capi- talize further on the trends toward greater complexity, higher rates of part replace- ment, and parts price inflation.
Supply Chain Disruptions The semiconductor shortage that has crippled automakers over the course of the past year appears to be accelerating in the wrong direction with further plant shut- downs taking place throughout Asia and productions backlogs failing to be filled. There have even been reports of manufac- turers in China hoarding supplies of semi- conductors in an effort to artificially inflate the market price of their products2
. Major
OEMs like Ford and GM have announced further downward guidance to their pro- duction forecasts for the remainder of 2021 and even into the beginning of 20223
Car Parc Changes .
The lack of new vehicle supply has driven used vehicle prices to unprecedented levels. In many instances we are seeing specific
1 Based on Mitchell Estimating Data 2
It should come as no surprise that North American consumers are opting more for light trucks and SUVs rather than tradi- tional passenger vehicles. Data from the last two years shows that over 70% of new vehicles purchased fall into the light
https://www.scmp.com/tech/tech-trends/article/3148576/chip-shortage-will-drag-some-time-chinese-ministry- warns-country
3
https://www.ft.com/content/86336d38-6b89-4637-a2a5-3978d14fb324 Automotive Recycling . This trend suggests
year, make, model of used vehicles actually exceed historical prices. An analysis of both the 2014 Toyota Camry and the 2014 Ford F-150 show average used vehicle sales prices (and subsequently, average total loss market values) in August of 2021 exceeding the average sales prices from January of 2019. The demand for used vehicles is at unprecedented levels and is resulting in more vehicles being retained and repaired. Total loss frequency declined in the first half of 2021 when compared to the same time period in the previous two years as a result of higher ACVs which means higher total loss thresholds (Figure 3). While the salvage pool may be somewhat diminished, the sales opportunities are conversely increasing at the same time.
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