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Closer ties with bodyshops and insurers

APB's David Cresswell
David Cresswell of the ABP Club indicates where the oppportunities for dismantlers lie
The Motor Vehicle Dismantlers’ Association’s recent annual general meeting was upbeat and focussed on business development with presentations from the body shop and insurance sectors.

Why is this significant? After year upon year of one piece of debilitating legislation after another (which has only ever served to drive end of life vehicles into the hands of illegal operators), it is really good to see the MVDA taking a pro-active approach, working closely with other bodies to open up the green parts business.

We all know that the repair market offers huge potential for professional dismantlers and news of the new FAB Bundle auction, offering bulk supplies of trade green parts to known standards is another major step to developing this market. But what was really interesting at this year’s AGM was the close links that are being created between our trade body and the repair trade.

One of the seminars this year was presented by David Cresswell, chairman of the ABP club, an organisation that represents well over 2,000 of the body shops in the UK. David had some very interesting facts about the body shop business. For example, did you know that the average pre-tax profit for a UK bodyshop is just 2.1%. So, with the average insurer repair costing £1332 the bodyshop is going to make £28. This lack of profitability has driven many bodyshops out of business.

David also broke down what makes up that average insurance repair. 36% is labour (at £30.65/hour), 21% is paint and 43% is parts. When we ‘bang on’ about the need for standards and parts to be as specified, it isn’t hard to see that if a bodyshop has to spend and extra hour putting right some minor damage on a part, then that extremely slim profit has now become a loss. As David went on to explain, it isn’t hard to appreciate that the potential for green parts for insurance repairs in going to be limited - but there’s more!
So where is the opportunity?
David gave the attendees a little more insight into the insurance sector so they could appreciate changes that are currently happening. These changes are actually reducing the insurance repair side of their businesses. With high fuel prices, motorists have reduced their mileage and less miles means less accidents and therefore less claims. Another significant point is that many motorists are opting for higher excesses to reduce their premiums. This has been made particularly easy with on-line insurance products where the user can readily see a saving in premium by increasing the excess. These two factors have led to significant reductions in claim frequency, down for 20% a few years ago to 12.6% currently.

It isn’t hard to see that if a motorist has an excess of £500 then there are going to be a lot of jobs where he can’t use his insurance. This is the growth area for bodyshops; individual motorists who want their car repaired where cost is now a serious issue. Gone is the insistence of brand new parts and only oem parts to be replaced with, “I want it as cheap as possible as long a it is safe and looks right”. This David stressed, is an area where real opportunities exist for green parts.

David explained that this retail area of business is worth £500 million and currently represents 14% of the total (£3.5 billion/year). We mentioned earlier that parts represented 43% of a repair so the parts spend here is £215 million each year.

This is a market we have great opportunities to do business and companies such as EuroCarParts will take it if we don’t get our act together. David had a lot more to say and members had the opportunity to discuss this market afterwards. As we already mentioned, the need for uniform quality standards is essential if we want a slice of this pie. That means we have to get our act together!

MVDA’s past Chairman and now Secretary, Chas Ambrose has been putting in the effort on MVDA’s behalf to get things moving and markets will open up. The week after the AGM he addressed the ABP members at their meeting. I have asked before and I will do so again, please think about joining the MVDA. Together we have real opportunities as I hope this article shows but it takes many of us pulling in the same direction to make it work. Isn’t it worth £10 a week for the opportunities we can develop together. Visit the MVDA website for further details.

Next month we shall look at another of their seminars of equal importance which tackled the problems with salvage categories and the problems arising from the insurers ignoring their code of conduct when it suits them. The presentation was by Phil Gledhill who has been heavily involved with the insurance sector for many years in senior positions. He was instrumental in the setting up of the code and currently he is an advisor to the Association of British Insurers. Again, I stress that it is only by working with other sectors that we can these opportunities into sales and to do that we do need a strong MVDA.

November 2013

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