North American Collision Electrical and Mechanical Replacement Component Aftermarket

Abstract

Insurance Companies Use their Clout to Reduce Parts Costs

Repair shops face a challenging task ahead as they compete to win the most lucrative collision repair jobs. This has become increasingly difficult; with insurance companies having a huge influence on vehicle owners decision to undertake a comprehensive and expensive repair job, more so given the rising premium rates. The risk potential of being hit with a premium increase following an accident has many vehicle owners refraining from reporting collisions to the insurance company, opting not to repair at all or selecting a more basic repair job and paying out of their own pocket. With increasing frequency, insurance companies are specifying lower-cost aftermarket parts which can range 15 to 45 percent below original equipment (OE) component prices. This has left OE component manufacturers scrambling as this widespread practice has started to severely impact their unit shipments and revenues.

This Frost & Sullivan research service examines the North American electrical and mechanical collision replacement parts aftermarket which includes radiators, condensers and exterior lighting components. It also discusses the various market trends and opportunities while providing in-depth analysis of market share, revenue forecasts, market drivers and restraints. Revenue projections and unit shipments help participants in targeting high growth areas for maximum return on investment.

Larger and more Expensive Vehicle Mix Drives Up Repair Costs

By 2012, the light truck and luxury vehicle categories are anticipated to grow by 6.0 percent to represent approximately 56.0 percent of the total in-use vehicle population. "This is significant to the collision industry since vehicles in this group are larger, more expensive, and typically have more advanced technologies and features," says the analyst of this research service. "Also, the increased size and weight, and engine power of luxury and light truck vehicles tend to cause greater damage during a collision, contributing to higher repair costs."

Collision Repair Component Revenues Show Significant Increase

Despite a decline in the number of reported collisions and repair jobs, revenues in the collision repair aftermarket are expected to grow from $1.28 billion in 2004 to $1.60 billion 2011. In 2004, the lighting category contributed 87.0 percent of the revenues to the mechanical and electrical collision repair segment. For the overall collision repair market revenues are likely to witness an increase of 4 to 5 percent annually, almost double the rate for the majority of wear replacement components, which have stabilized due longer lasting materials and better design.

"Going forward, repair shops will have to equip themselves with the necessary information to generate more cost competitive quotations in order to capture more repair jobs and capitalize on the rising average dollar value of jobs," concludes the analyst.