Two Reasons Body Shop Firms Keep Getting Bigger

Two Reasons Body Shop Firms Keep Getting Bigger

In February 2019, Caliber Collision acquired ABRA Auto Body & Glass, and the new company is expected to operate over 1,000 locations in the US. This acquisition (which was predictable) is emblematic of the market share gains that the “Big Four” body shops – ABRA Auto Body & Glass, Caliber Collision, Gerber Collision & Glass, and Service King – effected over the last decade.

Insurance Companies & DRPs

The first reason these shops keep growing? In a word; insurers.

Insurance providers drive consolidation in the repair sector through the use of Direct Repair Programs (DRPs). Insurers like to sign DRP agreements with car repair shops because the shop usually gives the insurer a price break in return for sending work their way. This lowers the claim payment the insurers must make and provides a steady source of work for the shop.

It’s important to note that insurance companies cannot force (“steer”) consumers using claim money to use a repairer the company has signed a DRP agreement with, but they are allowed to recommend shops. Insurance companies have been accused of delaying car inspections to persuade consumers to use DRP shops.

As a result of these practices, the ability of a repair provider to secure a DRP partnership represents a key competitive factor in this segment; though customers are permitted to use non-partnered repair shops, insurers encourage consumers to use DRP-partnered shops.

Insurers also prefer to work with a single firm with multiple locations to ease the administrative burden of handling car repairs in various locales.

Increasing Complexity of Car Repair

The increasing technology load of cars is driving up the cost of equipment, training, and original equipment manufacturer (OEM) parts required to conduct repairs, which is encouraging consolidation. Following the merger of ABRA Auto Body & Glass with Caliber Collision, the combined company stated it would increase investment in enhanced technologies, specialized resources, and innovative processes, to better handle the expanding cost and complexity of repairs. For example, vehicles include ever-larger numbers of cameras and sensors:

  • the 2019 Honda Accord, which uses cameras for its collision warning and emergency braking technology, and Lane Keeping Assist System
  • the 2019 Ford Fusion, which includes a blind spot information system, pre-collision braking, and a lane keeping assistance system
  • the 2019 Toyota Corolla Hatchback, which includes pre-collision braking, lane departure alert, and lane tracing assistance 

These technologies may require adjustment or replacement, even when separate car parts are being serviced, adding to the cost and complexity of repairs.

The Bottom Line

Body shop revenues are likely to continue growing, but at a slower pace than they did between 2008 and 2018. The actual cost of vehicle repair is likely to increase, as increasing cameras and sensors used for driver assistance technologies will require repair and recalibration. However, this effect will be offset to some extent by increasing economies of scale commanded by large firms. Increasing market share commanded by DRP shops, driven by insurer pursuit of cost-cutting, will also slow revenue gains. Finally, the increasing cost of repair may cause some consumers to put off non-essential repairs, especially for non-essential sensors that may cost hundreds of dollars to fix.

Want to Learn More?

We have you covered! For additional information and analysis of US industry trends, see Automotive Repair & Maintenance Services: United States. This report forecasts to 2023 US automotive repair and maintenance revenues and employer establishments in nominal US dollars. Total demand is segmented by type in terms of:

  • general repair
  • body, paint, and interior
  • car wash and detail
  • oil change and lubrication
  • glass
  • transmission
  • exhaust
  • other services, such as brake, diagnostic, and electrical

To illustrate historical trends, total demand, the various segments, and number of employer establishments by segment are provided in annual series from 2008 to 2018.

Data encompasses automotive repair and maintenance service revenues generated by employer and nonemployer establishments. Revenues include the value of parts and labor, but exclude parts sold at retail without the provision of a service. The value of repairs covered by warranty is included. Revenues generated by establishments that specialize in the service of motorcycles are excluded from the scope of this report.

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About the Author

Owen Stuart is a Market Research Analyst with Freedonia Focus Reports. He conducts research and writes a variety of Focus Reports, and his experience as an analyst covers multiple industries.