The latest iteration of Mitchell's Industry Trends Report (ITR)begins with an examination of the impact of the Japanese tsunami onvehicle parts pricing. Greg Horn, ITR editor-in-chief andMitchell's vice president of industry relations, alludes to storiesof salvage yards hoarding parts and asks some questions that haveweighed heavily on the minds of all involved in the collision partsindustry—from repair shops to insurers—since the disaster.

Will Replacement Parts Costs Go Up?

Although many presumed that aftermarket parts usage wouldincrease, and that OEM components would be increasingly difficultto come by, Horn quickly dispels these notions in the openingfeature of the 4Q publication. He then leverages the MitchellCollision Parts Price Index (MCPPI)—a metric similar to theConsumer Price Index (CPI)—to identify trends in parts pricesversus inflation and assess the impact of the tsunami on partsselection behavior.

“The tsunami in Japan was incredibly tragic and affected somany,” said Horn. “After having a chance to absorb the dramaticimpact on their Nation, we wanted to see how it would affect thecollision repair community. Our in-depth analysis using the MCPPIindicates the tsunami had little net impact on partspricing. Isolating the Japanese vehicle make parts index andbreaking out the subset of Japanese make vehicles by part typeshows that the Japanese vehicle index mirrors broader markettrends. In the aggregate, parts prices increased, even in a yearwhere inflation has slowed to the lowest rate since we beganmeasuring the index.

“OEM indexed parts decreased in price while aftermarket andremanufactured parts increased slightly, he added. “Spot shortagesand hoarding may have occurred immediately after the tragic eventsin the spring but had little material impact on Japanese vehicleparts prices.”

Mitchell created the MCPPI specifically for the collision repairindustry and designed it to analyze and track parts price changesusing the data for the top 20 most replaced collision parts. Toarrive at the results outlined in the report, Mitchell used themost up-to-date MCPPI data to analyze the most replaced collisionparts, contrasting that with a subset of Japanese-only vehicleparts reveals the true impact of the tragic tsunami this pastspring on Japanese vehicle parts pricing, including whether costsincreased as a result of shortages.

“Delving into insurance claims data helps the P&C andcollision repair industries assess marketplace conditions andadjust accordingly, which is critical since parts compriseapproximately 42 percent of average repairable estimate dollars anddirectly impact estimate severity,” Horn explained. Being aware ofthe impact of significant events and being armed with the latestcollision repair information and analysis helps our clientsincrease customer satisfaction, thus improving their businessperformance.”

Other highlights of the 4Q ITR include:

• The initial average appraisal value, calculated by combiningdata from all first and third-party repairable vehicle appraisalsuploaded through Mitchell systems in Q3-2011 was $2,536—a mere $3lower than the previous year's Q3-2010 appraisal average. Applyingthe prescribed development factor of 2 percent to these dataproduces a final anticipated value of $2,587.
• Mitchell's Q3—2011 data reflect an initial average grosscollision appraisal value of $2,812—$55 less than this same periodlast year. However, applying the indicated development factor of 3percent, suggests a final Q3-2011 average gross collision appraisalvalue of $2,884—an increase of $17. Also of note, the averageactual cash value (ACV) of vehicles appraised for collision lossesduring Q3—2011 exceeded $14,000 for the firsttime.
• In Q3—2011, the average gross appraisal value for comprehensiveauto coverage estimates processed through Mitchell servers was$2,694—compared to $2,600 in Q3-2010. The low supplement amountreflects the heavy hail appraisals written during the quarter.

The latest ITR may be downloaded in its entirety by visitingMitchell's website.