As I travel around the country speaking with collision repairers, insurers, and vendor groups, it strikes me how often the audience does not know what is going on outside of their area of the industry.
I know we struggle to keep up with our daily workload and balance family life, but there is value in reading, exploring, and gaining an understanding of the various segments of our industry and how world events affect them. Exchange rates, the price of a barrel of oil, and European Union regulations all influence each of the parts of our collective industry.
For example, we know that the price of a barrel of oil going up will hike up the cost of a gallon of gas. If that spike is severe, folks reduce their driving, which in turn reduces accidents. We have also learned from recent history just how much rising oil prices can affect used car values of larger vehicles, especially at a time when the fleet on the U.S. roads is full of trucks and SUVs. This combination resulted in lower values of these vehicles and more of these vehicles being totaled.
Beyond that, the price of a barrel of oil also affects parts prices. OEMs are hit with higher cost of parts delivery and will eventually be pressed to raise collision parts prices to cover this increase. Rising oil prices have also adversely affected the cost of paint manufactured from petroleum. So, you guessed it, the cost of refinishing a vehicle will likely also rise.
Is your head spinning yet? Hold on, there's more. The currency exchange rate is also a major player in our industry. A weak dollar will increase foreign car part costs. The currency to keep a close watch on is the Chinese yuan. The Chinese watch our economy very closely and can revalue their currency in a way that the European Union cannot. The yuan influences some OEMs (because many OEMs have Chinese assembly operations) and most aftermarket pricing. What about European regulations?
The European Union has "Carbon Footprint" legislation that requires its auto makers to lower vehicle emissions and improve mileage much in the same way we have our Corporate Average Fuel Economy regulations. This regulation pushes European car makers towards lighter construction materials that improve mileage, which will increase repair cost and complexity.
Understanding and anticipating changes that will affect our collision and insurance business is the key to being competitive in the future. So how can you keep up on the industry, outside of your box? Read everything you can get your eyes on. Subscribe to newsletters, blogs, and RSS and social media feeds related to all facets of our industry. You'll be amazed at the crossover of information.
Statements and opinions expressed in this article [or this blog] are solely those of the author. They are not offered as and do not constitute legal advice or opinion of Mitchell International, Inc.
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