Mitchell 4Q Report: Japanese Tsunami Did Not Devastate Collision Industry

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

Will Replacement Parts Costs Go Up?

Although many presumed that aftermarket parts usage would increase, and that OEM components would be increasingly difficult to come by, Horn quickly dispels these notions in the opening feature of the 4Q publication. He then leverages the Mitchell Collision Parts Price Index (MCPPI)—a metric similar to the Consumer Price Index (CPI)—to identify trends in parts prices versus inflation and assess the impact of the tsunami on parts selection behavior.

“The tsunami in Japan was incredibly tragic and affected so many,” said Horn. “After having a chance to absorb the dramatic impact on their Nation, we wanted to see how it would affect the collision repair community. Our in-depth analysis using the MCPPI indicates the tsunami had little net impact on parts pricing. Isolating the Japanese vehicle make parts index and breaking out the subset of Japanese make vehicles by part type shows that the Japanese vehicle index mirrors broader market trends. In the aggregate, parts prices increased, even in a year where inflation has slowed to the lowest rate since we began measuring the index.

“OEM indexed parts decreased in price while aftermarket and remanufactured parts increased slightly, he added. “Spot shortages and hoarding may have occurred immediately after the tragic events in the spring but had little material impact on Japanese vehicle parts prices.”

Mitchell created the MCPPI specifically for the collision repair industry and designed it to analyze and track parts price changes using the data for the top 20 most replaced collision parts. To arrive at the results outlined in the report, Mitchell used the most up-to-date MCPPI data to analyze the most replaced collision parts, contrasting that with a subset of Japanese-only vehicle parts reveals the true impact of the tragic tsunami this past spring on Japanese vehicle parts pricing, including whether costs increased as a result of shortages.

“Delving into insurance claims data helps the P&C and collision repair industries assess marketplace conditions and adjust accordingly, which is critical since parts comprise approximately 42 percent of average repairable estimate dollars and directly impact estimate severity,” Horn explained. Being aware of the impact of significant events and being armed with the latest collision repair information and analysis helps our clients increase customer satisfaction, thus improving their business performance.”

Other highlights of the 4Q ITR include:  

• The initial average appraisal value, calculated by combining data from all first and third-party repairable vehicle appraisals uploaded through Mitchell systems in Q3-2011 was $2,536—a mere $3 lower than the previous year's Q3-2010 appraisal average. Applying the prescribed development factor of 2 percent to these data produces a final anticipated value of $2,587.  
• Mitchell's Q3—2011 data reflect an initial average gross collision appraisal value of $2,812—$55 less than this same period last year. However, applying the indicated development factor of 3 percent, suggests a final Q3-2011 average gross collision appraisal value of $2,884—an increase of $17. Also of note, the average actual cash value (ACV) of vehicles appraised for collision losses during Q3—2011 exceeded $14,000 for the first time.  
• In Q3—2011, the average gross appraisal value for comprehensive auto coverage estimates processed through Mitchell servers was $2,694—compared to $2,600 in Q3-2010. The low supplement amount reflects the heavy hail appraisals written during the quarter.

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