The automotive industry is changing rapidly, so I track trends closely and revisit this topic often. Here are five major trends to watch.
Changes in vehicle construction materials
Automakers are moving away from advanced high-strength steel alloys toward more cost-effective materials like aluminum, which costs less than the exotic alloy alternatives and causes less wear during the manufacturing/stamping process. Some automakers also are looking at a cost-effective alternative to carbon fiber. Both Volkswagen and Ford are working with partners to develop a forged carbon process to produce carbon-based body panels at a lower cost.
In the standard carbon fiber process, a layer of carbon particles is laid down in a panel mold and a layer of fiber mat is placed on top, followed by another layer of carbon particles – kind of like an automotive lasagna – then the layers are baked to form a strong, lightweight panel.
The new forged carbon process takes a paste of carbon particles and extrudes it into a mold under extreme hydraulic pressure. Think of squeezing toothpaste from a tube with the mold being the toothbrush. This new process requires much less energy and produces a more precisely formed product that allows for sharper, better-defined body lines.
Additional changes aimed to save weight and increase mileage
Automakers also are using more aluminum and carbon-based products because of the stringent government-mandated mileage goals. These changes go far beyond just exterior panels. For example, a Michigan-based research company has developed a composite brake rotor made of an alloy center hub and a carbon-based brake surface. This design will reduce the weight of a rotor by 30 percent. Interior materials are changing as well. Soy-based seat foam is replacing standard foam rubber, resulting in a lighter, recyclable seat pad.
The exchange rates and its impact on parts and salvage
The value of the U.S. dollar against the Euro and Chinese Yuan will have an impact on parts manufactured in the respective countries and determine if a strong dollar to Euro rate will reduce the buying power of European salvage buyers. While the Mexican peso also is important to U.S. salvage sales, a significant amount of overseas purchases are dependent on the Euro.
New car sales rate
So far this year we've seen rebounding of new car sales and many experts forecast that U.S. new vehicle sales will end up in the 14.8 to 15 million range, substantially more the previous four years and nearly back to our pre-recession level. If this trend holds, it will soften the demand for used vehicles and soften the values of vehicles we repair. The end result will be more total losses. The upside of an increase in new vehicle sales is that all of these vehicles will require collision and comprehensive coverage, benefitting insurers. In the event of a loss, repair shops will benefit, too, since financed vehicles must be repaired.
Rising losses for insurers
We had a record storm season in 2011, and we've had a large number of damaging storms. While repairers in the storm areas will temporarily benefit from the increase in repair business, the insurers may increase the volume of direct repair inspections. The DRP model offers a very low-cost appraisal compared to a staff or independent appraiser inspecting a vehicle in the field, and holds the potential of a shorter repair cycle time.
Repairers can prepare for these changes with education:
- Understand the repair processes for the advanced materials and new components by investing in an electronic technical advisor database.
- Watch the exchange rates and new vehicle sales rate, as well as the used car value indices published by the auto auction companies.
- Make sure your insurance contacts are not prematurely declaring a borderline vehicle a total loss. Fully educate them by researching salvage values and market value.
- Educate insurers in your area about your capabilities when it comes to handling storm damage repair.
Greg Horn is vice president of industry relations for Mitchell International.