VACC CEO Geoff Gwilym says the prevailing challenges faced by the automotive industry represent an opportunity for body shops to raise prices, saying “if there was ever an opportunity for the body repair industry to actually use its power and influence in the market of fixing cars, it’s now.”
According to Gwilym, the skills shortage and business closures brought about in part by COVID-19 lockdowns and illness have created a backlog of work, prompting a call to decline poorly paying jobs.
“We have advocated for higher wages in the automotive industry for years. Well, guess what? We’ve got them,” Gwilym told BodyShop News. “We’ve got mechanics earning $100,000, $110,000, $120,000, $130,000. We didn’t want it through a pandemic, and we didn’t want it through a starvation of labour, but the tide has turned.”
Despite the history of insurance company control over body repair pricing, Gwilym said the industry can also use market conditions to lift prices.
“In a lot of locations around Victoria and Australia, consumers are waiting six, eight and 10 weeks to get their car back. That’s because we have run out of labour. In any supply and demand market there are opportunities for different parts of the market at different times and right now, insurers need to get cars fixed for consumers,” Gwilym said.
“There’s no doubt about it. If you evaporate some of the labour out of the market and some of the businesses are gone as well, ultimately there’s a huge back-up of consumer demand that reflects badly on insurers. They need to get cars fixed.
“I’m not raising a flag to body repairers that they need to gouge insurers. I’m just saying it’s an opportunity to step back and evaluate your business. People tell me body repairers haven’t had a real rise in wages or income for over 10 years because they have been marginalised through cost-cutting. To be honest with you, in many cases, insurers have screwed the body repair industry for many years and guess what – we’re in a different world now.”
He suggested repairers use an hourly rate calculator to determine the true cost of running their business and charge insurers accordingly. “I think they need to realistically look at the cost of their business, look at their hourly charge out rate, and charge it. If you don’t do it now, and the tide changes, in a couple years you will wish you had,” he added.
Gwilym also said businesses performing cheaper work because they own their premises undermines the rest of the industry as they set a low benchmark. “Some people would say ‘Geoff, that’s just market conditions’. Well, it is, but if you’ve paid off your workshop and your overheads are quite minimal, and then you’re pitching a price in the market that nobody else could survive at, then effectively you’re just helping to put other people out of business.
“If you own your workshop, you should include it in the cost of business because that’s the real cost of repairing the car. People in many cases just absorb it, almost as a benefit. It’s not a benefit, it’s a real cost and if you’re not charging that on, you’re actually giving the consumer or the insurer the benefit of you owning the building.”