Insurance companies are expected to continue entering the industry with chains or joint ventures of their own, increasing their revenue but pushing down prices.
Melbourne, Victoria (PRWEB) March 12, 2015
The Motor Vehicle Body, Paint and Interior Repair industry relies on vehicle accidents to generate revenue. According to IBISWorld industry analyst David Whytcross, “A combination of safer new vehicles and more risk-averse drivers has reduced vehicle accidents and decreased demand for the industry's services.” New car sales have remained strong following a big spike after the global financial crisis, meaning that more consumers drive vehicles with advanced safety features. As fewer consumers have traded-in or disposed of their older vehicles, the average age of the domestic vehicle fleet has remained stable over the past five years. However, the increasing modernity of the vehicle fleet has meant that more vehicles have improved safety features, reducing collisions. As a result of these factors, industry revenue is forecast to fall by a compound annual rate of 0.2% over the five years through 2014-15, to be worth $7.1 billion.
Revenue is estimated to decline by 1.8% in 2014-15, continuing the slow descent that began in 2011-12. Although the number of vehicle crashes has declined in most years, minimising revenue volatility, it is the growing power of insurance companies within the industry that is significantly reducing industry revenue. Most smash repairers rely on insurance claims to gain work, which makes obtaining preferred smash repairer agreements with insurance companies essential to ensure new customers. The falling number of motor vehicle accidents has reduced demand for industry services and enabled insurers to pay smash repairers less, contributing to the revenue decline. Similar trends are expected to affect the Motor Vehicle Body, Paint and Interior Repair industry over the next five years. New cars will have even more advanced safety features installed to help drivers avoid crashes. The average age of the vehicle fleet is projected to remain steady, meaning that consumers will be driving increasingly modern vehicles as time passes. “Insurance companies are expected to continue entering the industry with chains or joint ventures of their own, increasing their revenue but pushing down prices”, says Whytcross.
The industry is fragmented due to its ease of entry. This ensures that there are always new entrants to the industry when profit margins are sufficient. The majority of enterprises tend to only hold a small share of the market and are unable to gain significant economies of scale. This situation is changing with an exodus of smaller operators, such as working proprietors. The proportion of working proprietors to total establishments is estimated to have declined over the past five years. This has been partially due to the exit of working proprietors from the industry and the expansion of franchises, which has slightly pushed up market share concentration.
For more information, visit IBISWorld’s Motor Vehicle Body, Paint and Interior Repair industry in Australia report page.
The industry includes companies that are primarily engaged in repairing, panel beating or spray painting smashed or damaged motor vehicles. The industry also includes companies primarily engaged in replacing, repairing or tinting automotive glass and companies primarily engaged in interior repairs, car wash or cleaning services.
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