Welcome to 2018… If you’ve been enjoying a nice sleep-in after the millennium bug hit you’re probably going to wake up to a rude shock on the changes happening in the auto refinish industry, but also the greater automotive industry as a whole. It’s no surprise that we’re undergoing the biggest shift globally with the recent injection of market interrupters like Tesla, Uber and other robotic formats offering companies solutions that pose a nasty threat to the future of auto refinish. It’s safe to say that we will always enjoy the DIY project on our beloved car, it’s just that we may employ robots to DIY our other robots in the future.
The Australian automotive industry is going through a period of unprecedented change culminating in the closure of car manufacturers Toyota, Holden and Ford, in Australia in 2017. The impact of these closures will mean an abrupt decline in the forecast of employment and revenue growth between 2016 and 2018. These closures will have the biggest impact on businesses involved in manufacturing, whether it be the vehicles themselves, or parts for vehicles. However, the industry will continue to adapt and evolve. Businesses involved in wholesale and retail will benefit from greater access to imported vehicles and parts. There is already evidence that new car sales are on the rise driven by a combination of low interest rates and Government incentives. And as long as there are more vehicles on the road there will be a need for servicing and repair. So it is forecast that the Australian automotive industry as a whole will return to a period of positive growth sometime after 2018.
Some positive changes that have been making their way into the auto refinish world are online retailers who can offer incredible prices given their lack of overheads, freight services now offering door-to-door solutions much faster to avoid a decrease in shop productivity, AfterPay and other financial solutions to allow for better cash flow to smaller operators allowing them to survive in what feels like a David and Goliath industry with insurance companies buying up body shops to create their own market dominance.
So how does the evolution of the industry effect body shops around Australia? Will they survive?
The likely outcome in any industry is that operators will adapt to market needs. Customers will dictate the supply and demand but it’s quite commonplace that change comes over a long period of time and with good foresight for operators and customers to adapt.
Our view – We see the need for service and repair growing over the next decade until the next phase of automated, driverless cars taking over our roads, which will point to a decline in the service and repair industry. The inclusion of automated, driverless car technology will also see a market vertical integration where manufacturers will own the software, hardware, service, repair and insurance side of automotive. Change is coming, but there’s plenty of time to adapt.