Shift to Pricier Vehicles Has A Cost

Transcription

1 Perspective Shift to Pricier Vehicles Has A Cost Susanna Gotsch, Director, Industry Analyst, CCC As automakers have ramped up the content of vehicles now manufactured with more safety features, telematics, and other technology, the cost of vehicles has risen. New tariffs put in place by the Trump administration in CY2018 or under review for CY2019 may drive prices even higher. Already tariffs on aluminum and steel sourced outside the U.S. have led analysts to predict the price of a vehicle may increase by 1 percent, 1 and the Center for Automotive Research predicts the expansion of North American capacity for auto assembly, parts and components manufacturing, and steel and aluminum production, and the higher labor costs in Mexico called for under the newly proposed USMCA treaty may add more than 2.5 percent to the cost of U.S. non-truck vehicles, and parts and components imports. 2 Additional tariffs of 25 percent on vehicles produced by European Union, Japanese and Korean automakers are still under consideration for CY2019, which the Alliance of Automobile Manufacturers estimates could mean an additional cost of $5800 per vehicle to the 44 percent of vehicles imports sold annually in the U.S. 3 And, the 25 percent tariff on imports could also increase costs for U.S.-built vehicles by as much as $2000 per vehicle based on foreign-made content of about 35 percent according to the American Automotive Policy Council. 4 As the cost of new vehicles rise, the cost of used vehicles will also likely rise, this could lead not only to higher repair costs, but also to higher total loss costs as well. So, while there remains a great deal of uncertainty about the final outcome of the automotive tariffs, it s clear that higher costs across the entire automotive industry are a likely result. According to NADA, the average MSRP of a new vehicle sold in CY2018 increased another 2 percent from the year prior (see Figure 1). Higher vehicle ownership costs have increasingly become a concern not only due to its potential drag long term on new vehicle sales, but also as a key factor driving up vehicle repair and total loss costs.

2 Figure 1: NADA Average Selling Price of New Vehicles Sold Average MSRP New Vehicles Sold $36,000 $34,000 $32,000 $30,000 $28,000 $26,000 $24,000 $22,000 $20,000 CY2005 CY2006 CY2007 CY2008 CY2009 CY2010 CY2011 CY2012 CY2013 CY2014 CY2015 CY2016 CY % 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% Percent change in Average MSRP from Prior Year Avg MSRP % Chg from Prior Yr Source: NADA Rising Vehicle Repair Costs Analysis of vehicle appraisal data collected by CCC on behalf of its clients shows that volume has shifted to vehicleswith higher market value, or ACV during the last ten years. As the values of the vehicles themselves have risen, the cost of replacement parts for those vehicles has Figure 2: Annual Appraisal Volume Share by Loss Vehicles ACV Ranges 2.7% 3.6% 3.5% 4.9% 4.9% 6.1% 6.8% 7.2% 8.1% 8.2% 2.0% 68.8% 66.9% 65.6% 60.4% 60.4% 56.4% 55.7% 55.6% 53.5% 53.5% 28.0% 29.0% 30.5% 33.8% 33.8% 36.4% 36.4% 35.8% 36.5% 36.3% also risen driving up repair costs overall. For example, between CY2009 and CY2018, the volume of vehicles with ACV of $15,000 or less has dropped from 68.8 percent to 53.5 percent; while the volume share of vehicles with ACV of $45,000 to $60,000 has risen from 0.3 percent in CY2009 to 1.6 percent in CY2018 (see Figure 2). CY2009 CY2010 CY2011 CY2012 CY2013 CY2014 CY2015 CY2016 CY2017 CY2018 >$0 and <=$15K >$15K and <=$30K >$30K and <=$45K >$45K 2

3 As the value of the vehicle itself rises, its repair cost also rises (see Figure 3), part replacements share of the overall repair cost grows (see Figure 4), and the average number of parts replaced also grows (see Figure 5). Figure 3: Average Total Cost of Repairs per Dollar Range of Loss Vehicle ACV CY2009-CY2018 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 >$0 AND <=$15K >$15k AND <=$30k >$30k AND <=$45k >$45k AND <=$60k >$60k AND <=$75k >$75k AND <=$90k >$90K Figure 4: Parts % of Total Repair Cost per Dollar Range of Loss Vehicle ACV CY2009-CY % 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% >$0 AND <=$15K >$15k AND <=$30k >$30k AND <=$45k >$45k AND <=$60k >$60k AND <=$75k >$75k AND <=$90k >$90K Figure 5: Average Parts Replaced per Claim per Dollar Range of Loss Vehicle ACV CY2009-CY >$0 AND <=$15K >$15k AND <=$30k >$30k AND <=$45k >$45k AND <=$60k >$60k AND <=$75k >$75k AND <=$90k >$90K CY 2009 CY 2010 CY 2011 CY 2012 CY 2013 CY 2014 CY 2015 CY 2016 CY 2017 CY

4 A comparison of the number of replaced parts for collision and liability losses from CY2001 to CY2018 by vehicle age group reveals 15.2 parts on average were replaced on collision current model year vehicles in CY2018 versus 10.9 parts in CY2001 (see Figures 6A-B). Vehicle complexity has grown with more electronics, safety features and complexity of materials. As parts account for a growing share of the overall repair cost, they also become a factor in why a vehicle may be totaled. Figure 6A: Parts and Labor Cost Increases Drive Repair Costs Higher COLLISON LOSSES LIABILITY LOSSES Calendar Year Vehicle Age Group Share of Overall Vol by Age Group Parts % Total Repair Cost Avg # Parts Repl per Claim Share of Overall Vol by Age Group Parts % Total Repair Cost Avg # Parts Repl per Claim CY2001 CY2009 CY2018 Current Yr 9.4% 42.3% % 39.1% Yrs 39.0% 41.9% % 38.3% Yrs 27.8% 40.5% % 36.7% Yrs Plus 23.7% 37.3% % 34.1% 4.5 Total 100% 40.7% % 36.6% 5.6 Current Yr 5.3% 43.0% % 37.7% Yrs 36.3% 42.4% % 37.5% Yrs 29.4% 40.7% % 36.1% Yrs Plus 29.1% 37.1% % 32.1% 4.4 Total 100% 40.7% % 35.2% 5.4 Current Yr 6.5% 46.9% % 41.9% Yrs 36.3% 45.1% % 39.5% Yrs 25.7% 41.7% % 36.2% Yrs Plus 31.5% 37.3% % 32.1% 5.2 Total 100% 43.5% % 36.3% 6.8 Figure 6B: Share of Total Repair Cost CY2018 Other Materials Labor 11% 8% 40% n Labor hours increase n Labor rates increase n Calibration costs n New lightweight materials add complexity to repair Parts 41% Vehicle Repair Cost n Part cost inflation n Part counts increase n More captive OE parts as vehicle age declines, more sensors, cameras, etc.

5 To study this further, we conducted an analysis of vehicle appraisals with an ACV between $45K and $60K where the total loss threshold was hit. Within this subset of appraisals, there were over 76 parts replaced on average per appraisal with an average cost of $300 per part, and parts overall accounted for 62.4 percent of the overall repair cost (see Figure 7). Further analysis of the frequency of replacement of specific parts on these appraisals and their average replacement cost reveals over 80 percent included at least one fender replacement with an average cost of $429, and 63 percent included at least one headlamp replacement with an average cost of $1,371 (see Figure 8). 350 Figure 7: Replacement Part Cost Share of Total Repair Cost Distribution [10.27%, 13.37%] (13.37%, 16.47%] (16.47%, 19.57%] (19.57%, 22.67%] (22.67%, 25.77%] (25.77%, 28.87%] (28.87%, 31.97%] (31.97%, 35.07%] (35.07%, 38.17%] (38.17%, 41.27%] (41.27%, 44.37%] (44.37%, 47.47%] (47.47%, 50.57%] (50.57%, 53.67%] (53.67%, 56.77%] (56.77%, 59.87%] (59.87%, 62.97%] (62.97%, 66.07%] (66.07%, 69.17%] (69.17%, 72.27%] (72.27%, 75.37%] (75.37%, 78.47%] (78.47%, 81.57%] (81.57%, 84.67%] (84.67%, 87.77%] (87.77%, 90.87%] (90.87%, 93.97%] (93.97%, 97.07%] Figure 8: Average Price per Replaced Part and Share of Appraisals Including Replaced Part $1, $1, $1, % 80.0% $1,161 $1, $1,061 $1,004 $1,005 $1, $ $772 $684 $736 $ $500 $429 $388 $362 $ $364 $285 $258 $ $150 $81 $76 $130 $154 $56 $110 $88 $125 $- FENDER Fender FRONT LAMPS Headlamp assy RESTRAINT SYSTEMS Side impact sens RESTRAINT SYSTEMS Head air bag WHEELS Wheel, alloy FRONT BUMPER & GRILLE Bumper cover FENDER Fender liner HOOD Hinge RESTRAINT SYSTEMS Ft impact sensor COOLING Radiator HOOD Hood HOOD Insulator PILLARS, ROCKER & FLOOR Rocker molding FRONT DOOR Door shell Unknown Group Unknown Component RESTRAINT SYSTEMS Driver air bag FRONT BUMPER & GRILLE Park sensor FRONT BUMPER Bumper cover FENDER Ft fender liner QUARTER PANEL Quarter panel REAR DOOR Door shell RADIATOR SUPPORT Radiator support RESTRAINT SYSTEMS Seat belt assy CAB Roof panel 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Avg Price % of Claims with Part 4

6 In some cases, individual parts accounted for 0.2 percent of the overall value of the vehicle which in these examples was between $45K and $60K, so not an insignificant number. Figures 9 and 10 provide a comparison of the average cost per part (includes all part types) by OE for the most frequently replaced parts across this subset of appraisals. With each vehicle repair requiring more part replacements, at a higher cost, with more labor hours at a higher rate, it s easy to understand why repair costs are increasing. Couple that with a continuation of the shift of the vehicle fleet to higher cost vehicles overall, and the industry will likely continue to see repair costs rise. Unfortunately, the industry will also likely see more vehicles deemed total loss as cost and complexity of parts drives repair costs over the total loss threshold. Figure 9: Avg Cost per Part by Vehicle Make (Includes All Part Types) for Subset of Appraisals with ACV $45K-$60K Flagged Total Loss FENDER Fender RESTRAINT SYSTEMS Side Impact Sens $410 $434 $417 $331 $385 $215 $310 $400 $322 $359 $529 $225 $602 $439 $322 $555 $304 $237 $359 $361 $535 $658 $96 $95 $70 $140 $203 $202 $87 $93 $199 $301 $77 $256 $61 $49 $120 $94 $112 $124 $209 $291 $1,078 FRONT LAMPS Headlamp Assy WHEELS Wheel, Alloy $562 $466 $315 $288 $1,118 $1,476 $1,579 $1,238 $1,055 $1,594 $1,023 $1,579 $1,161 $2,248 $2,601 $2,120 $1,714 $1,681 $1,698 $1,671 $1,537 $760 $560 $677 $614 $933 $794 $896 $551 $945 $910 $898 $974 $604 $831 $586 $835 $656 $629 $855 $1,119 $912 $1,440 4

7 Figure 10: Avg Cost per Part by Vehicle Make (Includes All Part Types) for Subset of Appraisals with ACV $45K-$60K Flagged Total Loss FRONT BUMPER & GRILLE Bumper Cover FENDER Fender Liner $513 $408 $515 $365 $294 $435 $355 $456 $246 $318 $542 $392 $161 $30 $72 $73 $85 $69 $60 $70 $94 $106 $100 $89 $112 $63 $116 $116 $57 $83 $46 $92 $873 $727 $165 $147 RESTRAINT SYSTEMS Head Air Bag HOOD Hood $535 $377 $760 $759 $196 $539 $375 $507 $757 $814 $626 $724 $1,331 $325 $480 $349 $1,016 $782 $564 $636 $1,544 $1,063 $1,309 $1,007 $792 $1,126 $1,416 $697 $851 $702 $994 $998 $879 $809 $1,062 $1,827 $609 $539 $1,353 $1,019 $1,686 $1,643 $1,466 $2, One percent increase predicted by Morningstar. Stoll, John D. and Colias, Mike. Steel, Aluminum Tariffs Could Raise Car Prices by $ March 12, Center for Automotive Research. NAFTA Briefing: Review of Current NAFTA Proposals and Potential Impacts on the North American Automotive Industry. April How U.S. and China Tariffs Are Rippling Through U.S. Industries. July 13, Ibid CCC Information Services Inc. All rights reserved. CCC, the CCC logo, and powering Forward are registered service marks of CCC Information Services Inc. The information and opinions in this publication are for general information only, are subject to change and are not intended to provide specific recommendations for any individual or entity. Although information contained herein has been obtained from sources believed to be reliable, CCC does not guarantee its accuracy and it may be incomplete or condensed. CCC is not liable for any typographical errors, incorrect data and/or any actions taken in reliance on the information and opinions contained in this publication. Note: Where CCC Information Services Inc. is cited as source, the data provided is an aggregation of industry data related to electronic appraisals communicated via CCC s electronic network or from total loss valuations processed by CCC. To learn more about how CCC is transforming the claims experience poweringforward@cccis.com.