The Collision Repair Industry in 2022

As I sit here reviewing my personal and our company goals and objectives for 2022, I am also looking at what trends, technologies, events, regulations and other outside influences will affect the collision industry in 2022. Below are my top ten (10) predictions for the North American collision industry in 2022.

1. Collision repair consolidation will continue at the same and maybe even greater pace than 2021. With repair complexity increasing, the technician shortage, the increasing cost of training, equipment and OE certifications combined with record high valuations I believe “the big” will continue to get bigger, faster.

• High valuations will make it hard for “independent” repairers to say no to acquisition offers.

• In 2022 a growing percentage of independent, single location collision center (especially those in major metropolitan areas) will either add locations, become part of a network or franchise, get acquired or go out of business.

• I also believe we will see some of the “mid-size” consolidators merge to create a fourth “national” organization with more than 500 locations

• Speaking of a fourth “national” organization, I believe one of the “Big 3” will be acquired in 2022.

• Due to the ongoing consolidation of new car dealerships, dealer collision groups will grow dramatically.

• This ongoing consolidation will also affect insurers, paint companies, paint distributors, equipment suppliers, associations, industry consultants, industry 20 groups and more…

2. ADAS service and calibrations companies will be the fastest growing business segment. With the ADAS equipped car parc increasing to more than 90 million vehicles and the ongoing technician shortage, the need for companies that specialize in ADAS services and calibrations will increase dramatically! Most consolidators have figured this out and acquired companies like Protech, Mobile Automotive Services and others.

• Don’t be surprised to see the major consolidators continue to acquire more local/regional ADAS service and calibration companies to service the collision centers they acquire.

• The number of local and regional MSO’s that launch a new company/division to deliver these services to their locations will grow dramatically.

• LKQ/EliteTek is well positioned to benefit from this trend and have the resources to grow to meet the industry’s needs through internal growth and acquisitions.

• We can also expect smaller, regional companies to merge and take advantage of the industry’s growth.

3. Collision Center closures will increase: Vehicle technologies, training and equipment requirements combined with the technician shortage, insurance and OEM requirements, increased costs and lower margins will cause 2000-4000 shops to close.

• The purge the industry has talked about for years is now here.

• In some cases, these business closures lead to new business start-ups but at a much lower rate than the closures

4. The technician shortage will get worse. In my opinion, this is the industry’s #1 challenge with no short-term solution. This shortage will continue to affect the industry’s ability to properly repair vehicles and will increase keys to keys cycle time.

• This situation will affect all aspects of our industry.

• Increase consolidation

• Drive up compensation which equates to higher costs and lower margins

• Increase cycle times (LOR)

• Limit revenues

• Drive new training / mentorship models

5. Insurance driven technologies will permeate a large percentage of collision centers: Image based estimating and AI (Artificial Intelligence) will be pushed down to collision centers just as computerized estimated was pushed in the 1990’s!

• This will happen because there are too many benefits for insurers and the consumer loves the technology and the service

• This push will generate “friction” and a “haves VS have nots” scenario between the largest collision repair organizations and the rest of the industry.

6. OEM certifications will become more important. The combination of ADAS technologies and an increase of EV launches will make OEM certifications much more important than in previous years.

• Parts restrictions by the manufacturers will increase due to OEM certification requirements

7. Parts pricing and availability will continue to affect severity and cycle times. Chip shortages, supply chain issues and the manufacturer’s’ focus on EV’s will push parts prices up while limiting availability.

• Price increases and availability issues will also affect aftermarket and recycled parts

• The % of parts as part of an overall repair will pass 50%

8. Business technologies that use vehicle build data, AI, AR, VR, smart phones and more to improve repair procedure access and usage will be launched by multiple companies.

• These new technologies will make it easier for repairers and insurers to “be on the same page” when it comes to repair procedures

• Expect one or two companies to launch “build data” solutions with 15-20 manufacturer’s build data in 2022

9. OEC will begin to “flex” its muscles after its 2021 acquisition spree: After acquiring Verifacts, Assured Performance, NuGenIT and OPS, we should expect 2022 to be the year OEC “assimilates” these acquisitions to increase revenues and eliminate duplicate costs, expenses and management personnel.

• Expect OEC to acquire additional companies to “fill out” their portfolio

10. One of the four (4) remote diagnostic providers will be acquired: Today there are four (4) national/international remote diagnostic providers, with a fifth (5th) company, Bosch, announcing their intent to “join the party”. We believe its time for one or two of these companies to join forces to benefit from user count and technology platforms.