...measuring machines, welders and spray booths while charging $40 an hour.
"In January 2022, we found another company repairing lawnmowers in Illinois and in this case, they charge $85 to fix lawnmowers, while most of the body shops I work with are charging $40 to $50 an hour. It’s a completely inadequate return for what you need to get reimbursed.
"Consumers are familiar with labor rates that are considerably higher than what we have in collision repair," Ronak said. "In December of 2021, the average retail auto repair came in at between $75 to $130 per hour for labor. In addition, you can expect dealer rates to be significantly higher than that. I am speculating, but I can bet that the difference in automotive and collision labor rates in Texas is $25 to $40 an hour, with deviations based on the specific shop and its location.”
With the experts predicting another year of decades-high inflation---7%---Ronak asked, what are the consequences of that in the real world?
“Over the last several years, we have watched the amount of dollars in parts sales per RO have grown from $890 per RO to $1,300 on average," he said. "Labor used to be the largest portion of the collision repair sale and now it’s parts by far.
"During the pandemic, insurers were forced through legislation to reduce their rates to consumers. But now they have justified a return to their former rates because more and more consumers are driving more frequently at higher average speeds, so the mandated refunds are history," he continued. "So, there is a huge gap between the annual percentage increase in auto insurance and what it costs to fix a vehicle, and most insurers will tell you that the higher premium increase exists due to the high costs of personal injury cases.
“Inflation was at 7% in December and it’s been crazy how quickly inflation is sneaking up on our industry. We’re saddled with this increasing level of inflation that is two times more than originally forecasted," Ronak said. "Right now, the experts predict another year of record high inflation while other sources like with the Bureau of Labor & Statistics believe that inflation will peak this summer.
"Two percent is considered by the federal government as a healthy level of structural inflation, but now it’s the highest in 20 years," he said. "It’s like dead men walking---we haven’t faced the impact of this inflation yet. No one isn’t reacting and that is shocking to me. When the federal government puts a trillion dollars into our economy during the pandemic, it devalued our dollar and made every unit less in value. So, now it is going to...
Ed Attanasio