Pandemic hits auto shops, Auto News, ET Auto revenue streams

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Industry executives have said body shop revenues have halved compared to the pre-Covid period.

Bombay:

Fewer cars on the road during the Covid-19 pandemic meant not only fewer accidents, as most people were working from home, but also reduced body shop revenues and lower insurance claims.

Industry executives have said body shop revenues have halved compared to the pre-Covid period. This happened when the average distance traveled by a vehicle per month decreased by 30 to 40%, they said. Studies have shown that a positive consequence was that the number of deaths in road accidents fell to 320 per day from 428 before the Covid-19 epidemic.

“In the past 18 months, the revenue stream for collision repair shops has taken a hit, down 50%. Although it experiences a recovery from August, it has yet to reach pre-Covid levels, ”said Nikunj Sanghi, one of the main Mahindra & Mahindra dealers in Alwar.

The biggest impact has been on dealer shop revenue, where 70% of service revenue comes from the body shop, according to executives. As a result, very few workshops retained full staff – many were put on leave. “The first quarter of this fiscal year was a failure, due to lockdowns imposed following the second wave of the pandemic. However, business started to improve last month,” said Arun Malhotra, former Managing Director of Nissan India and automotive expert.

“While these are testing periods, dealers are extremely optimistic about their ability to reach pre-Covid levels in the workshops soon. Yet very few major damaged vehicles arrive. It’s more for small repairs. If it is a total loss accident, the cost of the repair is almost 50% of the car’s value, ”said Subhash Gehlot, a Rajasthan-based Maruti Suzuki dealership who has 36 workshops throughout. the state.

He said his workshops were repairing around 1,000 vehicles per month at the body shop before the pandemic and the average cost of repairs was around 70,000 rupees.

Gurdeep Batra, a Patiala-based Hyundai dealership, said body shop revenues, the backbone of any dealership, have yet to recover after plunging 75% in his case. He said his workshop would get around 200 vehicles a month from the body shop before the pandemic, with repairs costing around Rs 35,000 on average.

Dealers have said that while rear-end collisions declined 40 to 50 percent during the pandemic, vehicles affected while parked were a significant part of the body shop.

Insurance claims fell 60% year-on-year in April-June 2021, according to TA Ramalingam, technical director of Bajaj Allianz General Insurance. In the first quarter of the current fiscal year, claims were down 20% from the pre-Covid period, he said.

Bajaj Allianz General Insurance is one of the leading general insurers in India and has a large auto insurance portfolio across the country.

“We saw a significant drop in claims registrations during the nationwide lockdown last year. However, in May 2021, when various states imposed partial lockdowns, we saw a 50% drop in auto claims, ”Ramalingam said.

Abhijit Chatterjee, Executive Director (Claims), IFFCO Tokio General Insurance Company, shared a similar view, saying that during the first lockdown there was a significant drop in claims due to the reduction in traffic incidents as people did not venture. “Once the restrictions were relaxed, there was an increase in the number of complaints due to the backlog and the postponement of repair work in garages and workshops,” he said.

The Insurance Regulatory and Development Authority (IRDAI) has taken into account the drop in claims and has decided not to specify new third party (TP) rates for 2020-21 and 2021-22. Usually, in April of each year, the regulator increases the prices of third-party automobiles to account for inflation and rising prices for auto parts.

“One of the main reasons IRDAI chose not to increase prices is to avoid higher prices for the purchase of new vehicles. The regulator believes that since insurers’ claims for accident damage are low, they may otherwise incur prices in the short term, ”said an informed official on condition of anonymity.

Industry executives, however, have said that even idling vehicles can develop several problems such as battery drain and engine failure due to non-lubricating engine oils.

“IRDAI regulates the tariffs of third parties. He hasn’t changed the rates in the past two years. Recent court rulings announcing higher compensation have had an impact on the amount of claims for insurers, ”said Chatterjee of IFFCO Tokio General Insurance. “This has hurt the TP engine portfolio for many players. Several players have expressed their concerns about the inadequacy of the TP premium to cover the amounts of claims paid. “

Dealers proactively follow up with customers to encourage them to provide regular car service and maintenance, trying to improve turnaround time from service to body shop conversion and increase sales accessories. With the offices opening, however, it may not be too long before repairers have their hands full in body shops again.

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