Fuel prices, the credit crunch and now the car crunch
The credit crunch has left people with less money to spend and massively high fuel prices have exacerbated the problem leaving people to consider every penny they spend.
The media is reporting a myriad of ways on how to save money by driving cars more economically, taking different routes to work, only driving where absolutely necessary and more are taking advantage of car pooling, the net effect of this means that we now have “the car crunch”.
There’s fewer vehicles on the road because of the high fuel prices which means that fewer motorists are having accidents, which in turn means that the profitability of the Bodyshop industry is taking a nose dive.
The Bodyshop business is seasonal with more accidents happening in the Winter so we expect it to be more quiet in the Summer months. However, because we have fewer people driving right now, the Summer months have turned out to be a season of drought for the Bodyshop industry.
During this week, major Insurance companies are revealing that accident claims are 20% down on the same time last year. That’s great for Insurance business because their profitability is having an unexpected increase - I wonder if we’ll see this reflected in our premiums next year?
However, this 20% fall in claims is a real kick in the head for the Bodyshop as it comes at a time when many businesses are already on the brink of survival.
It’s already thought by many in the Industry that there are too many Bodyshops in the UK and that’s why Recovery Rates are so low; will the car crunch see an end to the weaker bodyshops and push them over the precipice?
It’s cash flow that keep a business in operation and that’s eactly what most Bodyshop’s suffer from because 80% of their work comes from Insurance companies with credit terms of 30 days or more.
With fewer accident repairs and therefore less cash, just what will happen to the industry in the months ahead? Are we in for big change in the Bodyshop Industry are will things stay the same?
I welcome your thoughts.
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I think this will apply to most businesses over the next few months, the key is reduce your expenditure and shorten your credit terms and where possible start renegotiating longer credit terms with suppliers now so your cashflow improves. You might just be surprised how accommodating they might be! Also dont fall into the trap of thinking because business is down there is no business out there just kill or be killed!