The move follows Ford's slashing of dealer parts margins in January that had a knock-on effect of reducing bodyshop parts margins by between 10-12%. Subaru has also announced plans to cut prices by up to 56%, including wings, bonnets and bumpers, to boost the use of genuine parts by bodyshops. It expects insurance premiums to fall due to lower accident repair bills.
Vauxhall says it reduced prices rather than dealer margins to protect bodyshop profits. In a statement to bodyshops, Mike Lee, Vauxhall parts sales manager, says: “There has been speculation that Vauxhall would follow the profit damaging action of others, but that would not be in anyone's interests. Our action reinforces our commitment to the repair industry.”
Bodyshops have an historic reliance on high crash parts discounts from dealers to support operating costs. While the Ford discount reductions have made insurer-approved contracts unviable, the Vauxhall parts price reductions have left margins largely intact. However, bodyshops are now passing on margin to insurers on lower priced items leaving them with an overall reduced retained profit.
Neil Kirk, managing director of Howard Basford, feels the issue of reducing parts margins is one of the biggest concerns facing the industry, although he believes the move may change the relationship between insurers, repairers and carmakers. “Reducing parts margins may hasten the onset of labour-only arrangements between selected repairers and some insurers and thereby allow the parts to pass to the insurer at cost,” he says.
Most insurers have responded swiftly to repairers' reduced parts profit by either cutting their discount requirement or enhancing labour rates. Market leader Direct Line/Churchill is, however, expected to wait until its new approved repairer contract is released in May before making any decision.