The German autobody repair industrey is experiencing tough times reports Eugene Gerden.
Record inflation rates and a complex business environment in Germany has put serious pressure on the industry these days.
Three year after the beginning of Russian-Ukranian war, Germany - the largest economy in the EU has yet to recover from the consequences of the war, which led to the end of era of cheap energy from Russia (Germany was Europe’s largest consumer of Russian gas) and negatively affected the overall competitiveness of Germany in the international arena and major export markets.
The ongoing recession affects all segments of German economics, including the country’s autobody repair sector. In recent months, the industry has faced with a sharp rise of prices for most spare parts, paints and other essentials, which negatively affects the profitability of local workshops and forces them to increase prices for their services in order to minimise their own losses.
According to experts at the General Association of the German Insurance Industry (GDV), at present car manufacturers have a quasi-monopoly on spare parts and other industry ranges, which negatively affects the level of competition in the market. GDV also added that local consumers are bearing the consequences, as parts and paint products are twice as expensive as they were ten years ago».
"While the inflation rate in Germany has recently been slightly declining, car manufacturers are continuing to increase prices. Between August 2023 and August 2024, prices rose by an average of 6.2 percent», says Jörg Asmussen, CEO of the GDV.
This price increase is part of a long-term trend that the GDV has been observing for years. "The costs of car spare parts are rising rapidly and are largely independent of general price trends. While the consumer price index has increased by around 28 percent since 2014, manufacturers have increased their spare part prices by an average of almost 75 percent," says Asmussen. Boot lids and rear side panels are now twice as expensive as they were ten years ago and the prices for tail lights have risen by 86 percent.
"Car drivers and workshops are forced to buy many of these spare parts directly from the car manufacturer - there is practically no free competition here," said Asmussen. Although a change in the law is intended to reform design protection, the existing OEM rights for most of spare parts will remain in place until 2045.
According to German AMZ die Aftermarketzeitschrift automotive paper, currently the interests of industry in the local state are lobbied by the German Federal Association for Paint, Design and Building Protection (FAPDBP), which comprises 300 regional guilds and 16 state guild associations. It represents 39,241 painting and varnishing companies, of which around 3,500 are automotive companies (vehicle painting division), with a total turnover of 19.4 billion euros, according to the association.
In terms of market structure, independent workshops make up almost two thirds of the industry’s companies in Germany and provide over 105,000 jobs. The majority of these companies are small and micro-enterprises.
In addition to current economic problems, in recent years the industry has faced with understaffing and, according to analysts’ predictions, the current situation will continue to deteriorate due to the aging German population and the outflow of some of the most skilled workers. According to data of the German Federal Association Day of the Central Association of Body and Vehicle Technology (ZKF), the current wages in the industry remain relatively low, not exceeding EUR 40,000 (AUD66,000) per year, which is a relatively small figure for Germany, given that the current wages in other segments of the country’s industrial production are significantly higher.
In accordance with the earlier study 'Service market 2040: Perspectives and strategies for independent workshops', prepared by FAPDBP, the rate of employment in independent automotive workshops across Germany will fall by around 18 percent by 2030 and around 36 percent by 2040 (both compared to 2022).
In the meantime, despite the current market condition, most of leading local product suppliers and major international companies, operating in the local market, plan a further expansion in the German market. That will primarily take place through the launch of various innovative products, with a particular focus on sustainability.
Jochen Kleemann, Managing Director PPG Industries Deutschland Sales & Services GmbH,said: "At a time when sustainability is becoming a decisive factor for business success, bodywork and paint shops are also increasingly becoming the focus of an environmentally conscious transformation. However, a sustainable approach does not mean accepting higher costs or lower efficiency in order to protect the environment. On the contrary - companies that are well positioned for the future understand that minimising environmental impact goes hand in hand with increasing efficiency."
According to Kleeman, there is the ever growing demand for energy-efficient products, air-drying technologies which ensure responsible use of energy and lower costs.