Fuel Economy Standards Drive Change

The U.S. finalized new fuel economy standards in August 2012, that require each manufacturer’s fleet to achieve average fuel economy of 54.5 miles per gallon for cars and light-duty trucks by model year 2025.  These standards extended the requirement already in place for a manufacturer’s vehicles by model year 2016 to reach 35.5 mpg.

In anticipation of higher fuel economy standards coming in 2016, automakers have ramped up their small car production where competition is fierce.  Ford and GM have introduced strong products in a segment traditionally dominated by the Japanese and Korean manufacturers.  In an attempt to drive up prices and profits, and attract younger more technically demanding customers, many of these vehicles are loaded with content.

Automakers have also started to manufacture larger volumes of crossover vehicles, placing the SUV onto more fuel-efficient car platforms.  According to data from the University of Michigan Transportation Research Institute, the average fuel economy of all vehicles sold in calendar year 2013 was 24.8 mpg, up 1.0 mpg from 2012 and up 3.9 mpg from 2008.[i]

Time to shed some weight

As automakers race to meet the ever stricter corporate average fuel economy standards, they are looking at many ways to meet these new standards – tweaking existing engine technologies; adoption of hybrid, electric or hydrogen engines; broader adoption of start and stop technology; more electric power steering more efficient air conditioning compressors; tweaked transmission shift intervals,[ii] etc.

One of their key challenges is to reduce the overall weight of the vehicles themselves.  This has driven up the use of lighter-weight substrate metals such as aluminum and magnesium by automakers.  As technology reduces the cost and speed of vehicle development through advances in electronic modeling and CAD systems, manufacturers can now select different materials and joining methods within a single vehicle body structure. The result is a potential combination of materials: ultra-high strength steel, high strength steel, mild steel, aluminum and tailored blanks all used in a single vehicle structure.[iii]

Material Changes

As the industry shifts away from larger, heavier vehicles towards smaller, lighter-weight vehicles, there will be impacts across numerous industries.  Steel, aluminum and plastic are three primary vehicle materials, yet development of new alloys and fabrication methods may help reduce the amount of material needed while increasing strength and performance.[iv]

Research predicts steel will remain the dominant structural material used for most passenger vehicles in the future, although the number of alloys will increase from four (typical only five years ago) to more than twenty.[v]

With the weight of aluminum nearly three times lower in density than steel, expanded use of aluminum is underway.  Drucker Worldwide expects the automaker’s use of aluminum to double between 2008 and 2025, growing from 200 million pounds in CY 2012 to 1 billion in 2014, and to between 3.2 billion and 6.4 billion pounds by 2025.[vi]

Individual part component analysis reveals that hoods, front bumper impact bars, fenders, radiator support upper tie bars, absorbers and lift gates are the components which see most frequent aluminum usage (disregarding the engine and wheels).

The steel industry will face stiff competition from the aluminum industry, which is responding by producing more advanced high-strength steel, and promoting their lower cost and flexibility (for the automakers and the repairers).[vii]

Substrate Impact on Automotive Claims

As new vehicle sales begin to ramp up in the U.S., the number of vehicles on the road in the U.S. today that include substrate materials will grow.  While the impact to the overall automotive claims industry annually is still rather small in terms of the overall share of appraisals impacted, on an individual repair basis, the addition of multiple material types can add a great deal of complexity and potentially cost to the repair.  Collision repairers must also make the leap of faith that they will see enough of these vehicle repairs to support the significant investment in the training and special materials.  With overall repair orders continuing to trend down in the U.S., any additional costs come under even greater scrutiny.

New Materials Call for Integrated Repair Method Information

The decision to design the 2015 Ford F-150 with an aluminum body (essentially the first high volume vehicle to date with this construction) will certainly drive demand within the collision repair industry for the certification, training, and equipment needed to repair aluminum. Industry experts estimate that less than 10 percent of the 30,000-plus independent repair shops in the U.S. today have the certification and tooling needed to work with aluminum auto body parts.[viii]

A full 89.3 percent of all new vehicles sold in 2013 had one or more part components constructed of a substrate such as aluminum, boron, magnesium, high-strength steel, ultra high-strength steel, and sandwiched steel.[ix]  When grouped together by major part group, over one-third of the substrate  components on these 2013 MY vehicles fall within “PILLARS, ROCKER & FLOOR”, followed by 23 percent within the “FENDER” group, and 13 percent within the “REAR BODY & FLOOR” group.

Using information supplied by the OEs regarding the material make-up of individual OE parts, and the vehicles on which those parts appear, the growth in both the number of vehicles and the number of parts can be measured across automotive claims.  In 2004, the share of overall repairable appraisals for which CCC collected data showed only 7.9 percent of the appraisals were for vehicles that included one or more substrate parts in its construction.  By 2013, this number grew to 57.4 percent.  However, not all of these appraisals actually included the substrate part(s); when the data is filtered further to include only those appraisals where the substrate part was included in the parts needing repair/replacement, the share of overall repairable appraisal volume fell to 25.7 percent in 2013.

However, the total cost of repair of repair for these vehicles with one or more substrate parts included in its repair however accounts for 36.8 percent of all appraisal dollars in 2013.

Research included in CCC’s Crash Course 2014 publication provided a comparison of key appraisal metrics for vehicles with one or more substrate parts included in its repair (the 25.7 percent of all appraisals in 2013) versus all other appraisals reveals the following differences.  The average repair cost for appraisals on vehicles with one or more substrate parts included in the vehicle repair is roughly double the cost for all other appraisals excluding the appraisals with substrates.  A higher share of the overall repair cost was spent on OE parts for the substrate appraisals, while fewer dollars were spent on refinish labor, non-OE parts, and miscellaneous (includes sublet items and manually-entered items).  A key reason why there is such a large difference in repair cost is the difference in vehicle age:  the average vehicle age for the substrate appraisals is almost three years younger.  In fact, if the age distribution for the substrate appraisals were the same for overall repairable appraisals, overall repair costs for the industry would be nearly six percent higher.  With that said however, there are other numerous differences among the appraisals with substrate part(s) and those without beyond just age that explain difference in repair cost.  Vehicle appraisals with substrate part(s) have more than double the number of part replacements and labor hours per claim, and have likely sustained significantly more damage (as measured by the percent of non-driveable appraisals and the average number of lines per appraisal).  With more than 33 percent of all substrate part components falling into the part group ‘PILLARS, ROCKER & FLOOR’, this also suggests that these vehicles may have sustained more damage.

Analysis of vehicle appraisal data points to a number of differences among vehicle appraisals with and without substrate part(s).  When air bags were first introduced, the industry looked to identify the difference in repair cost when an air bag was added to a vehicle.  Then and now, high level differences can be identified; however, numerous other factors such as overall vehicle design, inclusion of other systems such as crash-avoidance, the vehicle drivers, accident type, etc. cannot all be accounted for.  Therefore while the complexity of vehicle construction might suggest higher repair costs, the difference is still not fully identifiable, and may be offset in the future by greater adoption of crash avoidance technologies.  Thus the future may hold fewer but more expensive repairs.

Driving Change in Collision Repair

As the use of these materials extends, it leads to growing challenges for the collision repair industry. Perhaps the most significant challenge lies not in the use of a single substrate such as aluminum, but rather numerous substrates in a single vehicle. The use of a broader range of materials requires new joining techniques, methodologies and machine parameters to reinstate reliable repair joints and ultimately restore the integrity of the pre-accident vehicle structure.  With these new material types, some methods of using heat and cutting operations may not apply. They instead require a variety of new attachment methods (MIG brazing, weld bonding and mechanical fasteners).[x] Repairers must also be aware of how these materials interact with one another and with other more traditional materials. Different tensile strengths and specially coated fasteners used to reduce likelihood of corrosion are only two of the considerations. With lower elasticity than steel, aluminum, for example, can be more prone to cracking, and subsequently require part replacement.[xi]

With a greater number and variety of high tech materials used in the construction of their vehicles, automakers are actively releasing studies and bulletins that underscore the criticality of following the recommended repair procedures and methods to ensure the vehicle is being repaired safely, and will perform as designed in any subsequent collisions.  Having access to this information in a format that is directly integrated with the estimating and shop management system reduces the time spent going to various websites or manuals, and facilitates discussion with the insurer and repairer regarding the proper procedures necessary to bring the vehicle to pre-accident condition.

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The information and opinions in this publication are for general information only, are subject to change and are not intended to provide specific recommendations for any individual or entity. Although information contained herein has been obtained from sources believed to be reliable, CCC does not guarantee its accuracy and it may be incomplete or condensed. CCC is not liable for any typographical errors, incorrect data and/or any actions taken in reliance on the information and opinions contained in this publication. Note: Where CCC Intelligent Solutions is cited as source, the data provided is an aggregation of industry data collected from customers that use CCC’s products or services and/or that communicate electronic appraisals via CCC’s electronic networks.