Many bodyshops are barely breaking even, according to research from automotive analysts MFBI (Market Facts and Business Information).
It said the car body repair market was reaching a turning point, and that the current model of containing costs in accident repairs, based on low bodyshop labour rates and discounts on replacement parts and paint costs, was no longer effective.
MFBI's research revealed that although repair costs kept rising, the profitability of bodyshops was at an all time low. It said bodyshops in the UK were currently operating on "unsustainably" fine margins with some repairers achieving average net profit margins of £3 on an average repair costing around £1,000.
MFBI warned insurers that they faced a stark choice if they were not to suffer future repair capacity shortages.
It said insurers could either increase bodyshop hourly charge-out rates, or reduce rising overhead costs by cutting the free services provided under repair contracts.
