The cost of vehicle repairs has skyrocketed, with some car parts increasing by 350% in price over last year, according to insurers.
As the expense of repairs sometimes surpasses the vehicle’s current market value, motor insurers are often finding it more cost-effective to write off vehicles rather than fix them, Insurance Association of Malta director general Adrian Galea told Times of Malta.
Like many sectors, motor repair businesses are grappling with a sharp rise in operational costs while at the same time seeing the price of replacement parts go up. Topped with delays in the delivery of parts, insurers were seeing a spike in claims costs, he said.
Galea said the price of vehicle replacement parts, ranging from side mirrors to rear bumpers, had significantly increased over the past year. This surge could be attributed to a combination of factors such as disrupted supply chains and heightened production costs.
He blamed the long-term impact of the global pandemic, which had caused supply chain disruptions, manufacturing plant closures and fluctuations in the demand for raw materials. All these contributed to increased production costs. The price of raw materials such as steel, aluminium and plastics, crucial in vehicle part production, had also increased substantially over the past couple of years, he said.
Citing examples, Galea said the price of a tailgate of a popular small car had increased from €350 to €480 while the passenger door of a different model was now priced at €1,250 when the same part was purchased for €357 in January 2022.
The price of parts for high-end models had increased even more dramatically, he said.
Delivery delays
To make matters worse, the rise in spare parts prices was coupled with prolonged delays in delivery.
He said insurers were reporting that many parts were regularly taking up to six weeks to be delivered. In some cases, especially for less common models or where a used vehicle had been imported from Japan, delivery was taking three months or more.
It was becoming more common to have parts such as headlamps taking eight months to be delivered because they were on "back order" at the manufacturer.
“Pinpointing the exact causes of these delays is challenging. Factors such as local importers limiting stock levels to control costs, supply chain disruptions, and manufacturers scaling back production all contribute to varying extents across different vehicle makes.
“Delays in parts supply directly impact the cost of a repair claim for insurers, as most times they must cover the cost of hiring replacement vehicles if damaged vehicles are unsafe to drive,” he said.
Labour shortages
He admitted that insurers may be compelled to adjust motor insurance premiums to maintain a sustainable business model. This adjustment would mean an inevitable increase for the average motorist, even for those who have not recently recorded a claim on their policy.
Galea also spoke about the “severe shortage” of skilled labour which he said was one of the primary challenges facing the repair industry. The demand for qualified body repair technicians has outstripped the available workforce, leading to intense competition among businesses for these skilled professionals.
“This heightened competition directly contributes to the rise in wages as repair shops strive to attract and retain top talent. Simultaneously, workers are seeking wage increases to cope with the escalating cost of living,” he said.
Another challenge faced by repairers was the rapid evolution of automotive technology, with modern vehicles featuring advanced electronics and computer systems. This meant that repair shops must invest in continuous training, tools and equipment to keep pace with these technological advancements.
This also affects the overall repair cost as some modern vehicles, especially electric, take longer to repair due to the requirement to observe safety protocols.
"This predicament could potentially lead to some closures, further shrinking the pool of available repair services"
Galea said the consequences of these challenges were particularly pronounced for smaller repair shops, which were struggling to absorb increased costs or pass them on to price-sensitive customers.
“This predicament could potentially lead to some closures, further shrinking the pool of available repair services.”
Increasing the availability and use of good quality pattern parts and of recycled parts could significantly reduce costs, he added.
To mitigate the impact of these inflationary forces, concerted efforts were needed, including initiatives to train new and existing body repair technicians, making it easier for repairers to access skilled labour.
He said the association had been engaging with several authorities over the years – the consumer affairs authority, the National Skills Council, foundation for transport and Transport Malta among others – recommending the introduction of a skills card similar to that being introduced in the tourism industry.
“We recommended this in the face of the challenges posed by electrification of vehicles and the increased use of technology in vehicles used today. The authorities do not seem to consider this as a priority perhaps because it hasn’t become an emergency to deal with it as yet.
“As we navigate these and other economic challenges, collaboration between policymakers, industry stakeholders and consumers is essential to finding solutions that preserve the affordability of car repairs and motor insurance premiums.”
The association had always shown willingness to engage with all concerned parties to contribute to the process, he said.
“Neglecting these issues, aside from raising premiums, could also lead to unsafe repairs and the increased risk of some motorists forgoing insurance, ultimately resulting in higher costs for all concerned.”