Right To Repair

A competitive collision repair marketplace has returned, which is good for the insurance business and good for consumers.

Access to diagnostic and repair information is a complex problem without an easy solution. Some vehicle manufacturers were restricting the access to factory-specific tools, training and diagnostic and repair software from independent installers, preventing them from repairing late-model vehicles. By signing an agreement referred to as the Canadian Automotive Service Information Standard (CASIS), Canadian automobile manufacturers finally acknowledged the aftermarket has the “right to repair” vehicles. Signed on Sept. 29, 2009, the agreement between the aftermarket and all car companies that sell vehicles in Canada1 will open access to original equipment manufacturer (OEM) tools and information to the aftermarket.

By now, most people in the repair community have likely heard of the right to repair issue through the introduction of Bill C-273 in the House of Commons in January 2009.The bill has now been withdrawn, although its introduction clearly served a purpose: politicians acknowledged in the House in October 2009 of this year that the agreement between the car companies and the aftermarket was the result of legislative pressure.

THE AUTOMOTIVE AFTERMARKET

The automotive aftermarket is a $19-billion industry in Canada, employing more than 410,000 people who service close to 20 million vehicles. In 2008, there were 337 OEM car and truck make/model combinations and more than 850 series in Canada, requiring an overwhelming diversity of tools, information and training needed by automotive service providers.

Independent repair shops or garages made up the largest segment of the ‘do-it-for-me’ (DIFM) service channel in 2006, reaching 40.7% of the overall market. New car dealers, on the other hand, accounted for 32.5%. The aftermarket is therefore an important link in maintaining a competitive market place.

There are roughly 6,000 collision repair facilities in Canada; only a fraction of these are directly associated with a dealer.

The vast majority of dealerships (88.2%) are located in designated urban areas. Of the 416 dealerships represented in rural areas, 383 are Ford, GM or Chrysler franchises –91% of the total. Dealership service to drivers in rural areas is therefore limited.

The agreement to share information between the dealers and the aftermarket has now levelled the playing field. In particular, it gives the aftermarket access to information for repairing key technologies found in most vehicles today, including flash reprogramming and on-board diagnostics.

KEY REPAIR TECHNOLOGIES

Flash reprogramming

Although it means many things, the right to repair issue can be boiled down to one central, key ingredient — flash reprogramming. While the aftermarket still has many channels to access much of the information and tools required to repair today’s vehicles, the growing information gap for aftermarket service professionals is primarily software-based.

Much like the operating system of a PC, the calibration files of an Engine Control Module (ECM) are updated from time to time to ensure ideal performance as the vehicle ages. These improvements, provided by the vehicle manufacturers, are often related to fuel economy, driveability and diagnostics. Before the introduction of flash technology, technicians in most cases would be forced to replace the entire ECM with one that had an updated calibration. With the introduction of flash technology, the technician can simply update the ECM’s calibration electronically, without removing the ECM from the vehicle or its programmable memory. Currently, every manufacturer has their own method, but generally it involves three components: OEM software and data, a personal computer and a pass-thru device (either an OEM scan tool or an aftermarket interface).

On-board diagnostics

Collision repair centres also sought access to tools that would help them repair a vehicle’s electronic systems such as On-Board Diagnostics. Most vehicles today use On-Board Diagnostics II (OBDII), a standard of systems introduced in the mid-90’s. OBD II systems have evolved to allow for almost complete engine control and monitoring parts of the chassis, body and accessory devices, as well as the diagnostic control network of the vehicle. Modern OBD systems use a standardized fast digital communication port to provide myriad real-time data, in addition to a standardized series of diagnostic trouble codes (DTCs) that allow someone to identify and remedy malfunctions with the vehicle rapidly.

Significant increased use of electronics in cars is further expected in planned upgrades and innovations in safety, emission, comfort and entertainment. Looking ahead to 2010, it is expected that 40% of the cost of a new vehicle will be in its electronic systems and related diagnostic support.

IMPACT ON INSURERS

Have insurers given any thought as to how the right to repair issue might affect their business? The picture starts to form by taking a look at just a few key product categories. For example, by 2006, sales of aftermarket ECM-related parts were stagnant or declining, although they shouldn’t have been. As a result, vehicle repairs were being subleted to dealers because collison repair shops did not have the option to repair the vehicles themselves. Also, the option did not exist to associate with aftermarket shops as an alternative to dealers for many of the mechanical repairs necessary after a collision. This was limiting competition and driving up the price of repairs. Your customers were at risk. So were you as insurers.

The insurance industry is one of the largest single consumers of automotive repair services when one considers the collision repair industry. Many of the mechanical repairs required that result from collisions require access to service and repair information and factory-specific tools. This access will be universally available to the aftermarket repair community (parts manufacturers, distributors and repairers) once the CASIS Agreement comes into force on May 1, 2010, reversing what was rapidly becoming a distinct market disadvantage. Consider the following benefits of a more competitive marketplace:

• cost of parts decreases due to improved competition;

• cost of labour decreases due to increase in competition;

• distribution of OEM dealer repair channels is limited, as evidenced by AIA dealer study. The availability of a more diversified aftermarket parts offering improves with the broader marketplace;

• wait times are reduced with the larger available bay capacity of aftermarket retail outlets to perform similar functions;

• turnaround time (cycle time) decreases due to fewer outsourcing requirements;

• duplication of services from having two shops perform one repair is reduced;

• the liability that results from repairs undertaken when flash reprogramming is required but not performed is reduced; and

• the likelihood that other vehicles on the road continue to drive with underperformed maintenance is reduced.

Essentially, consumer choice is as important for the insurance industry as it is for the average consumer. Improving productivity at the collision shop level, reducing the duplication of services, reducing the liability of underperformed maintenance and potentially reducing (or at least capping) labour inputs will all serve to improve the collision repair business and by extension, the insurance industry. With the “right to repair” issue now settled, everyone can get back to the business of serving customers.

1 The reference to “all” car companies refers to mass-market brands and does not include exotic car manufacturers with limited exposure to the Canadian marketplace.