Car industry supply chain issues explained

If you’ve recently taken your car to be repaired or you’ve been told that a part needs replacing, you might have been surprised at the length of time it is taking to complete what are usually straightforward jobs. A recent survey estimated that 72% of independent and dealer garages have experienced delays in getting parts since the start of the year.

Unfortunately, these delays also impact on the length of time it takes to resolve a vehicle insurance claim – whether that be how long it takes for a repair to be completed, the availability of courtesy cars, or sourcing a replacement vehicle in the event of a total write-off.

Recently, the lead time for getting work done on your vehicle has increased greatly. There are several factors that are aggravating the situation, with some of them here to stay for the foreseeable future.

So, what are these factors, and why are they having such an impact?

The Covid-19 pandemic

The pandemic hit the global economy and supply chains in several ways.

The most obvious impact came during shutdowns – factories stopped producing parts and logistics companies stopped shipping goods. The backlog this created is still being felt today.

One of the countries most seriously hit by lockdowns was China, which is where a large proportion of automotive parts come from. When China shuts down, it has a knock-on effect across global supply chains.

Labour shortages have also impacted on production times and added to the strain the motor industry is under.

Availability of new vehicles have been impacted in the same way, leading to an increase in demand for second-hand vehicles. Many garages who rely on lease vehicles for their courtesy cars have had to return vehicles, but have been unable to source replacements, leading to a shortage of courtesy cars available.

As we approach the third anniversary of the outbreak of Covid-19, its effects are ongoing. Even though lockdowns have finished in the UK, this is not the case in other parts of the world – China, under its zero-Covid strategy, still regularly has localised lockdowns.

The impact of Brexit

Brexit has impacted the car-repair sector in several ways.

With the end of freedom of movement, it’s harder to find workers from overseas to fill vacancies. This means there is less capacity within the sector, which causes delays.

There has also traditionally been low pay within the trade, so as job vacancies open up in other, better-paying sectors, they are proving more attractive to workers – exacerbating the labour shortage yet further.

Also aside from labour shortages, Brexit regulations mean that the importing of parts can be more protracted and expensive.

Russia’s invasion of Ukraine

The war in Ukraine has had several impacts on the sector.

As well as being one of the causes of inflation and the massive rise in the cost of energy, there’s been a direct impact on supply chains as 30% of steel supplies come from Ukraine and Belarus.

Many factories in Ukraine have been repurposed as part of the country’s war mobilisation, meaning there are fewer manufacturing factories and therefore fewer parts to go around. Even where production has continued, many transport corridors have been blocked because of the conflict.

Other pressures on the labour market

The labour shortage is particularly pronounced within the distribution network. Partly due to Brexit, there is a huge number of vacancies for skilled HGV drivers. Some estimates state that the UK needs another 100,000 lorry drivers, and this shortfall plays a large part in preventing the timely movement of parts and components within the UK.

Meanwhile, as technology continues to advance and vehicles become more technical, more specialist labour is required to fix them. For some makes and models of cars – and for electric and hybrid vehicles in particular – that means there is a smaller pool of places that can carry out repairs, which creates delays as well as putting up the cost. It doesn’t look likely that this issue will be resolved anytime soon; the Institute of Motor Industry predicts that there will be a shortfall of 160,000 workers in the sector by 2031.

The impact of inflation

With the cost of most things soaring, individuals and businesses are looking to make savings.

Motorists are keeping their cars longer instead of replacing them every few years which increases the demand for repairs and servicing. Worse still some people may be unable to afford to maintain their vehicles leading to more unroadworthy vehicles being on the road.

Theft of vehicles and their parts

Global delays and shortage of parts is also having an impact on vehicle related crime. As parts are harder to come by, there has been a rise in the theft of vehicles to strip them of their components. Recent research suggests that, on average, one vehicle is stolen every six minutes in the UK, and in some areas of the country vehicle theft increased by 28% in 2022.

In turn, this puts more pressure on the motor industry, as often a vehicle theft, or theft of a part, will lead to the victim making a claim. This inevitably will either require a repair, or replacement vehicle.

How does this affect clients of Alan Boswell Group?

Delays in vehicle repairs is having a knock-on effect with the time it is taking to resolve a vehicle insurance claim. However, all insurers are facing the same situation. If you do need to make a claim, our dedicated claims team will do everything they can to expediate the process and keep you in the loop on the progress. If you would like any further information, please contact us on 01603 218000.