Automobile Bodywork and Paintwork

Industry data

In Israel, there are currently approximately 580 automobile bodywork garages. In addition, many general automobile garages also operate bodywork departments.

 

 

Market Characteristics

  • The industry is controlled by a large number of small, privately owned businesses.
  • Most bodywork requests are a result of road accidents. This clientele can be divided into two groups: bodywork covered by the insurance company (the larger part of the market) and those not covered by insurance.

 

Customers: Defining the Target Market and its Size, Market segmenting

The market is composed of a number of groups:

  • Insurance companies, as part of their settlement automobile garage plan.
  • Private customers. These customers approach automobile garages in order to repair damages not covered by insurance or when they are not interested in repairing as part of an insurance settlement.
  • Corporate customers- company and corporation automobile fleets.

 

Competition

Most competition stems from similar businesses operating in the area. Notwithstanding, a garage associated with an insurance agency has a relative advantage stemming from the large number of insurance company requests  and comfortable customer payment terms to .

 

Vendors

Replacement part vendors: Original parts, refurbished parts, unoriginal, or used: car importers, parallel import, junk yards, and refurbishment garages. As a rule, the decision regarding the source of parts is made by insurance assessor in case of a car accident.

Additional vendors: paint, tools, expandable materials.

In addition, establishment, installment, and maintenance of fume chamber, including compressors and pneumatic systems.

 

Marketing resources

  • Advertising in local press and specialized guidebooks.
  • Reputation and references.

 

 

Entry Barriers

  • A Ministry of Transportation automobile garage management license is required in addition to employment of a certified professional manager, investment in equipment and tools, renovation, and appropriating the construction as required.

 

Human Resources:

Human resources in the automobile bodywork and paint industry are composed of professionals, expert painters/artists and assistants/ trainees.

Staff is usually comprised of four professional tinkers to each professional painter. In addition, 2-6 assistants/trainees.

In a small business approximately 6 employees including the owner, 2 expert tinkers, and 3 assistants.

 

Required Equipment and Property:

Average area of a car garage is 300-500 square meters, which allows the business to simultaneously care for 10 automobiles.

In order to conduct painting, an air compressor, pneumatic systems, and various spray painters are required. There should also be a closed fume chamber for painting and color baking near or around the structure.

Many garages own an automobile lift used for chassis maintenance and repairs.

In addition, office furniture and equipment is required.

 

Required Investment

Financing required in order to establish a bodywork garage is relatively low, in comparison to other types of garages. Investment is mainly required in construction, establishment of a fume chamber, and acquiring professional equipment and tools.

 

Industry revenue and profitability

Profit in the industry stems from two main sources: Revenue from labor and revenue from parts. The ratio of revenue from labor and revenue from parts is 1 to 1.7-2.3. Meaning: for each 1NIS earned for labor, 1.7-1.3 NIS is earned for parts.

Revenue per worker from labor +parts for  2003:

  • General garage- 977-1,193 thousand NIS
  • Certified or Specialized  garage- 1,221-1,483 thousand NIS

 

Revenue per working paintwork craftsman for 2003:

  • General car garage- 241 thousand NIS
  • Certified or specialized garage – 291 thousand NIS.

 

An additional source of revenue is contract work- work contracted out to another garage in order to complete the job, such as electricians, glaziers, or mechanics. Profit for these jobs is 15%.

 

 

Automobile Bodywork and Paintwork

  • Most transactions in the industry are conducted through insurance companies. In these cases, the garage owner receives a postponed check from the car owner for 30-45 days. During this period, the insurance company returns the money to the car owner, and the check is then cashed by the garage owner. The car owner pays the full cost of the repairs including self-participation.
  • An alternative is a garage is associated with insurance companies. This alternative provides payment for the car garage by the insurance company, and the latter bills the car owner for self-participation.
  • Typical payment terms offered to business customers running a fleet of vehicles by contract is EOM+30 to EOM + 60.

 

Risk Level:

  • When the business is first established the risk is relatively high, due to the high investment required in equipment, inventory, and licensing.
  • Long-term arrangements with insurance companies or corporate customers may decrease profitability, but promise coverage of regular expenses and reaching the balance point within a short period, and therefore the initial high risk is reduced.

 

Licenses and Certifications:

  • The garage must be licensed by local authorities and the Ministry of Transportation, and receive a permit from the Ministry for Quality of Environment.

 

Insurances:

Business insurance (for content and inventory), third party insurance, employer’s liability insurance, professional liability insurance loss of income insurance, and garage liability insurance. In addition to the above, an insurance agent should be consulted in regards to the need for additional insurance.

 

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