Why a car parts shortage is driving up insurance premiums

First, we had the shortage of cars. That came in the wake of the Covid-19 pandemic, as factories struggled to build up to pre-2020 production levels, and the entire automotive supply chain heaved under a wave of unfilled employment roles, from manufacturing to shipping and beyond.
Then came the shipping shortage. Again, due to the expanding blast waves of the pandemic which affected investment and employment in the microchip industry, as well as a disastrous fire at one major factory, and the fact that car companies failed to get in the queue ahead of the big tech companies for supply.
Now, we’re suffering the car parts drought. This one’s being blamed on a huge number of circumstances, from Covid to Russia’s invasion of Ukraine, to whatever you’re having yourself. The shortage affects parts as complex and expensive as entire battery packs for electric cars, and as seemingly inconsequential as a humble metal bracket for holding that battery in place. It’s not just EVs that are suffering, nor their owners who are being put off the road – or into rental cars – for months at a time. This is affecting everyone.
Jaguar Land Rover was one of the brands most heavily affected, with a reported 10,000 cars off the road last year as the car maker suffered a dramatic shortage of spare parts production for repairs and replacements.
That would be bad enough for the owners of such cars, but worse was the knock-on effect. The shortage of parts led to a rash of thefts of high-end Range Rover models which saw, in some cases in the UK, those cars becoming all-but uninsurable. Although such insurance issues never reached Irish shores, in the UK at least Land Rover had to step in and offer buyers its own bespoke insurance service.
However, while the worst effects of the Jaguar Land Rover crisis failed to materialise here, Irish insurers are certainly concerned about the current shortages of spare parts, which can mean that a simple repair which should take only a few days can sometimes stretch to months. It’s axiomatic that longer repair times mean higher costs, and higher costs will lead to pricier insurance premiums.
One senior member of the Irish insurance industry, who asked that we not use their name, told The Irish Times that the delays “depend on the parts required”.
“Serviceable items can be off the shelf, overnight or within five working days. However, parts associated with accident damage, such as body panels, body trim, even weatherstrips, electrical items, cooling items, suspension components, safety related components and interior trim, can take longer. In some cases we would experience 7- to 21-day delays, and in more extreme cases we can’t get an estimate date of arrival – which is always a bad sign – with some extending into months.”
It’s not just the parts that are in short supply either. Repair shops and garages are also short of apprentices and staff. It doesn’t help that with the increasing complexity of cars and their components, the training of a mechanic or technician becomes far more complex and involved. That not only takes time, but, as Volkswagen Ireland told The Irish Times, also leaves those trainees and training graduates susceptible to being poached by rival high-tech industries, such as microchip and medical device manufacturing.
Our mole in the insurance industry also responded to worries that corners might be cut on repairs just to get people back on the road, and out of expensive loan cars which are often provided as part of policies. “The insured is entitled to a loan car depending on their policy terms and conditions and where the repairs are carried out,” said our source. “We may do a temporary repair, but will never compromise on a safety-related part such as a suspension component.”
There are other factors at play. Chinese brands have become hugely important in the car market, but there are accusations that those big China-based car makers don’t understand the nuances of the European and Irish car markets, and haven’t been sufficiently prepping parts supply, nor providing repairers and garages with the appropriate systems and instructions.
In some ways, that’s down to a fundamental difference between the European and Chinese car markets, and especially the aftermarket in both regions. In China, labour for repairs is so much cheaper than it is in Europe that cars that would be automatically written off here can be economically repaired there. While that doesn’t in and of itself cause a parts shortage, it does demonstrate something of a gulf in understanding.
In the UK, Chinese brands have been criticised for not being fully prepared for market entry when it comes to parts supply and repair manuals, with Auto Express magazine noting in a report that some Chinese brands have become ‘uninsurable’ because of parts shortages driving up repair time and costs.
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That situation does not, apparently, pertain in Ireland. The Irish Times approached the two biggest Chinese car brands in this market – BYD and MG – and were told that both have adequate stocks of parts and sufficient information for repair shops.
According to a spokesperson from BYD’s Irish importer, Motor Distributors: “The BYD brand situation is proving to be fine on the parts demand side. Despite its success in sales terms, there is no known pressure for parts, save for some exceptional accident damage. At Motor Distributors Limited, a store of parts is kept sufficient to supply a likely month-long demand. This base store is kept topped up as required.
“Moreover, parts for the Irish market are supplied to us via BYD’s parts centre in the UK, where massive supplies for UK cars, commercial vehicles and buses are also kept. Through that facility, deliveries with 2-4 days are normal. We are experiencing no pressure or complaints from dealers as regards parts supply.”
It was much the same story from MG, whose spokesperson told The Irish Times: “We stock service- and damage-related parts in our warehouse in Dublin; these can be overnighted to our dealers. After that our parts supply comes from the UK, and we can have parts within 48 hours if urgent, but the general timeline for delivery of parts would be 3-7 days if we don’t have it already.
“Outside of the UK, MG are also in the process of opening their second European parts warehouse in France. We haven’t heard of any issues regarding insurance cover – and, yes independent garages get the information required to repair a damaged MG by contacting ourselves or an MG dealer.”
The parts shortage will in all likelihood, as with the car shortage and the chips shortage, eventually pass. However, while we wait for that to happen, consumers are counting the cost, in both time lost to cars being off the road, and the increase in insurance premiums which automatically follow any spike in repair costs. Patience may be a virtue, but that’s not much comfort to someone waiting months for a suspension wishbone or battery bracket.