The rise of energy resource prices will increase the cost of car service prices 10-20%, predicts the manager of the Automotive Association of Latvia Andris Kulbergs.
He explained that this year there has been a considerable increase of both the price of electricity and natural gas. The increase of electricity is 48% and the increase for natural gas is 171%. Both of these energy resources make up a large portion of the car service costs, especially body repair and paint work.
Kulbergs notes maintenance services are normally provided during work hours, which is usually listed on the receipt as work performed to replace, repair or service a specific vehicle unit. Manufacturers also have certain guidelines and standard hours within which each type of maintenance is expected to be done. Authorized car workshops usually stick to these hours. This is where multiple price factors appear.
Labour costs are the first major component. For a car workshop to operate and provide quality services, it needs labour force in two categories: productive personnel and mechanics, the work of which can be accurately measured for every task.
The hourly rate of a qualified mechanic is about EUR 13.61.
According to Kulbergs, if a car workshop works in accordance with manufacturers’ specifications and technologies, has qualified personnel and uses modern equipment and pays all required taxes, the cost per working hour is EUR 42.39 for regular service and upwards of EUR 55.51 for body work.
Kulbergs explains that so far car workshops have been able to compensate the rise of prices of energy resources using internal resources. However, now that costs have increased again, these resources are already exhausted.
At the same time, Kulbergs adds that body maintenance is a sector that is in critical state. Before the recent surge of prices, the cost per working hour remained around EUR 35, which is already far below the base cost of the service. The rules of the body repair market are dictated by insurance companies. Workshops are forced to obey these rules because of the pull insurance companies have and because of the requirements of manufacturing companies, says the head of the association.
«The growth of energy resource prices increases prices 10% for regular maintenance and up to 20% for body work due to high energy capacity, which will lead to an eventual need to increase prices,» he adds.
There are independent car workshops on the market. They can reduce costs because they work in a simple garage, without modern equipment or any need to raise the professional skills of their employees. They can offer a price that is 20-30% below the average market price.
«I can say with a degree of confidence that anyone who offers an even lower price likely works in the grey sector,» stresses Kulbergs.
He also notes that the issue of operations of all the workshops that win procurements organised by the state and municipalities is also topical.
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Kulbergs says that while there are efforts to push out grey economy, there are also regulations that govern public procurements under which the grey economy is able to bloom. The rules dictated by insurance companies do not help the situation.
«The state loses at least EUR 60 million in lost taxes every year with the situation remaining the way it is,» claims the head of the Automotive Association of Latvia.
Association: rise of energy resource prices may increase car service prices up to 20%
