Special Report Emerging Trends Shaping The Collision .

Special ReportEmerging Trends Shaping the Collision Repair IndustryMay 2021

COVID-19 halted mobility in most countries; VMT, lead indicator of collision repair market,declined significantly in 2020 in top marketsEstimated Decline in VMT (Billion Passenger km) – Passenger Vehicles (Top 20 markets*) (2019-20) 24,000B1500B17% 23%750B11%1400B13%350B22% 20,000BDecline of 4,000 billion passenger km2019(Pre-Covid)To/From WorkShopping & PersonalErrandsSocial RecreationTourism2020(Estimated)*includes US, Canada, Germany, France, Italy, UK, Spain, Japan, Australia, Poland, China, India, Brazil, Mexico, Russia, Turkey, Korea, New Zealand, Malaysia, ThailandSource: Government Sources, Associations, Primary Interviews, Aranca Analysis1Special Report Emerging Trends Shaping the Collision Repair Industry

Collisions fall sharply by 20-25% in key regions as number of vehicles-on-road dropEstimated Decline in Number of Collisions – Key Markets* 2.6MLATINAMERICA19%22%*includes US, Canada, Germany, France, Italy, UK, Spain, Japan, Australia, Poland, China, India, Brazil, Mexico, Russia, Turkey, Korea, New Zealand, Malaysia, ThailandSource: News Articles, Country Mobility Trackers, Inrix, Primary Interviews, Aranca Analysis2Special Report Emerging Trends Shaping the Collision Repair IndustrySize of the bubble represents thenumber of collisions in 2020YoY Decline in Collisions (2019-20)attributed to COVID-19

Developed markets expected to drag recovery; developing countries to emerge resilientPerformance of Industry Metrics Defining Collision Repair Industry (YoY Change) (2014-25F)DEVELOPED MARKETS(Top 10 Countries*)DEVELOPING MARKETS(Top 10 4%5%7%20202025F2014-23%VMT2020-25%NUMBER OF COLLISIONS1**includes China, India, Brazil, Mexico, Russia, Turkey, Korea, Vietnam, Malaysia, Thailand*includes US, Canada, Germany, France, Italy, UK, Spain, Japan, Australia, Poland1 Total number of collisions involving passenger vehicles2Collision Repair Market includes a total of labor, parts and consumablesSource: Primary Interviews with Collision Repair Experts, Government Sources, Associations, Aranca Analysis38%Special Report Emerging Trends Shaping the Collision Repair IndustryCOLLISION REPAIR MARKET22025F

Following global recovery, changing customer demands and some emerging trends attractstakeholder interest worldwideMapping Degree of Impact of Key Trends in Collision Repair IndustryTrends in Collision Repair123SophisticationIncreasing ADAS penetration drives demand foradvanced technical infrastructureConsolidationLarger body shops taking over smaller ones toexpandDigitalizationIncreased digital practices optimize businessesacross value chainRising Repair Cost4Newer technology demands new types ofproducts, services in collision repair spaceIncreasing Insurance Penetration5Rise in share of repair orders through insuranceclaims versus customer ordersSource: Aranca Analysis4Special Report Emerging Trends Shaping the Collision Repair IndustryNorthAmericaLATAMEuropeanUnionAPAC (ex.China)China Prevalence of Trend High Moderate Low

#1: Rise in ADAS offers growth avenues in sensor calibration, replacement; growingsophistication to drive speedy CAGR of 10–20% over next five yearsChange in ADAS PenetrationChange in Mix of Average Repair Cost; Case Example: US2019-25F2019-25F I Figures in USD201911%2025FTraditionalAverage Costof Repair(ex. margins)40%2019( )12%38%6%20%7594%Source: Primary Interviews with Automotive OEMs and Collision Repair Shops, Aranca Analysis5Special Report Emerging Trends Shaping the Collision Repair IndustryADAS partsADASCalibration 9-25CAGRRefinishTraditionalCoatings &Parts andConsumables Components14006432025F( )10%LaborEmerging3%1052%

#2: Larger players aggressively take over smaller, distressed body shops, thus pavingway for greater consolidationChange in Number of Body Shops in US and Germany (2019-25F)41KUS201940.5K39.5K20202025FKey MSOinvolvedin M&A6KGermanyKey MSOinvolvedin M&AM&A resulted in 1000 body shops in 201920195.9K5.8K20202025FExpansion by convertingindependent shops to franchisesChange in Share of Body Shop Type in US and Germany (2019-25F) 2,800 2,500 3,300 3,400 30,000 32,000 9,500 8,50020192025F20192025FStrengthening of A&B type of body shops will support the need for a more structured industry offering improved service qualitySource: Primary Interviews with Body Shop Associations, Aranca Analysis6Special Report Emerging Trends Shaping the Collision Repair IndustryA (Revenue 3M/yr)B (Revenue 1.5M - 3M/yr)C (Revenue 600k - 1.5M/yr)D (Revenue 600k/yr)

#3: Digitalization changing collision repair industry operations; offers opportunities inrepair process optimization, workflow managementPenetration of Select Digital Solutions in Body al record of vehicleDigital Vehicleinspection with real-time updatesInspectionto customersGrowth Rate(2019–25F)Tailwinds80–90%8–10%Improved transparency between body shops andcustomers30–40%30–35%Time savings of up to 50%Enables tracking history of repairsDigitalizedOEM ,Diagnosis &CallibrationDigital manuals and procedureswith timely updates80–90%12–15%45–50%20–25%Track repair journey, costestimation, part sourcing, ordermanagement75–80%8–10% 4020–30%Aggressive push by OEMs, associations, states formandates in collision repairPush from insurance companies to reduce time cycleOptimized resource allocation, process control,higher vehicle throughput, better order history trackingIncreasing ADAS penetration in parcDiagnostics pre-/post-scanning,ADAS calibration / recalibration30-35%30-35% 5%35–40%Source: Body Shop Magazines, News Articles, Primary Interviews with Collision Repair Shops,, Aranca Analysis7Increasing vehicle complexity: New materials,sensors, parts (such as AEB) will require OEM supportSpecial Report Emerging Trends Shaping the Collision Repair IndustryRepair shops see high share of scanning requirementdriving need for sophisticated toolsIndustry transitioning from OBD to OTA diagnosticsDeveloped MarketsDeveloping Markets

#4: Demanding overheads, technical complexities compel body shops to push up autorepair costsFactors Impacting Average Cost of Collision RepairFactors Driving CostScenarioCost of Vehicle Componentsand PartsVehicle Complexity Impacting Skillsand Infrastructure Sensor-based parts (bumper,windshield, etc.) incur additionalreplacement costs. Eachsensor costs 500–1500 based Labor rates: 20–25%on application. Training expenses: 50% Light-weight and dissimilar Capital investment: 1.3–1.5xmaterials raise panel cost by30–50%.Additional Service Requirements Addition of ADAS recalibrationas a new service in repair shops Increase in average share ofscanning and recalibrationservice from 1% of totalrepair cost to 10% by 2025 Different parts are required tocater to electric vehicles.ImpactAverage increase in partreplacement costIncrease in operating expenses forcollision repair shopsIncrease in cost of repairservice 500–10001.2x10–20%With the rising complexity of parts and the irreparable nature of some components, such as sensors, the industryis transitioning towards a trend of replacement over repairs, especially in developed markets.Source: Body Shop Magazines, News Articles, Primary Interviews with Collision Repair Shops, Aranca Analysis8Special Report Emerging Trends Shaping the Collision Repair Industry

#5: Increasing insurance penetration further driving share of claims within repair orders,especially in emerging marketsInsurance Penetration in Collision Repair Industry in Developing Markets (2019–25F)Share of Insurance Claims (vs. OOP) in Collision RepairIndustryChinaIndia48%44%2025F Regulatory evolutionCompulsory motor third-party liability (MTPL) insurance (India,China)53%48%ENABLERS2019Factors Enabling Insurance Growth Improvements in market accessIncrease in FDI from 49% to 74% to enable foreign brokeragefirms to venture into India Insurtech revolution5x growth in number of InsurTechs in Brazil in past three years Growing use of mobile devices95% of auto insurance carriers in China embracing virtual claimshandlingBrazil35%41%Source: Insurance Reports 2020, News Articles, Primary Interviews, Aranca Analysis9Special Report Emerging Trends Shaping the Collision Repair Industry Wider financial inclusionReduced premiums, expanded coverage on auto TP insuranceby 50% in China

How is Aranca helping players in the collision repair industry?We offer solutions serving a diverse set of requirements across the value chainMarket Tracker(Tracking collision repair indicators such asVMT, collisions, claims, parc, sales, age of vehicle, etc.across 30 markets to perform relative benchmarking)Opportunity Quotient for New TechSolutions(Evaluating emerging profit pools with technology trendssuch as ADAS (recalibration tools, etc.), digitalization(diagnostic tools, workflow management, etc.) shapingthe industry)Competition Assessment(Deep-dive analysis on peers across value chain,including suppliers of parts and consumables andcollision repair equipment, as well as body shops;detailing peers’ financial and operational dynamics) 10Special Report Emerging Trends Shaping the Collision Repair IndustryIndustry Assessment and Implications(Estimating market size, its implication on businesses,covering elements of labor, parts, paints, allied materialswhile studying repair order costs, claims/OOP, etc.)Business Expansion Strategy(Identifying partners, targets to pursue inorganicexpansion to capitalize on opportunities emerging fromadjacencies in existing portfolio, markets, value chain)Voice of Customers(Studying customer behavior in terms of purchase,business workflow, sales to gather intel on purchasecriteria, repair timelines, changing customerrequirements, technology uptake, etc.)

2Our Work in CollisionRepair Industry25 500 Market & Business AdvisoryProjectsNetwork of Body ShopsConnections across 30 markets15 Clients Assisted in Collision RepairEcosystemABOUT ARANCABusiness Research & AdvisoryValuation & Financial AdvisoryCXOs in Strategy, SBUs, Sales, Marketing, CI/MI, InnovationCFOs in Start-ups, PE/VC Firms, Corporate M&A Teams, Mid-marketCompanies11Technology IP Research & AdvisoryInvestment Research & AnalyticsR&D, Tech Scouting, Open Innovation, IP Teams, Product DevelopmentBrokerage, Hedge Funds, IRPs, I-Banks, AMCs, Investor RelationsSpecial Report Emerging Trends Shaping the Collision Repair Industry

Connect with our TeamVishal SanghaviMakshi ShahHead AutomotiveAssistant Manager Automotive 91 022 3937 9999vishal.sanghavi@aranca.com 91 022 3937 9999makshi.shah@aranca.comFor more details: www.aranca.com https://www.linkedin.com/company/aranca https://www.aranca.com/knowledge-library

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Developed Markets Developing Markets #3: Digitalization changing collision repair industry operations; offers opportunities in repair process optimization, workflow management Penetration of Select Digital Solutions in Body Shops 7 Special Report Emerging Trends Shaping the Collision Repair Industry