German insurance providers are lobbying for regulatory changes to mandate the use of recycled and used spare parts in automotive repairs. The move aims to lower claim payouts and combat rising repair costs driven by inflation and complex vehicle electronics, potentially shifting the profit margins of the automotive aftermarket sector.
The friction here isn’t just about a few used bumpers. It is a systemic clash between the insurance industry’s need to curb loss ratios and the automotive industry’s preference for new, OEM (Original Equipment Manufacturer) parts. As we move into the second half of 2026, the cost of repairing modern vehicles has climbed significantly due to the integration of Advanced Driver Assistance Systems (ADAS), which require expensive recalibrations and high-cost sensors.
The Bottom Line
- Cost Containment: Insurers are pushing for “green parts” (recycled components) to reduce the average cost per claim.
- Regulatory Pressure: The industry is seeking a legal framework that prevents workshops from rejecting used parts based on arbitrary “quality” standards.
- Market Shift: A successful mandate would divert revenue from OEM parts manufacturers toward certified dismantling and recycling firms.
The Margin War Between Insurers and OEMs
The math is simple. A new headlight assembly for a luxury sedan can cost upwards of €2,000. A certified used part from a salvaged vehicle might cost €600. For a company like Allianz SE (OTCMKTS: ALIZY) or AXA (EPA: CS)**, scaling this difference across millions of claims represents a massive boost to the combined ratio—the primary measure of an insurance company’s profitability.
But the balance sheet tells a different story for the manufacturers. OEMs rely on the “aftermarket” as a high-margin revenue stream. By pushing for new parts, they maintain a closed-loop ecosystem that ensures maximum billing. When insurers demand used parts, they aren’t just saving money; they are actively eroding the aftermarket monopoly held by brands like Volkswagen AG (OTCMKTS: VWRLY) and Mercedes-Benz Group (XETRA: MBG).
Here is the reality: the “Right to Repair” movement has shifted from a consumer hobby to a corporate financial strategy. Insurers are now the primary drivers of this shift, using their leverage as the payers of the bills to force a change in how workshops operate.
Quantifying the Shift to Circularity
To understand the scale of this transition, we must look at the broader macroeconomic pressures. Inflation in the automotive sector has remained sticky, with parts prices increasing faster than general CPI in several European markets. The shift toward a “circular economy” is no longer just an ESG (Environmental, Social, and Governance) talking point—it is a fiscal necessity.
| Metric | New OEM Part (Avg) | Certified Used Part (Avg) | Estimated Savings (%) |
|---|---|---|---|
| Body Panels | €800 – €1,200 | €300 – €500 | 60% – 65% |
| Electronic Modules | €1,500 – €3,000 | €600 – €1,200 | 55% – 62% |
| Lighting Systems | €1,000 – €2,500 | €400 – €900 | 60% – 68% |
This data highlights why the insurance lobby is intensifying its efforts. By shifting just 20% of their claims to used parts, a mid-sized insurer could potentially save millions in quarterly payouts, directly impacting their net income and dividend capacity.
The Regulatory Hurdle and the ‘Quality’ Smoke Screen
The primary obstacle is not the availability of parts, but the legal definition of “equivalent quality.” Currently, many repair shops refuse used parts, citing safety concerns or warranty voids. However, the insurance sector argues that these claims are often exaggerated to protect the higher margins associated with new parts.
This battle is playing out in the halls of European regulatory bodies. If the government mandates that used parts must be accepted provided they meet specific safety certifications, the power dynamic shifts. The Bloomberg terminal often reflects these shifts in the “industrial” sector as a move toward sustainability, but the core driver is purely financial.
The implications extend to the supply chain. We are seeing the rise of “certified dismantlers”—companies that don’t just scrap cars but systematically harvest and certify components. This creates a new asset class in the automotive world: the “certified salvaged part,” which carries its own valuation and warranty.
Impact on the Broader Automotive Ecosystem
How does this affect the everyday business owner or the retail investor? If the mandate passes, we will likely see a decline in the quarterly revenue of OEM parts divisions. Conversely, we may see a surge in the valuation of specialized recycling firms and independent repair networks that can pivot quickly to these lower-cost inputs.
Furthermore, this trend aligns with a broader move toward Reuters reported trends in “circularity” across the EU, where waste reduction is being codified into law. When the Wall Street Journal discusses the “green transition,” they often focus on EVs. But the real financial battle is happening in the “brown” sector—the repair and maintenance of the existing internal combustion fleet.
The risk for insurers is that a heavy reliance on used parts could lead to a slight increase in “re-work” rates (where a part fails and must be replaced again). However, the cost of this risk is negligible compared to the immediate savings on the initial claim. The math simply favors the insurer.
The Path Toward 2027
As we look toward the close of the current fiscal year, the trajectory is clear. The insurance industry will not stop until the “used part” becomes the default for non-structural, non-critical repairs. This will likely lead to a tiered repair system: “Premium” (all new) for those paying out-of-pocket, and “Standard” (mixed) for insurance-funded repairs.
For investors, the play is to watch the margins of the major German OEMs. If their aftermarket revenue begins to dip, it is a sign that the insurance lobby has won the regulatory war. For the consumer, this could mean lower premiums in the long run, provided the savings aren’t simply absorbed as corporate profit.
Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial advice.
