Federal Reserve senior policy advisor: Collision shops at front lines of auto industry changes

As the U.S. auto industry faces multiple disruptions, collision repairers are on the front lines of observing how consumers respond to changes in a sector critical to the nation’s gross domestic product (GDP), Kristen Dziczek, senior policy advisor at the Federal Reserve Bank of Chicago, said during The Industry Exchange at the Collision Industry Conference in Las Vegas.

“I think your shop is really where this broad economy meets people’s pocketbooks,” Dziczek said. “You’re seeing that decision made right on the front lines.” 

Dziczek says those collision shop experiences will tell a story about the economy before data shows it. 

“You’re seeing how trade increases the price of the part shipping,” Dziczek said. “You’re seeing how technology changes the things you have to do for calibration and the arguments you have to have about paying for those sorts of things. You’re seeing how finances change to higher deductibles; how the loss per mile is lower, but the loss per collision is higher.” 

Part of Dziczek’s job is to have conversations with those throughout the auto industry, including collision repair businesses, about what they are seeing in the economy, she said. 

“There’s a bunch of really smart people who are doing very complicated mathematical models of the economy, and we listen to all of that, and then they say, ‘And now, what’s really going on in the economy?’” she said. 

Dziczek has been working at the Federal Reserve for about five years. Previously, she worked at General Motors, the UAW, in various auto industry roles for Congress, and at a nonprofit auto industry think tank. 

“I think I have the coolest job in the auto industry,” she added. 

Auto makes up about 5% of the U.S. GDP and employs more than 1 million people, Dziczek explained. She added that the industry touches all the “big moving parts,” like steel, aluminum, copper, microchips, oil, critical minerals, and magnets. 

“We’ve got lenders, we’ve got insurers, we’ve got repair, we’ve got customers,” Dziczek said. “We’re [Federal Reserve] looking at consumer behavior, we’re looking at banking behavior, we’re looking at all sorts of things through the lens of the auto industry. It’s super duper important, and there are very few other segments of the economy that are 5% of the GDP.”

During the Industry Exchange, Aaron Schulenburg, executive director of the Society of Collision Repair Specialists (SCRS), asked Dziczek about the current and possible future pressures on the auto industry. 

In 2026, gas prices, vehicle sales, tariffs, EVs, and technologies were some of the developments that the Federal Reserve paid attention to, she said. 

“I’ll say this isn’t the highest gas prices have ever been, but it is the highest they’ve ever been this time of year,” Dziczek said as she ran through the list. “Sales have been remarkably resilient, coming in around $16 million this year. Consumers keep buying, so there’s been not really any kind of pullback with that. We’ve seen a few little blips from supply chain disruptions here and there, and then of course tariffs and how tariffs have played out.”

When discussing consumer spending, she said buyers seem to “be fine.” However, she added that new car buyers tend to make six-figure incomes. She added that there are some troubling signs with auto delinquencies, adding that they are at the highest level since 2010. 

Dziczek said the EV reset has shifted focus to hybrids. Currently, about 16.7% of the vehicle market is hybrid, and some vehicles only have a hybrid configuration. 

Electrified vehicles overall are about 24% of the market. 

“That EV reset, however, burned about $100 billion in capital for the automakers,” Dziczek said. “A huge, huge turnaround, while the rest of the world continues on in electrification.”

Schulenburg asked if there are other vehicle technologies that the Federal Reserve is watching. 

In response, Dziczek said two technologies that are most important to the collision repair industry: manufacturing changes to fewer parts and ADAS/automation. 

Automakers are following Tesla’s lead on gigacasting to make vehicles less expensive, she said. 

This year, Ford has been at the forefront of the conversation about gigacasting (or megacasting as Ford refers to it). 

The automaker announced it would invest $5 billion to change how it makes electric vehicles to lower its EV prices. The target starting price for a mid-sized EV truck is $30,000 compared to the average EV cost of $56,000, according to CBS News.  

The shift includes changing how the assembly line operates and a reduction in the total number of parts used in the vehicle. For example, a Ford press release says the wiring harness will be 4,000 feet shorter.  

Dziczek said replacing many parts with fewer parts does make vehicles easier to manufacture but “maybe not easier to repair.” 

It also could have implications for the companies that make the parts being reduced by the automakers. 

ADAS and automation are changing the industry in other ways, she said. This includes federal regulatory actions and conversation.

In September, the National Highway Traffic Safety Administration (NHTSA) announced an agreement with SAE to expedite the development of data-driven AV performance standards. 

In March, NHTSA also announced plans to research ways to update its autonomous driving regulations.  

The agency also mandated automatic emergency brakes as standard in vehicles by 2029.

ADAS features do come with a cost, Dziczek said. 

“Sure, my car can’t crash, but when the car that can crash runs into it, that bumper is very expensive,” she said. 

For collision repairers, this means calibrations, she said. 

Dziczek also said technology is changing how vehicles are manufactured.

Automakers are using AI from beginning to end, she said. This includes product design, supply chains, engineering, manufacturing quality, safety, and in the product itself, she added. 

She shared an example of an automaker building a check engine light that tells consumers the vehicle is trending out of spec. It then sets up an appointment and can order parts with a push of the button on the dashboard. 

There are parts of the manufacturing process that are already lights out, Dziczek said.

A recent federal study found that manufacturing is slightly lower in AI use than other business sectors but that it is rapidly increasing its use, she said. 

“The rate of change is about double that of the overall economy,” Dziczek adds. 

Schulenburg asked whether technology could change productivity and cost of producing vehicles. 

“I think some of that’s up to consumers,” She replied. “If you get greater productivity, which technology should bring you, you have scale, which means you’re not just making a few cars that way. You are changing really quickly and can lower costs, but savings come about through market forces, policy, and consumer decisions.”

Consumers are choosing vehicles with more features. 

“You’re still spending more dollars because you’re loading it up with features,” she added. 

Other costs can also show up after purchasing a vehicle, including insurance, maintenance, and repair. 

Repair costs are rising, she said. 

Labor costs and labor availability are part of driving repair costs, she added. The rates can change for different brands, repair types, and the cost of the parts. 

Insurance is also a complicated set of constructs, she said. Consumers sometimes don’t realize the consequences of lowering their insurance costs. 

Schulenburg asked how the Federal Reserve distinguishes an underlying product that becomes more complex and expensive from the broader inflationary pressure. 

Dziczek replied that the Federal Reserve looks at things that are inflationary or products that are risking costs over time. One-time shocks, such as increased prices post-COVID, are seen as transitory, she added. 

“We’re looking at things that build a sustained growth,” Dziczek said. 

Fuel costs aren’t necessarily inflationary right now, but that could change because of all the places it comes through the economy, she said. 

The closing of the Strait of Hormuz is an event that could cause a one-time shock or create an inflationary event that ripples through multiple industries, she added. 

Aluminum, which currently has a 50% tariff, passes through the strait, she said. She added that helium also comes from the region, which is used to make microchips. 

“We take fuel, obviously, which goes into our gas tanks, but also goes into the plastics that we use in the vehicle, and then it goes into the diesel trucks that bring the parts to the factory and the ships and runs factories in other countries that don’t have big energy emergency supplies,” Dziczek said. “Taiwan, for example, there’s only limited supply or places to store energy on the island of Taiwan. So if you get an energy shock to Taiwan and you can’t make chips, big problem.”

However, right now, auto price increases have remained modest, up 1.5% last month. This is down from overall inflation at about 3.7%, she said. 

Tariffs so far have only created a one-time shock rather than an inflationary event, Dziczek said. 

“The tariffs didn’t keep going up month after month,” she said. “They went up once, and actually they kind of got negotiated down over time, or there were exceptions to the rules that came into place, so there was a spike, and then it came back down.”

There is a threat that tariffs will be increased to 50% on autos and parts from Canada Jan. 1, she added. That also wouldn’t be inflationary unless it became 75% the next month and 100% the following month. 

Election results were not in while Dziczek spoke on Tuesday; however, she said any changes from the election could affect tariffs and regulations. The changes could also affect budgetary policies, she added. 

Schulenburg asked if the competitive position of the automotive industry in the U.S. changed as other countries have expanded their capabilities. 

“China is the number one exporter of vehicles, 7.1 million vehicles last year,” Dziczek said. “But the U.S. is effectively walled off from China and Chinese brands.” 

Global automakers are competing abroad, she said. 

For example, Chinese-built vehicles were about 4% of the Mexican market, she added. She explained that not all are Chinese brands. Some Western brands that lost share in China have been exported to other markets.

“They’ve really become a big force in global vehicle production, and even without that direct competition in the U.S. market,” Dziczek said. 

She noted that intense competition in China has caused manufacturers to develop vehicles really fast. It’s often believed that the vehicles are lower cost because of subsidies and governments behind them. Yet, she added that a recent study found that when BYD was compared to Tesla, there was only a 5% cost differential from subsidies. 

The rest of the cost savings comes from controlling the supply chain from batteries to minerals to cells, she said. 

“They have immense scale and dominance in batteries,” Dziczek said. “They don’t just make EVs, though; I’ll point out they also have immense vertical integration.”

She added that China also has density in its supply chain. A lot of what is needed to build a vehicle is in China. 

Because of the high competition, Chinese manufacturers are also developing vehicles faster than in the U.S. 

“Their development from paper to vehicle on the road is less than two to three years,” she said.

It can take five to seven years in the U.S., she said. 

“One thing that’s interesting about two to three years is that your policy environment is probably more stable over the next two to three years,” she added. “Like we know who the president is for the next two years.”

The U.S. automakers can’t make a vehicle 100% in the U.S., she said. For example, Nvidia chips can’t be made in the country. 

The country is seeing some shifts in assembly, she said. Multiple automakers, including GM, Stellantis, and Audi, have announced production investments in the U.S.

“Since the tariffs went into effect, we’ve seen an uptick of about 6,500 manufacturing jobs in the motor vehicle assembly sector,” Dziczek said. “The parts sector has lost jobs for 32 straight months, down about 10,400.”

As parts companies come back, they are turning to automation and AI,  she added. 

Schulenburg asked which economic indicators Dziczek will be watching in 2027. 

“The renegotiation of USMCA and whether we’d get to some kind of a trade truce with Canada and Mexico that settles things down and gives some more stability to the investment environment,” Dziczek answered. 

The pace of sales, transaction prices, and employment is always at the top of the list, she added. 

Dziczek said another thing to watch is auto credit delinquencies, lending standards, and what is happening to rates. 

Repair costs versus insurance gaps is also on the list, she said. 

“Income growth has dropped below the inflation rate, so when wages are growing faster than inflation, that’s good,” Dziczek said. “When wages are growing more slowly than inflation, that might cause people to become more conservative.”

If people stop making big purchases, auto plant workers wouldn’t make cars, she explained. 

“It starts this spiral downward,” she said. 

The collision repair industry should be looking at its labor pipeline, Dziczek said. 

“How you’re going to get people to do this work because this is not offshore work,” she said. “This is work that technology can change, but it’s not going offshore.”

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Aaron Schulenburg, SCRS executive director and Kristen Dziczek, senior policy advisor at the Federal Reserve Bank of Chicago, discuss the automotive industry during CIC in Las Vegas Nov. 3, 2026.