The aftermarket for automotive parts and services is undergoing rapid change as big brand manufacturers and consumers gear up for smarter and greener mobility options. In the realms of the passenger car segment it is fair to say that newer forms of mobility such as hybrid and fully electric vehicles should no longer be considered emerging forces in the auto industry, and are well on the way to replacing their fossil fuel forebears.
But this process isn’t done yet. And there is much work to still be done within the aftermarket channel if it is to be ready for the technical challenges ahead.
“Changing market dynamics will require aftermarket players to invest in adding new competencies, offer different service profiles and focus on developing sustainable/eco-friendly supply chains,” he says.
It will also requires new technical competencies, with an understanding of new components (such as batteries, motors) required by all market players.
“Electric engines have fewer moving parts and, thus, less wear and tear. Overall, aftermarket maintenance costs for battery electric vehicles are expected to be approximately 40% lower than for conventional combustion engine vehicles,” says Pandey.
“This phenomenon, however, is not strictly a profit pool “shrinker” for aftermarket players. Opportunities exist in an investment in skill sets, offerings, and messaging that match the growing call for sustainability.”
For the aftermarket channel, electrification is arguably not even the most promising opportunity for them to address. There may be over 200 EV models announced by OEMs globally, but electrification is only one of trend of many being experienced by the channel as we head to the mid-way point of the decade.
Glasgow Research and Consulting’s Vishal Pandey has dug deep into the data and surveyed the auto-industry to spot seven other disruptive forces shaping the channel. A promising application is how connected vehicles (CVs) are enabling predictive maintenance, Pandey notes CVs offer new features like route tracking, park and find, accident and breakdown assistance, dealer search, and vehicle status information.
“For aftermarket players, increasing connectivity delivers the potential of closer, more immediate relationships with customers,” he says. “Connectivity enables a new range of digital services, which customers can purchase on demand (e.g., onboard delivery of mobility-related services such as infotainment or concierge services, usage-based insurance, and personalised recommendations).”
As a further example, he explains that an advanced breakdown service will not only call for roadside assistance, but also transmit accident-specific data, helping the responding party deliver the most appropriate service by knowing in advance which car parts are necessary.
The service will also recommend a location for servicing, and consumer research indicates that approximately 60% of drivers in the US, Germany, Brazil, and China would follow the recommendation.
CVs also offer greater scope for predictive maintenance, he adds: “The continuously sent status data of connected vehicles enable an instant analysis and check of the vehicle. If an actual or potential malfunction is detected, appropriate actions can be taken.”
Instead of vehicle service happening at regular time intervals, preventive service would be based on actual driving behaviour and vehicle usage.
“This type of service could increase in-workshop traffic through maintenance recommendations and targeted maintenance campaigns, especially when the warranty expires and customer loyalty usually drops.”
As per industry experts surveyed by Glasgow Research and Consulting, approximately half of passenger vehicles sold in 2030 could be highly autonomous with another 15% likely to be fully autonomous.
“Autonomous driving impacts the aftermarket in various ways,” says Pandey. “Over the last years, global advanced driver-assistance systems (ADAS) volumes grew significantly. ADAS and autonomous driving leading to fewer accidents but shorter maintenance intervals.”
Despite concerns from early adopter regarding the safety of autonomous vehicles, Pandey believes the technology will ultimately lead to fewer accidents.
“AVs will reduce and eventually eliminate the human error element of driving. Decreased human control will be the main driver of a drop in the number of collisions, as more than 90% of all crashes in the US, for example, are primarily caused by driver action. This not only impacts the direct aftermarket players (e.g., body shops), but also intermediaries such as insurance companies, which will need to adapt their business model.”
“AVs are designed to operate optimally. Since much of a vehicle’s maintenance is related to how it is used (e.g., braking behavior) autonomous cars will experience less wear and tear. On the other hand, these vehicles need to be fully functional at all times and, therefore, will be equipped with more sensitive components (e.g., sensors), which will likely require more frequent diagnostic checks. In addition, the service interaction between customer and workshop will change since the vehicles might drive themselves to the workshop, taking in-person human interactions out of the equation.
“AVs may shift liability more toward OEMs,” This has the potential to make OEM-backed service models preferable to independent service and repair models.”
Having weathered a pandemic, regulatory whiplash, and a host of other hurdles, shared mobility endures. Of his next standout disruptive trend, Pandey suggests that we are only at the beginning of a phenomenon that will encompass a huge range of vehicles.
“The next big things in shared mobility include autonomous taxis (so-called robo-taxis) and airborne varieties, which have lately seen increased traction,” says Pandey. “When considering future mobility modes, respondents are open to robo-taxis, with more than half of them interested in trading in their car in the future, while 7% of consumers express they would even pay a premium compared with owning a car. Brazilian and Chinese respondents expressed the greatest likelihood of switching to robo-taxis and shuttles in the future.”
“Survey respondents said that their main reason for using shared mobility is convenience. This reflects today’s dominance of e-hailing over other shared-mobility modes. The most important features of shared-mobility services for consumers are safety (which may reflect the impact of the COVID-19 crisis on our consumer survey at the end of 2020), a competitive price, and availability. The latter, especially, might be an important factor in shared mobility’s ability to replace private-car ownership in the long term. Notably, availability is the most important feature for German consumers.”
Since 2010, more than $100 billion has been invested in shared-mobility companies. Looking deeper into types of investors, it’s not the automotive players that are investing in shared-mobility companies. Instead, around 72% of the total amount of disclosed investment since 2010 has come from venture capital and private-equity players, suggesting a bet on the future rather than on established and already sustainable business models.
“Tech players are second at approximately 21%, while automotive-company investments amount to approximately 4%. One reason for the traditional automotive industry’s lackluster showing could involve shared mobility’s potential for disrupting an automotive player’s core business.”
In next month’s issue, Vishal Panday will look at how the aftermarket must adapt to survive the next wave of mobility disruption.