How electric vehicles, remote connectivity, automation and AI are fundamentally changing the after-sales market
Technological advances like artificial intelligence (AI) and ever-improving mobile connectivity are changing our lives profoundly and quickly. The auto manufacturing industry is certainly poised to keep up to speed – and undergoing a fundamental change itself.
At the bottom of this is the burning need (pun intended) for cutting down the CO2 emissions of traffic, of course. In practice, this means a gradual movement from combustion engines to electricity – and a big change in the build, manufacturing and maintenance of vehicles.
The sustainability efforts are also affecting the market outlook. In a recent analysis of the US, China, Japan and Europe top 5 markets (EU5), Deloitte found that a global decline of 11% is expected in the now lucrative aftersales business.
Figure 1. Vehicle aftersales are forecasted to drop radically by 2035. (Source: Deloitte)
True, on an upbeat note, the overall vehicle sales by manufacturers are forecast to grow by 25 percent until 2035. However, most of that growth will come from China, already taken over by the local manufacturers. Just a little growth is expected from the United States as well.
Unfortunately for the European and Japanese manufacturers, the prospects look slightly gloomy:
EU5 and Japan show a drop in revenue, for both new and used cars.
Setting sights on the service
What to do in the face of the slightly grim aftersales market outlook? One thing, it pulls the quest for a better user experience to the forefront on the agenda of the manufacturers and vehicle service providers. Competition is likely to get stiffer, so customers will have to be courted with a better service.
Hence, the ever-increasing use of AI, edge computing and automation for all kinds of vehicles, be it a car, truck, bus, tractor…
By the way, when it comes to AI, great numbers of AI industry leaders are worried about the potentially existential threats generative AI could pose. And we too certainly echo that worry. However, it seems that AI keeps relentlessly marching on, deaf to anybody’s cries of worry… so I here just stick to what vehicle manufacturing industry experts say and leave that angle alone.
Vehicle maintenance and repair is the sector perhaps to be touched the most by these developments. How? Let us take a look at that now.
Based on my takeaways from numerous accounts by experts, I will present the key drivers for the disruption in the market. Then present five key consequences that (will) follow and the issues that need to be solved first by manufacturers and garages.
Shift in emphasis from hardware to software
Already today, vehicles manufactured rely on a lot of software. In-vehicle diagnostics, predictive maintenance and yearly updates are keywords for product development for the future. Vehicles are increasingly starting to behave like our mobile phones and kept running smoothly by software updates over the air.
At the same time, the vehicle hardware is becoming simpler. There are fewer moving parts.
In electric vehicles (EVs), the number of powertrain parts is reduced to one fifth and oil is all but eliminated.
Figure 2. Spearheaded by electricity, alternative drivetrains are expected to overtake the market at least in China and Japan. (Source: Deloitte)
Indeed, two of the top three maintenance actions — oil changes and brake service (24% and 5%, respectively, of all maintenance transactions in the U.S. market) — are reduced radically by the move to EVs.
Why are brakes impacted? EVs often use a process called regenerative braking, which slows vehicles down while also saving energy – and saves brake pads and rotors a great deal. The life of the pads is sometimes extended to more than three-fold.
…Except for the tires
This means reduced wear and tear for the hardware and less need for maintaining the vehicle – with one notable exception: the tires. Especially the weight of the batteries puts much more pressure on them. One tire replacement service says that its EV customers come back for tire replacements 30% more often than traditional internal combustion vehicle owners.
True, new technologies are being developed to extend the life of the tires, for example, tire and suspension settings optimization and wheels that auto-inflate the tires from the inside. But these are very unlikely to keep away the accelerated service frequency altogether.
Figure 3. Electric vehicle customers come back for tire replacements 30% more often than traditional vehicle owners.
New opportunities for faster service and recycling
Overall, however, the repair and maintenance work on hardware is less with EVs. It is even further reduced by practices like Tesla’s: when, say, a battery pack or drive unit fails, Tesla replaces the whole unit, not just the failed components. This is simply much quicker and easier.
And why wouldn’t other manufacturers and garages start doing the same – especially as the broken parts of a unit swapped out can be replaced with new ones and the unit then be fitted in another broken car?
After all, recycling is another buzzword for the day – and not only for environmental reasons. It can help with the severe material shortages vehicle manufacturers have reported during the last few years: for semiconductors, computer chips, rubber, fabrics, steel, even leather…
From hardware towards software and electricity business
So in the big picture, vehicle maintenance and repairs are increasingly about software and electricity fixes.
With the advent of fast, low-latency 5G network connectivity, maintenance and repairs are also happening more and more remotely over the air. The same applies to software updates, which can be expected to come more frequently than now.
This is a part of the larger move to the Internet of Things (IoT) connectivity built into vehicles. It will be used to transmit real-time vehicle diagnostics. These will enable increasingly sophisticated and convenient predictive maintenance schedules.
Figure 4. As vehicles go green and electric, so does their repair and maintenance.
Analytics powered by artificial intelligence (AI) will enable the vehicle to flag issues soon to happen to the garage or manufacturer. As the mechanics will receive the diagnostic information ahead in time, they can proactively order the necessary software or components. The drivers will get a faster service and have to worry less about pinpointing vehicle maintenance issues while enjoying increased safety on the road.
Auto is becoming even more auto(matic)
Over-the-air optimization will further improve vehicle performance. Think about the engine, for instance. When diagnostics are available about its performance, it is possible to optimize its settings, whether by in-vehicle AI or a remote system. This can prevent damage to the engine, increase its life, improve the safety of the driver and reduce fuel consumption. Or for another example, think about the auto-inflating tires I mentioned before.
As a result, we can expect to see more autonomous vehicles on the road. Not that soon, perhaps, ones that have no driver, but at least ones equipped with autonomous driving and driver assistance, enabled by AI.
Implications for manufacturers: 5 key opportunities and issues
Above I have covered some key drivers for the disruption the automotive aftermarket caused by EVs. But as always, there seem to be issues to be addressed before the full benefits that follow can be reaped.
1. Mechanics need new tools and skills
The auto mechanics’ work will change. Ok, we will see many of them still turning a wrench like before, but not that many and that often. As the work with the electronics and software is taking more space in their schedules, so are new tools taking their place in the garages. Battery-powered impact wrenches, air ratchets and bolt spinners will see less use as the mechanics rely more and more on oscilloscopes, laptops, and a variety of electronic tools.
Figure 5. Finding car mechanics with the required skills is not easy.
2. Hiring shortages will continue
A shortage of skilled mechanics is already causing headaches for vehicle manufacturers and garages and the trend is likely to continue to the end of this decade and on. The baby boomers are now retiring from the service and, in many parts of the world, there is a lack of trained new blood to take their place.
Plus, the average skill level of the new mechanics coming in is often reported to be lower. Combine this with the higher professional requirements the EVs place on them and it is easy to see, why their employers are looking more and more into…
3. Automation will prevail and grow where applicable
With the triple challenge of a shortage of mechanics, the requirement for improved skills and the quest for a great customer experience – like shorter service times – comes the need for automation, anywhere it can reduce and accelerate work. Advanced diagnostics and other new vehicle software are a part of this development, but there will also be more physical robots doing the maintenance and repair tasks.
And here’s a small hint that can make a big difference: eliminating routine administrative tasks like creating standard-form documents, messages and reports can do a lot to save the mechanics’ time and work. And it can do that already now, while even more is possible in the future, with companies like ours continuously coming out with new innovations.
4. Data and system security threats are on the rise
With the bigger role software and IoT connectivity comes increased sensitivity to cyber threats. This applies both to the vehicles and the systems they connect to. To make matters worse, malicious attempts to damage vehicle software and the supporting systems will no doubt make them an attractive target to cybercriminals. And even to terrorists, considering the damage that they might be able to do from a distance without bombs, guns, physical weapons of any kind.
To safeguard themselves and their customers especially, manufacturers and garages must ensure top data security. Following all the best security practices, like those stipulated by ISO 27001 and TISAX standards, is one thing. Another is to ensure that each system provides the highest cybersecurity even before deploying it. This includes also verifying the security of each and every application and add-in the systems are equipped with, since these apps may carry a much higher vulnerability risk than their mother systems.
5. The closer the future, the more remote it will get
Ever more refined vehicle diagnostics and performance optimization are on the horizon. Software updates and repairs, too. And what about the hardware repairs? Many vehicle owners probably would like to get remote assistance to make some of the work themselves, without the need to visit the garage.
By using VR equipment, mechanics are expected to enable this. They will be able to guide the customer step by step to fix a hardware fault or change a component. With VR equipment, customers can also better access parts hard to reach; the same applies to mechanics working on their own sites.
Major changes, far beyond EV maintenance
EVs and the disruptions they are causing, in general, are highly interesting to follow. But other general tendencies are shaping the business of manufacturers of cars, buses, trucks and other vehicles.
One is that the ownership models of cars are getting more diversified, though not as quickly as some experts have predicted in the past. Subscription contracts are expected to become gradually more common, along with car sharing and mobility-as-a-service (MaaS) services. Car ownership is becoming more of a community thing for many drivers.
Figure 6. Increase in vehicle sharing is expected to lead to more efficient utilization of vehicles. (Source: Deloitte)
And there is a drive for larger communities on the manufacturing side: a more profound reliance on different ecosystems is predicted for all players in the market, whether that is about recycling, renewable energy supplies, the ‘advanced supply chain’ based on better fleet management or providing an elevated consumer experience with communities, 3D web experience or personal customization of vehicles parts.
Manufacturer ecosystems are expected to grow in size and the number of players participating. And this is exciting for us to watch, since we supply vehicle manufacturers for their numerous customer touchpoints, be those for sales and marketing or after-market services.
Read more about our solutions to help vehicle manufacturers with their customer service.