The introduction and eventual universal adoption of driverless technology will completely change the retail automotive game and any Dealers slow to adapt will find themselves left behind. For the smart, however, there will be opportunities.
Fewer sales, more service
Market analysis company IHS estimates that the technology in self-driving cars will initially add between $7,000 and $10,000 to the sticker price of a car in 2025 with, hopefully, a nice margin built in for Dealers. That price premium is, however, expected to decline in the following years as the technology becomes more prevalent.
A 2015 study by researchers at the University of Michigan’s Transportation Research Institute concluded that owning a self-driving car could lead to families owning fewer cars than they do now.
Today’s average of 2.1 cars per household could drop to 1.2, with features such as ‘Return Home’ allowing user trips to overlap. This, however, will lead to an estimated 75 per cent increase in mileage, creating opportunity for more frequent servicing requirements. That’s great news for Dealers because, as we all know, greater profits are to be found in the service department than in new vehicle sales.
At the 2016 J D Power and NADA Automotive Forum, John Krafcik, CEO of Google’s self-driving car project, said he believed people who purchase a self-driving car could see annual mileage upwards of 100,000 miles (160,000 kilometres), compared to a household average of roughly 13,500 miles (21,500 kilometres) today.
This was because the car could be used by multiple people, including for things like ride-sharing services. With this dramatically increased usage it is logical to assume there will be a greater need for professionally trained technicians to service the technology. That means more jobs.
An extensive Pricewaterhousecoopers (PWC) study predicts supplier revenues will shift from engines, interiors and chassis to electronics, software, cloud services and batteries.
On the downside, service technicians will need to be trained to repair and maintain all this new technology, but that is a cost that Dealers will share with manufacturers.
Adapt or die
The PWC report says revenues from ride-sharing, robofleet and similar sectors will grow rapidly, as will revenues from pure digital services such as on-board entertainment and location-based information providers.
New players will supersede old companies unable or unwilling to adapt and car makers will have to share a greater proportion of the profits. The PWC study suggested that by 2030 traditional auto makers and suppliers will see their share of industry profits drop from 70 less than 50 per cent as technology companies gobble up the connectivity dollar. Already Apple is reputed to have spent $US10 billion on developing an iCar and Google’s autonomous vehicles have driven over 2.5 million kilometres.
PWC predicts that by 2030 ‘shared mobility’ will account for 10 per cent of the auto industry’s projected $US7.8 trillion turnover and 20 per cent of its $US600 billion profit. ‘Digital services’ will take a further five per cent of profits and ‘supplier (new technology/software)’ another 11 per cent.
This raises the possibility that not all OEMs will survive and new players will almost certainly emerge, so Dealers need to take a strategic look at their franchises and make a judgement on which will survive in this brave new world.
PWC predicts the automobile aftermarket business will grow faster than average in the early years, with shared mobility increasing vehicle use. This, however, is expected to decline once the growth of electric vehicles soars.
Nonetheless dealerships can position themselves to sell connected car packages to consumers, mostly bundled with new cars, as Audi, Mercedes-Benz, and Tesla already do. Connected car data could provide opportunities to sell ‘life of vehicle’ monitoring and service/maintenance.
“Any company providing on-board services will have access to far more information about drivers and passengers, their behaviour, interests and preferences, which can be used to market to them much more precisely,” the PWC report reads.
“A large market for aftersales upgrades and services will likely be established, much like the market for apps and accessories that grew so quickly around smartphones.”
By 2022 connected car packages are expected to make up 6.9 per cent of the total vehicle price for volume cars and 14.2 per cent for premium models.
Connectivity will come before full automation and the needs and wants of consumers will follow from that. PWC predicts smart mobility services to lead the way, providing for travel and accommodation bookings, ride-sharing, car-sharing, robo-taxis and more. Other services to be used in-car include advertising, communication, social media, commerce, banking, entertainment content and services such as health and education.
These will be designed and provided by tech companies and those auto manufacturers quick enough to adapt. The key for Dealers will be picking winners and partnering with them. Features more related to the performance of the vehicle, such as advanced driver assistance systems, human-machine interface, infotainment, connectivity, computing and cloud-based enabling services, represent the best opportunity for Dealers to get and stay involved through system and software updates and maintenance.
Content is king
Elliot Garbus, General Manager of the transportation solutions division at Intel, said recently that delivering content to autonomous vehicles could eventually be worth up to $US5 billion. In the short to medium term in-vehicle content will help consumers adjust to the change to autonomous driving. With up to 75 per cent of survey respondents saying they were afraid of riding in an autonomous vehicle, features that show them exactly what the car’s radar, sensors and camera are picking up will help ease those concerns and make consumers more comfortable using autonomous driving technology.
Another great opportunity lies in in-car entertainment and information systems. With all car users to be reduced to the role of passenger, the demand for and opportunity to provide for them will be significant. Commuters will want their cars to be mobile offices, with the ability to check and send emails, make calls, stream videos, find nearby restaurants and more. Smart Dealers will facilitate these consumer desires.
Another factor to consider is the cost of installing and insuring features and equipment such as LiDAR, cameras, aerials and ultrasonic wheel sensors. You should think about beginning a conversation with your insurance provider and F&I partners.
Australians are proven ‘early adopters’ of technology. On the opportunity side, therefore, there is the possibility of monetising consumers’ desire to have the newest and the latest via financing options.
Ride-sharing – a different model
Toyota’s investment in Uber, VWs in Gett and GMs in Lyft means that in the future dealerships might become garages for these fleets, with fewer people choosing individual ownership.
If individual car ownership goes by the wayside, dealerships will have to change their models to become service providers rather than sales outlets.
No-one knows exactly how the future of passenger vehicles will evolve. One thing, however, is for sure: it will be those who are informed, aware, innovative and adaptable who will not only survive but thrive.