Connected vehicles, EVs will reshape aftermarket supply chain

Despite getting a lot of attention during the past five years, electric vehicles are still just a small part of the entire vehicle fleet. According to Navigant, there were just 2.6 million hybrids, plug-in hybrids, and battery electric vehicles on the road globally in 2015, a number that is expected to grow to slightly more than 6 million by 2024.

The market for connected vehicles, meanwhile, is growing quickly. Gartner forecasts that one in five vehicles on the road worldwide will have some form of wireless network connection by 2020.

How will the roll out of additional high-tech and electric vehicle models affect the aftermarket parts supply chain? These new types of vehicles will require new categories of replacement parts and assemblies, while demand for other types of replacement parts may decline as they increasingly rely on electronic functions rather than mechanical ones.

As EVs, connected cars and other types of vehicles continue to incorporate advanced technology, more parts and components will include processors and embedded software. "That can make it considerably more difficult to build compatible parts," says Aaron Lowe, senior vice president of regulatory and government affairs at the Auto Care Association. "Some of that is also due to OEMs protecting that software through copyright protection, which has become a major issue in the aftermarket."

At ACDelco, Bob Stewart, manager of aftermarket service support, says there will be more modules that need to be set up with a tool or are programmable once installed, which affects installation at the repairer level. "The other big thing we've seen is that there are more remanufactured electronic assemblies," Stewart says.

Demand for connectivity will expand beyond new vehicles, which presents an opportunity for the aftermarket. While newer vehicles will be increasingly connected, the fact remains that the overall fleet is increasingly getting older. The aging of the vehicle fleet will likely be exacerbated by the fact that younger drivers are delaying vehicle purchases or putting off buying a car altogether.

"Having a sufficient number of cars in the fleet that can communicate will require the aftermarket to provide and install that equipment," Lowe says.

When it comes to electric and hybrid vehicles, the types of parts and assemblies that may see growth in the future will depend on which types of alternative fuel sources gain traction. "Whether we see bigger growth in electric cars or fuel cell vehicles could change parts demand, or reduce the number and types of components that have to be repaired because they aren’t under the same type of stress as in a traditional car," Lowe says. "How big the opportunity is and when those technologies will come into the market remains to be seen."

More data will improve the supply chain

With more telematics technology and connectivity in the vehicle fleet, repairers could conceivably get faster access to information about what services or parts will be needed for a given repair. That, in turn, could provide better demand signals to the rest of the parts supply chain. According to Stewart, however, efforts to develop ways to effectively leverage that data are still in their infancy.

"Everybody's desire is to get more data to be able to forecast demand," Stewart says. "But at the end of the day we’re dealing with mechanical parts. From a service perspective, if there is a trouble code in a vehicle there are still additional diagnostics that have to go on to determine what the problem is."

The types of repairs needed also will evolve as more technology is integrated in the vehicle. Parts are continuing to get more durable (which has been the case regardless of electrical vehicle or connectivity), but there will also be more fixes delivered via firmware or software upgrades.

"An independent shop can make those repairs but they have to have the right equipment," Lowe says. "That's actually more of a threat to the dealers because if you don't need to go back to the dealership to get the car updated, you can get it repaired anywhere."

The Right to Repair movement achieved a key victory a few years ago in getting OEMs to provide all software and repair information in the cloud beginning next year for these newer model cars. That will go a long way toward providing access for independent repairers.

The biggest challenge is to understand the data and what it really means. That will be the key to moving from simply trouble code reporting to providing actionable information to consumers and shops. "We have some 2016 model years that have vehicle health management for the electrical systems, and we're testing that to understand how we can predict battery failure or alternator failures before they happen and notify the customer," Stewart says.

Customers could then be notified via OnStar or a text message. "There is a lot of fear that we are only going to put that out to OEMs and dealers, but the aftermarket is part of this whole equation. You want the customer to have a positive service experience. At the end of the day it doesn't matter where the GM vehicle gets repaired; if they have a good experience the likelihood of buying our product is greater,” Stewart says.

Stewart emphasizes that the data is still useless without the input of a skilled repairer. "For many of these repairs, you still have to do physical tests beyond getting the data," Stewart says. "Data is the diagnostic indicator but you have to put everything together to figure out what the failure is and what needs replaced. Telematics is just a remote reading of the fault code; you still need service information from going through the whole diagnostic process to fix the root cause."

The aftermarket supply chain will have more information about part failures and customer demand, but the types of parts required and the frequency with which they are replaced will change dramatically.

"A lot of this is going to depend on the technology," Lowe says. "No one knows if it will be pure electric or hybrid or hydrogen. They will all have reduced needs for different engine parts compared to gasoline-powered engines. They'll still need tires and brakes, but it will be different."

"We are still quite a bit away from the car sending a code and letting the shop and distributor know that you need to order this part for it before the car gets here," Stewart says. "That's everybody's ultimate goal, but I think there are some challenges yet to be overcome."

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