The evolution of connected-car technologies has long been viewed as a threat, rather than an opportunity, to the automotive aftermarket.
Automakers’ plans to use embedded telematics platforms such as Ford’s SYNC® and General Motors’ OnStar system to link vehicle owners to local dealerships for parts and service, could make it difficult for manufacturers, distributors and installers in the independent aftermarket to reach their customers. Vehicle electronics can communicate part failures or recommended service intervals to the driver, then schedule an appointment at the automakers’ nearest location using the Bluetooth® connectivity of the GPS or audio receiver.
Without a telematics-based ecosystem of its own, aftermarket parts and service suppliers are at risk of being shut out of the connected-car revolution. However, the threat is fast becoming an opportunity. All modern automobiles are equipped with a diagnostic port, usually located under the steering wheel, that can convert them into a “connected vehicle” capable of receiving and sending the same data used by OEMs to market a wide range of ancillary products and services to consumers. All cars manufactured for sale in the United States since 1996 have an OBD-II diagnostic port, as mandated by federal law.
Second generation on-board diagnostics (OBD-II) is a standardized system used by automotive service professionals to maintain and repair vehicles. Diagnostic tools plugged into this connection generate fault codes that tell the technician what is wrong with the car.
Nonetheless, OBD-II is capable of much more than diagnostics. OBD-II can function as a do-it-yourself telematics platform that supports a wide range of services, such as usage-based insurance, vehicle tracking and driver monitoring, and a full suite of fleet management tools. The possibilities are even greater when integrated with the user’s smartphone.
Such integration has spawned a vast industry that exists below the radar of most of the aftermarket and includes a wide range of non-automotive stakeholders including device manufacturers, app developers and even telecom providers.
Frost & Sullivan forecasts the aftermarket for OBD-II telematics to develop into a billion-dollar industry by 2020.
Today, revenue is driven almost exclusively by usage-based insurance. More than a million drivers nationwide are using OBD-II devices to qualify for insurance discounts based on speed, location and other behavioral data captured from the vehicle and transmitted to underwriters.
Over the medium to long term, other industries will develop from this technology. The most significant is fleet management, allowing companies to diagnose vehicle maintenance problems, track their location and monitor the behavior of their drivers. For consumers, OBD-II can be used to find a stolen vehicle or keep tabs on a teenage driver.
Finally, for parts distributors and service providers, OBD-II provides them with a platform to build their own maintenance and repair networks to compete against the automakers and their franchised dealers in the connected-car universe. Working together with app developers, they can ensure that cars equipped with the right OBD-II device will send drivers to their shops and service centers for maintenance and repairs instead of their competitors.
Editor’s note: Anuj Monga is a senior research analyst for Frost & Sullivan’s Automotive & Transportation Global Aftermarket research practice. He focuses on monitoring and analyzing emerging trends, technologies and market behavior in the global automotive aftermarket. For more information on Frost & Sullivan’s Automotive & Transportation research, contact Clarissa Castaneda, corporate communications, at [email protected].
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