LAS VEGAS — For 100 years, the automotive industry hasn’t changed much. The cars are better than the days of Model Ts, but drivers still press the gas petal and turn the steering wheel. But the industry is on the precipice of major disruption.
“Auto Industry Disruption: Win Despite Change” was presented by Frank Terlep, author and consultant, during the Society of Collision Repair Specialists (SCRS) 2019 Repairer Driven Education at SEMA 2019.
A disruption happens when new products and services create a new market, and in the process, significantly weaken, transform or destroy existing product categories, markets or industries. Terlep’s session aimed to help attendees understand who and what is to be disrupted and provide insight with how to prepare and adjust for the future.
The classic disruption cycle has four steps: 1.) overconfidence; 2.) sudden collapse; 3.) too little too late; and 4.) ongoing decline. Those in the industry need to prepare now in order to avoid ongoing decline, Terlep said.
“We cannot look historically anymore to predict the future. What you are seeing is not just an automobile disruption, but a computer disruption because cars are now computers on wheels,” Terlep said. “The value of the car of the future will not be in the metal, but in the software.”
Driving disruption in the industry
Currently, there are three main challenges in the automotive aftermarket: a shortage of vehicle technicians, OEMs having a much larger influence on the repair process and insurers.
But who are the truly being disrupted and acting as the disrupter? “No one is immune. Everyone is going to feel disruption in one way or another,” Terlep said.
Several factors are driving disruption, including the increased need for improved safety. Approximately 1.3 million road traffic deaths occur every year, with more than 90 percent caused by human error. In the U.S. last year, 40,000 people died in automotive accidents, while 4.5 million people were injured.
There are also 33 megacities on earth with another six expected by 2030. Traffic is a major consideration.
The ever-growing presence of software, including iOT, hardware, broadband, high-def mapping, Blockchain, artificial intelligence, virtual reality and more — continues to change vehicles and disrupt the industry.
Main forces of disruption
Terlep detailed the main forces of disruption, starting with the consumer, who buys vehicles and determines how they are getting from point A to point B. The consumer has more transportation options than ever before, which may have an impact on the fact that the importance of ownership is also dropping and many consumers feel they can’t afford a new car. Consumer sentiment is also mainly positive about autonomous vehicles and continued growth of hybrid and electric vehicles. And an alarming statistic for dealerships is that 82 percent of consumers are comfortable buying a vehicle online; however, they expect the vehicles they buy to be like a smartphone.
The digitization of the automobile is forcing shops to have to transition from generalist to specialist. It is too complicated to continue down the path of general vehicle repairs, Terlep said.
Mobile apps are also changing the repair process. Scan tools will change as we will not need to scan a vehicle; it will be able to send codes via mobile apps.
The continued growth of “industry electrocution” — or the number of electric and hybrid vehicles on the road — will change the vehicle landscape. Terlep anticipates that once battery prices go down and the range goes up, EVs and hybrids will dominate the roads. “And that will happen,” Terlep said. Autonomous vehicles are also changing the vehicle landscape and how consumers will be interacting with their vehicles and others in the future.
Big data and software is changing the way dealers have access to vehicle owners, and is negatively impacting both service and collision repair industries as they can drive owners directly to their vehicle service and repair shops before a consumer can even reach out to an independent.
Mobility as a service is changing vehicle ownership attitudes. With 60 percent of trips in the United States coming in at five miles or less, there are more options on how consumers can get around. Flexible vehicle sharing models are also reducing the need to outright own a vehicle.