IoT is driving new wave of service aggregation for auto aftermarket

Aug. 24, 2016
With the disruption in technologies around the Internet of Things (IoT) and connected vehicles, the possibilities in the aftermarket have grown exponentially. This opens opportunities for new players who want to try a variety of service integration possibilities, enabling a new dimension of value-added services in the auto industry.

It comes as a surprise to learn that only 37 percent of the total auto and automotive aftermarket industries’ profit comes from selling automobiles to consumers. The rest of the profit, according to Responsewise.com, is made by the aftermarket industry, which encompasses the manufacturing, remanufacturing, distribution, retailing and installation of vehicle parts, chemicals, equipment and accessories.

Traditionally, aftermarket components are divided into two categories:

• replacement parts; and

• accessories, which are made for comfort, convenience, performance, safety, or customization, and are designed for the add-on after the original sale of the motor vehicle.

However, with the disruption in technologies around the Internet of Things (IoT) and connected vehicles, the possibilities in the aftermarket have grown exponentially. This opens wide opportunities for multiple new players who want to try their hands at a variety of service integration possibilities, enabling a new dimension of value-added services (VAS) in the automotive industry. This dimension would address safety, convenience and integrated services to the end users.

The fragmentation of the consumer automobile market, with vehicles moving out of their warranty period, is another reason why thousands of auto service retailers are viewing next-generation service aggregation as the next emerging opportunity for the aftermarket business.

There is enough buzz in the market for driverless cars and vehicle to vehicle (V2V) machine to machine, but the drive of IoT is bringing a dramatic shift in the way consumers are handling their cars, their repairs and accessing services.

In a study done by IHS Automotive - Emerging Technologies: Big Data in the Connected Car, IHS forecasts there will be 152 million actively connected cars on global roads by 2020. This shows the potential for growing demands of smart and connected devices and accessories. This shift was purely driven by the need of safety and convenience, thus opening a big market for service players, aggregators and retailers to adopt completely new business models for providing VAS to their consumers.

Service aggregators will become one-stop shops for consumers to buy automobile parts online for do-it-yourself (DIY) mode, and also connect them online through IoT for predictive maintenance, remote diagnostics and value added services on a pay-per-month or pay-per-use business model. These aggregators will become the catalyst for customers, from suppliers, service centers, insurance companies, parts dealers, car service and wash centers etc. and add VAS like localized shopping, personalized offers and customized trip plans.

While a business-to-business scenario would enable driving based insurance, service aggregation and parts eco-system build-up, the interesting scenarios that would enable from business to consumer would have a direct value on a different business model. Some of the business cases are below.

Value added services on an aftermarket IoT device for consumer vehicles:

• Track a driver (child or aged parents)

• Fuel pilferage

• Geo-fencing

• Driver health conditions (with additional wearables attached)

• Service tracking

• Remote diagnostics/alert (through OBD-II)

• Predictive maintenance and health check of your vehicle

• Location based offers and services

Service aggregation: Plan your trip:

• A possible aftermarket offering would enable customers to enter data with respect to a planned long trip. The device then would aggregate different sources of data to provide information.

• From the car, it could get information about the fuel, engine, tire pressure, while getting data from external sources such as weather, road conditions, traffic conditions, possible stops, historic places en-route, places to eat, gas stations, places for service, rest areas, etc. It would also possibly allow you to use social channels or apps for carpool or car share.

Service aggregation in case of accidents:

• This premium service from an aftermarket player would possibly integrate services to hospitals, ambulance, insurance, police, or relatives, providing the location, condition of car, condition of driver and allow for a quick response team to not only take care of the accident, but enable emergency care to the passengers and also process the insurance before accident victims reach the hospital.

It is predicted that online business to consumer sales of automotive parts and accessories alone will increase to a $20 billion by 2020 in North America and Europe – estimating an overall 9 percent to 10 percent penetration rate within the overall aftermarket.

Openbay is developing an app to detect vehicle maintenance issues through a plug-in device and automatically send repair quotes from local service garages.

There are many different possibilities and we might see a new set of service aggregation players coming to address this open market. What could start with passenger vehicles would possibly work for two-wheeled vehicles as well. The aftermarket player then has an opportunity to provide their products as-a-service model, and possibly collect much more data and behavior traits enabling more personalization, security and services to consumers.

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