Dealers continue to review their level of readiness for new profit opportunities as the future of connected, autonomous, shared and electric vehicles becomes increasingly intertwined with consumers, OEMs, and government initiatives and legislation.
If the modern evolution of the auto retail industry and its disruptive forces have taught us anything, it’s this: everything is connected — from consumer expectations to the features being introduced in vehicles, and the budding revenue opportunities that come with it.
For consumers, a desire to ensure their vehicles mirror their lifestyle is driving much of the change on all fronts, according to Suhas Gurumurthy, Senior Research Analyst, Connected Cars, Frost & Sullivan. That change has opened up new revenue possibilities where connected features and data are concerned, and where connectivity is key.
For example, in the electric vehicle category: “Each OEM is introducing electric vehicles into their portfolio, but they need to have a way to connect them as well — to remotely monitor them, and also provide services that are unique to electric vehicles,” said Gurumurthy, in an interview with Canadian auto dealer. “With that in mind, connectivity becomes the underlying layer which provides those services.”
The same can be said for autonomous and shared vehicles. Connectivity is introducing profit opportunities for various players, but it’s especially true for OEMs, who stand to benefit from both direct and indirect revenues.
Gurumurthy describes direct revenue opportunities as the sale of navigation systems, connected services such as smartphone integration (think Apple CarPlay and Android Auto), upgradeable features, and the monetization of data generated from connected vehicles. Technology players and suppliers who help OEMs with these goals also benefit from this market.
Indirect revenue opportunities include things like software updates, remote monitoring of the vehicle (for safety and security purposes), emergency calling for vehicle assistance during a breakdown, and research and development (R&D) to create innovative products and services.
The latter trend is especially popular in North America, where Gurumurthy said 85-90 per cent of vehicles are connected through an indirect connectivity.
Autonomous vehicles
Connected, autonomous, shared and services, and electric are the four trends that will shape the future of mobility, according to a Mercedes-Benz CASE study. Many OEMs are moving ahead swiftly in each of these directions, and are set to reap rewards in both revenue streams.
For Mercedes-Benz, its 2020 GLS model features systems such as Active Brake Assist with Turning-Off Function, which they say activates autonomous braking if it detects the risk of a collision with oncoming traffic. It also includes Route-Based Speed Adaptation, which uses the vehicle’s map data to slow it down when approaching everything from bends to exit ramps.
Brian D. Fulton, President & CEO of Mercedes-Benz Canada said the goal is to make these next-level technologies widely available by the middle of the next decade.
Fulton said the future of connected and autonomous vehicles will be shaped by a combination of consumer interest, government policies, and results from various pilot projects. Collaboration between the various levels of government he said, including federal, provincial, and municipal, will be “vital to maintaining consistent standards from coast to coast.”
The government’s role
We know what is moving the automotive industry, and we know what some OEMs are doing about it. But the federal government is also taking active steps in the direction of connected and autonomous vehicles.
One example of this is the Manufacturing and Automotive Innovation Hub in London, Ont., which is described as a research and demonstration facility focused on applications for advanced manufacturing and connected and autonomous vehicles. It’s part of the National Research Council, which is a national network of laboratories with a mandate to help the Canadian economy through new technology.
What does this mean for dealers?
The technology is advancing and the opportunity to branch into additional profit streams is there. So how can dealers benefit from these trends? According to Perry Itzcovitch, Past-chairman of the Canadian Automobile Dealers Association (CADA) and co-owner of several dealerships in Calgary, Alta, the situation is a bit complicated.
“It will depend on the participation level the dealer wants to be involved in,” said Itzcovitch. “Hopefully there will be opportunities for revenue, but there are factors to consider, especially in terms of connected vehicles and data. Where will the privacy law go? Where will dealer agreements go? Where will the legislation of the government go? There are a lot of variables that are not under the control of the dealer, so depending on how a lot of these things play out, that will affect whether a dealer can get involved with a connected vehicle.”
Last year, CADA released a report on the future of auto retailing: Driving the Road Ahead: A View Into the Future of Canadian Automobile Retailing. Itzcovitch, who has read the full report, said it advises dealers to try and diversify their business and not put all your eggs in one basket. To do this, dealers will need to consider things like how they can get involved in the ride-sharing market — or, regarding the level of technology integration, how can a dealer provide a service that a consumer is going to want, but that also ensures the dealer remains relevant?
“My advice to dealers would be, first and foremost, the position and the importance of the dealer within the distribution system is sound,” said Itzcovitch. “There will be a need for dealers in the future, because there is no other distribution system that’s as efficient as the current dealer system.”
Itzcovitch said the issue comes down to dealers operating intelligently, adapting to their environment, looking for opportunities, and then being able to respond to the conditions in their market and find a way to control expenses and pull a positive return out of their business operation.
Dealers in Quebec, for example, should be the first to move forward on the EV trend, with the vehicles, charging stations, and other infrastructure and uptake efforts. The province already offers a rebate program, and teamed with the federal zero-emissions vehicle incentive, consumers are already buying, said Itzcovitch.
“Depending on where you are in the country for your market, you want to follow in the way that meets the demand of your manufacturer and the customer demand, but not be so far ahead of the curve where you’re wasteful and you’re over-spending for resources that may not get used,” said Itzcovitch.
Based on the speed at which the technology arrives in your market, Itzcovitch advises dealers to continue to review their level of readiness for new profit opportunities, and to “be prepared for the unforeseen” coming their way.
