The current market leaders could run into some challengers.
Telematics is poised to affect us all, sooner rather than later. As with all new automotive technologies, independent shops must be prepared to adapt to the change to continue operating successful businesses.
Technology doesn't just happen. It takes years to develop, implement and perfect. My first lesson in this was a decade ago, when I visited with Larry Bums, then General Motors vice president for research and development, at a Sequel hydrogen vehicle media event at Northwestern University near Chicago. Ironically, it wasn't hydrogen that captured my attention.
During my test drive with Bums, I asked him what other technologies were on his radar screen. 'Telematics," he responded casually. "Bob, suppose you owned a Corvette. Now suppose I told you GM had developed a software patch that could provide your Corvette with 20 more horsepower that could be sent directly to your vehicle overnight. Would you be interested in that?"
After I replied affirmatively, he added, 'Well, we can do that now in our research facilities. All we need to do is build the infrastructure to deliver it widely, and the means to monetize it." That day, 10 years ago, my interest was sparked. Today, telematics is on the cusp of dismpting traditional vehicle service and repair, particularly in the area of remote vehicle diagnostics.
Modem street automobiles are no longer mere mechanical devices with a driver. They're also an array of data and communications technology that permits telematics-enabled decision-making. Vehicles are pervasively monitored and controlled by dozens of electronic computers, sensors and controllers, coordinated via internal networks.
As with other vehicle technologies, OEMs also want to turn telematics products and services into a revenue stream. Modern telematics products and services generally fall into one of two broad categories:
*Customer Relationship Manage- ment (CRM) telematics, such as infotainment, navigation, location and other conveniences.
*Vehicle Relationship Management (VRM) telematics, such as remote vehicle diagnostics, preventive maintenance scheduling, driver behavior modification and more.
The recent boom in consumer electronics demand provided a timely doorway for OEMs to market telematics. The transition began first with CRM embedded products and services that targeted "top-of-mind" consumer demands. These focused on growing the bond between vehicle owners and the automaker by delivering telematics-based applications that provided positive in-vehicle experiences. In addition, it was determined that consumers would willingly pay for CRM products and services.
The annual International Consumer Electronics Show (ICES) provides a good barometer for the growth of vehicle telematics systems over time. OEMs first began demonstrating CRM telematics in the early 2000s-typically infotainment and navigation products delivered through center stack consoles. It was during this time that General Motors pioneered its OnStar suite of telematics services, which was the first, albeit limited, implementation of remote vehicle diagnostics, safety and other VRM telematics.
Other automakers began to follow suit. The automobile industry is now a significant participant in exhibitor, speaking, panel and planning roles at ICES events. At the recent 2013 event, more than a dozen OEMs participated, each with embedded telematics products that featured a mix of proprietary embedded CRM and VRM features.
Consumers have been more or less conditioned to see automakers as the providers of infotainment, navigation and other high-value CRM solutions. Persuading them to use vehicle diagnostics and other VRM services is the next step, as OEMs try to broaden their customer relationships by persuading motorists to also view dealers as their go-to guardian and service provider.
Huge Revenue Potential
"The automotive aftermarket is one of the few industries where we know what we're going to have to service approximately seven years in advance," shared Frank Ordóñez a few years ago, while he was the president of Delphi Product & Service Solutions. That holds true for telematics.
Polk (recently acquired by IHS Automotive), Strategy Analytics AB I Research, J.D. Power and Associates and other market research firms project that telematics will grow exponentially between now and 2018. In the next five years, these research firms say, telematics installations will increase by more than 600% and revenues will more than quadruple. They also say that most of the sales growth will be concentrated in the U.S.
Here's the rub: Telematics allows direct communication with vehicles, so it can be used to refer motorists to facilities for service and repair. The ability for the OEMs to lead and control the dialogue with the vehicle owner via embedded proprietary systems, remotely diagnose and repair vehicles and suggest maintenance could negatively impact the aftermarket, notably independent shops.
However, telematics technology also creates the opportunity for the aftermarket and service and repair shops to compete by developing the means to communicate with their customers and their vehicles in the same manner. The aftermarket, its shops and technicians must recognize this and act collectively to respond to telematics' inherent challenges and opportunities.
A Customer Retention Aid
From a service information and procedures standpoint, Toyota Motor Sales USA has led automakers in making information and diagnostic services affordable and readily available to independent shops. Toyota has repeatedly stated that it wants those who purchase its vehicles to be able to have them
Serly serviced and repaired at any ty, dealer or independent. Toyota knows positive service experiences in the aftermarket improve the chances of a repeat customer. Some other, but not all, automakers have followed suit.
But OEMs also know telematics plays a key role in improving customer retention. "Everything an automaker does after a car is sold is aimed at customer retention," explained Mark Seng, vice president of Global Aftermarket Practice Leader at IHS Automotive, "From a service perspective, Toyota's practice has a posttive impact on customer retention, but there's more to it than this. OEMs know that keeping vehicle service at dealerships results in a better customer retention rate than can be realized when vehicles are serviced at independent shops. Telematics is a tool that can help achieve this.
"The results of a recent Polk/IHS Automotive stud confirm this," Seng adde "Brand loyalty was measured among customers with vehicles that were just outside the traditional warranty period. OEM brand loyalty amongst customers who conturned getting service done at the OEM's dealer network was at 45.1%. That measure is considerably higher than the 28.4% loyalty rating amongst customers who had their vehicles serviced by an independent aftermarket facility."
Make no mistake. Vehicle designers are combining sensors, probes and two-way communication devices that gather data, create information for vehicle owners and refer aftermarket service and repairs to their dealer organizations. Proprietary codes are being used to limit access to the vehicles databases. Are car-buying customers really being served?
It's All About the Data
To date, there has been little collaboration between automakers and the aftermarket to ensure that telematics data, like service information, is equally avail- able at dealer and independent shops. Instead, OEM-embedded proprietary telematics solutions are being leveraged to encourage customers to keep having vehicle service performed at dealerships beyond the warranty period.
"Automakers are building a closed ecosystem of embedded telematics, which puts them first in line to get repair and maintenance data," notes Fred Blumer, CEO of Vehcon Inc., who also co-founded Hughes Telematics. "Clearly the independent aftermarket cannot sit by and do nothing while OEMs deploy this strategy."
To be competitive and capable of meeting the needs of vehicle owners, the after- § market, especially indepen- = dent shops and their associa- « tions, must work to ensure -j; that consumers who buy ve- $ hides with embedded tele- ^ matics systems have the 3 same choice they have today ° as to where their vehicle gets 2 serviced. Bottom line? Shops *§" cannot afford to be hogtied >. or inactive when it comes to *£ accessing and using telemat- § ics data to preserve and grow ig customer bases. |
"OEMs also need to stop " trying to figure out how to get consumers to pay for telematics subscriptions and just turn the modems on," says Roger Lanctot, associate director for global automotive practices at Strategy Analytics. "The data about the vehicle's use is worth more than any [consumer] revenue stream they might create." Examples include monetizing telematics by charging other commercial users of the data, such as insurance companies who are trying to modify driver behavior, service and repair fadlities and professionals or third party service information providers.
"Consumers crave connectivity in their lives, including their time behind the wheel," explained Scott Luckett, chief information officer for the Automotive Aftermarket Industry Association (AAIA). "Nearly 160 million vehicles, 1996 and newer, are equipped with an OBD II diagnostic port that can accept an aftermarket telematics upgrade.
"AAIA and like-minded aftermarket organizations have begun raising awareness and addressing concerns regarding telematics. We believe that consumers have a right to choose where their telematics data goes and that telematics communications should be across standards-based, open platforms that do not compromise consumers."
Luckett cited several key initiatives: *In 2009, AAIA introduced the Shop of Tomorrow (iSHOP), an aftermarket proof-of-concept at AAPEX, which demonstrated the integration of remote diagnostic telematics, wireless communication and shop management and information systems. Visit www.aftemiar ket.org/Tornorrow for more information.
*In 2011, AAIA began to formulate its annual Aftermarket Telematics Challenge to spur the development of aftermarket telematics solutions, then identify and recognize the best examples of connected-vehicle technology that can be fitted to vehicles in the aftermarket. Delphi Product & Service Solutions won the 2012 challenge with an OBD II plug-in telematics module that enabled car owners to monitor vehicle health and send diagnostic trouble codes to the service facility of their choice. Verizon Telematics (formerly Hughes Telematics) won the 2013 challenge with its InDrive system, which offers consumers a choice of telematics services, including safety and security, vehicle operation data, navigation, roadside assistance, diagnostics and service reminders.
*In mid-2013, AAIA formed the Aftermarket Telematics Task Force, to discuss the future of telematics and determine what the independent aftermarket strategy should be. Current sponsoring associations of the Aftermarket Telematics Task Force are: AAIA, the Automotive Aftermarket Suppliers Association (AASA), the Automotive International Association (AIA) of Canada and the Equipment and Tool Institute (ETI). It has already formed three subcommittees-policy, technical and marketing-to capture the range of possibilities, identify possible barriers or risks associated with telematics and determine a path forward.
"The Telematics Task Force exists to serve the longterm needs of independent and national service retailers," Luckett stated. "All of the participants on the Telematics Task Force are either highly technical and can help design a technical solution, or they are associations that represent the interests of all of their members, including shop owners through AAIA's Car Care Professionals Network (CCPN), an advisory body of independent shop owners whose purpose is to represent their needs and interests with the rest of the association."
What Can an Independent Shop Do?
While the automakers are actively engaged in deploying telematics for realtime connectivity with their customers, the bulk of independent aftermarket shops are offline, noping customers will remember them. Aside from the CCPN, the majority of aftermarket shops that fix the vehicles consumers buy are not involved in the Telematics Task Force dialogue.
'In the aftermarket, telematics needs to be deployed by thousands of shops at a time in order to be cost-effective," Luckett added. "National retañers, program groups and banner programs are also going to have to deploy solutions en masse in order to have the scale to keep costs low and to create visibility among consumers."
"Telematics is still in its earliest stages," Lanctot emphasized. 'The power of telematics is not what it is today, but what it could become. Product cycles for telematics systems are typically in the threeto six-month range, much shorter than vehicle product cycles. The aftermarket is also better positioned than automakers are to react to this faster pace of change."
Here are five strategies independent shops and technicians can consider acting on now:
Get informed. Independent shops and technicians must become and remain aware of the current state of telematics, as weU as emerging trends, products, threats and opportunities. Automakers are investing huge dollars in developing embedded systems and marketing them to consumers, insurance companies and others. That's critical mass that must be reckoned with.
Get engaged. Frankly, telematics is too important a technology for independent shops to stand idly by whüe others shape their future. If nothing else, ask your associations why they aren't part of the Telematics Task Force dialogue, and what they're doing instead to help you remain competitive and top-of-mind with motorists.
Learn what you don't know that could hurt your service readiness. The proliferation of certain aftermarket devices that plug into the underdash OBD II communications port, underhood or elsewhere, can complicate your ability to service vehicles, according to ACDelco and GM.
"An unauthorized [by the automaker] aftermarket device connected that uses the vehicle's serial data bus to perform data requests or information gathering may cause a variety of hard-to-diagnose conditions," cautioned Bernard Lackey, a brand quality manager at GM Service Operations.
Ask customers if they've had aftermarket devices connected to their vehicle since their last visit to you. Before you begin service, y need to know this or you could end chasing ghosts.
"Because OBD II regulations require OnStar [in GM vehicles] not to interfere with aftermarket devices when connected and making a data request through the OBD II port, OnStar can be prevented from gathering critical diagnostic data," Lackey advised. "Certain aftermarket devices that remain connected to the vehicle (underhood, for instance) during service can also cause problems. If a device makes connection with only one CAN bus [between service intervals], it can cause bus errors and strange control module behavior. In addition, should the device still be operating, it can interfere with diagnostic communications, such as reprogramming control modules, since the device won't aUow the bus to power down."
Understand that telematics is being seen as vehicle security information. Automakers, insurance companies, law enforcement organizations and regulators are concerned that OBD II ports and underhood connections provide hackers, thieves and others with easy access to data and communication networks, including telematics systems, to gain control of vehicles, or set them up, for theft.
At a recent industry event, Motor asked the automakers present what measures were being considered. Several said they were considering eliminating the OBD II port and replacing it with wireless connectivity. This would allow data and communications to be better safeguarded and made available to vetted, bona fide service and repair professionals. If OBD II ports disappear, will you and the aftermarket be ready?
Let me share one more of Larry Bums' insights from that test drive ten years ago. "Down the road, vehicles wül also become more intelligent. Advanced sensor systems, communication networks, telematics and other new technologies will enable OEMs to offer more advanced infoê ê options, improved | collision and passenger safety 3 protection, smarter traffic w routing, enhanced remote di>, agnostics and management of & vehicles, [and] aUow vehicles o to be connected and even ä open [them] to autonomous E driving-putting new levels of safety, convenience and vehicle maintenance within technological reach."
The emergence and evolution of telematics is poised to affect us all-from automakers to the aftermarket to consumers-sooner rather than later. As with any new technology, we must understand telematics and be willing to accept that we may have to use new technologies, tools, training and procedures and integrate innovations into our business models in order to maintain it. That's just the wa change rolls.
This article can be found online at www.motormagazine.com.