The following is GaragePlug’s analytical approach to understanding the future of the vehicle service side of the automotive industry.

The analysis of the trends and forecast of the main automotive industry will give a direct understanding of how it’ll be reflected in the service side.

Here’s how we approach –

1. We first understand the forecast of the automotive industry for the next 15 years.
2. We then study the trends expected in the automotive industry.
3. Based on the trends, we will make an analysis of its impact on OEMs.
4. We then study how this translates to automotive servicing.
5. Then, we study Thailand’s demographic segmentation and understand the likely impact of these automotive trends.

Automotive industry forecast (2021- 2035)

A decline in production since 2018 and the COVID-19 pandemic have severely impacted the entire automotive industry. This has resulted in disruptions in the supply of automotive components due to lockdowns imposed by governments.

Global sales of automobiles are forecast to fall to just under 70 million units in 2021, down from a peak of almost 80 million units in 2017. The auto industry’s most important industry segments include commercial vehicles and passenger cars.

China is counted among the largest automobile markets worldwide, both in terms of sales and production. Car sales in China dipped for the first time in 2018; the market cratered in February 2020 but bounced back shortly after.

Here’s a chart that shows the Global reduction in the demand for automobiles taken during October of 2020, amidst the Pandemic.

                                                                     (Statista.com)

Here’s how the global revenues might look like –

                                                                                             (statista.com)

By looking further into the reports from Dellotie, the following were the inferences made –

                                                                    (Deloitte)

Global sales growth will be slower, growing at just +1% CAGR –

                                                                                            (Deloitte)

Overall, we can clearly infer that the automotive industry will continue to grow, the average CAGR is down to +1 %.

We need to clearly note that the rate of growth might differ in reality which would completely depend upon the newest technological disruption that might occur unforeseen.

With current trends potentially closing doors in the traditional automotive space, we can expect new business opportunities to arise in a reshaped mobility industry.

Current and upcoming trends in the automotive industry

The automotive industry is one of the fastest adopters of new and revolutionary technologies. The statement may not always be true, but current trends do seem to infer the aforementioned statement.

Even though the sales growth may be minimum (+1% CAGR), but within this CAGR, there will be some remarkable changes to the types of cars being sold.

Here are the current and future trends –

1. Increased adoption of EVs and advanced vehicle technologies

Emerging power drivetrains such as Battery-electric vehicles (BEV), hybrid electric vehicles and fuel-cell vehicles (FCV) will emerge victorious in the market. Of course, battery electric vehicles will be leading the market.

Reason –

1. Stringent environmental regulations are putting enormous pressure on IC engines.

2. Almost all OEMs and leading manufacturers are already putting great effort into being the first to bring about a new disruption to the drivetrain aspect of the industry.

                                              ( Deloitte report )

Connected Cars

By 2035, 100% of cars being sold can be expected to have connected car features. Consumers across the market are expected to give higher value to connected car technology.

The penetration of the connected car technology would also highly depend on the infrastructural development of the region.

The upcoming arrival of 5G technology will give rise to a sudden boom in connected car technology. Therefore, it is safe to assume that the connected car technology will follow regions where 5G gets implemented first.

Connected customers

Global internet connectivity among people has given rise to a scenario where consumers prefer shopping online first. They are accustomed to seamless online purchases of consumer goods and services. This expectation will definitely get passed onto the automotive and the service industry as well. COVID-related lockdown situation has already boosted this phenomenon of expecting a seamless online purchasing experience.

Note – Although 100% of cars being sold in 2035 will have connected technology, only a fraction of them will have Vehicle-to-everything (V2X) technology in place. The reason for this could be attributed to the elevated hardware costs. This can come as a premium segment in consumer cars.

                                                                                     (Deloitte report)

Autonomous driving vehicles

Automotive manufactures are forging their way to reach full automation levels. Level 3 and partial level 4 autonomous vehicles are already being launched in the market that can perform autonomous highway driving and autonomous valet parking to a good extent.

The trend will continue to rise. By 2035, we can expect a massive increase in the number of level 4 and level 5 autonomous vehicles in the market.

Based on the current statistics, it appears that China will once again top in the number of such autonomous vehicles on the road.

In general, it is safe to assume that the global car market will move towards autonomous vehicle manufacturing.

2. Change in customer behavior/ usage pattern and shared mobility

Here’s a quick report based on a study conducted by McKinsey.  It shows that the global response to the COVID-19 pandemic has speeded up the process of digital technology adoption by several years.

Consumers are adopting newer technologies at a much higher rate than ever before in history.

Thanks to this, companies around the world have also upped their digital game. Consumers are now being severely pampered with newer levels of digital technology-aided convenience.

Not just the developed countries like the USA, but all around the globe, similar trends can be seen –

This means, similar customer experiences through digital transformation will also be expected of the automotive and the service industry.  

Shared mobility

With the increased technological ability to coordinate the flow of information and to enable connectivity between cars, consumers, and fleet services, shared mobility will increase. There will be a major shift in vehicle ownership from private customers to fleet operators. Increased urbanization and increased hardware cost of upcoming connected car technologies will lead to an increase in this trend.

This could also potentially explain the rather slower sales growth in the automotive industry till 2035.

Not just that,

The global cost of automobiles is expected to increase with the increased hardware cost to build autonomous and connected cars. This will also see an increase in car rentals.

Car Subscription Market to Reach $12.09 Bn, Globally, by 2027 at 23.1% CAGR: Allied Market Research. Affordability, flexibility, and convenience along with more benefits in comparison to leasing fuel the global car subscription market growth.

Here’s a quick study that shows all data related to car rentals – prnewswire.com

The increase in vehicle distance being covered directly correlates to an increase in the service requirements especially for wear and tear parts.

How does this reflect on OEMs?

Without significant digital transformation, OEMs will find it difficult to grow!

The following diagram shows the traditional business segment in the automotive industry.

The following diagram shows the newer models of business segments that are emerging –

Here are the predictions based on these modes –

OEM dominance in the future market will directly depend on the level of technological disruption that they (OEM) can bring.

These diagrams clearly show the distribution of revenues when taking the aforementioned business models into account.

This shows – more the technological disruption adopted, the more will be the dominance and size of the business.

How does this translate to Automobile services?

The reduction in automotive sales aforementioned directly translates to more vehicle service requirements. Moreover, the increasing trend towards mobility will require a major shift in the automotive services to keep along with the newer business models.

Consumers are less willing to replace their vehicles and buy newer models. Secondly, the automotive trend of building cars that lasts longer also directly translates to consumers maintaining their vehicles for a longer period of time.  

All this means more vehicle servicing. Regular maintenance is required to maintain the smooth functioning of modern vehicles. Consumers are also aware of this. The increasing consumer awareness on the importance of vehicle maintenance statistics can be found from this study conducted in Malaysia – here

Automotive service companies need to adapt along with the automotive industry to survive in the upcoming trends.

The increasing convenience of online shopping and service booking will also be directly expected from the automotive service providers. From the aforementioned analysis, the industry is clearly moving towards mobility. This makes apt sense to introduce mobile van services to catch on with the upcoming vehicle trends.

Conclusion

Upcoming trends in digital technology adoption by the automotive industry will clearly change the way with which the industry operates. Major business model overhauls can be expected and the power importance will shift from OEMs and move towards customers. Customer convenience will be the highest priority. This will eventually push the industry towards mobility as a service.

Even in 2021, we can clearly see the increase in rentals and subscription models. Within 2025, the model will become further optimized and will be most preferred in the consumer segment.

Though unsure, mobility as a service has a higher chance of the 3rd party players dominating the industry. OEMs and the service industry would need to quickly adopt the current technology disruption and try building any type of innovative business model that aims to improve customer convenience (no matter how disruptive the model could be).

How GaragePlug can help keep up?

GaragePlug is an innovative cloud-based software that aims to bridge the current gap between the automotive service industry and the upcoming technological disruption.

GaragePlug can act as any auto service business’s first step to keep on pace with the upcoming disruptive technologies. In fact, GaragePlug IS one of those digital disruptive technology. Our innovative solutions to build a ground-level digital customer experience are solely aimed to improve convenience – for both consumers and the service business.

GaragePlug was built from scratch by industry veterans who understand the service industry inside out and also have a keen-sighted vision of the future.

Bridging the gap between disruptive technologies and the automotive service industry – GaragePlug  

The following are the sources used

• https://www2.deloitte.com/us/en.html
• https://www.mckinsey.com/mgi/our-research/all-research
• https://www.statista.com/
• https://www.ibisworld.com/global/market-size/global-car-automobile-manufacturing/
• https://www.prnewswire.com/news-releases/car-subscription-market-to-reach-12-09-bn-globally-by-2027-at-23-1-cagr-allied-market-research-301247122.html

The above is a research paper submitted by Team Garageplug

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