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Tesla Demonstrates How OEMs Could Cut Into Service Revenue

Everyone in the automotive industry is familiar with Tesla’s entry into the automotive retail business.

However, not as many realize that they’re simultaneously spotlighting innovative functionality that any manufacturer could use to make automotive service easier and more convenient for the consumer.

 

Tesla vehicles are all integrated with an AT&T chip that allows Tesla to make over-the-air updates to the vehicle. While there are many vehicles that are connected to the internet, the difference here is that Tesla is able to not only make software updates on the fly, but to also make physical changes to the vehicle.  For example, Tesla recently rolled out an over-the-air update following the National Highway Traffic Safety Administration’s investigation into the Tesla fires. Two of the three accidents were attributed to debris in the road. Through this update, Tesla was able to remotely reconfigure the vehicle’s suspension to allow increased clearance at highway speeds.

 

The technology and integration that allows Tesla to fix its cars remotely is something that any manufacturer could adopt. My guess is that there are many manufacturers that are watching this area of Tesla’s business, just as they are watching the consumer-direct sales battles that have been happening throughout states. According to a report by the LA Times, Tesla Motors “has generated the highest consumer loyalty of any car it has surveyed in years” receiving a ‘near perfect’ 99 overall test score. You can easily see why manufacturers are almost certainly paying close attention.

 

While most dealers are focused on how Tesla’s entry into consumer-direct sales could possibly affect franchise agreements and other manufacturers following suit, not many realize that the technology that Tesla is showcasing in it’s over-the-air updates is both innovative and scary. Think of all the business you get simply due to user error. Recently, the wife of an acquaintance of mine had the instrument panels on her Toyota Prius go dark. The car would run fine but she couldn’t see the speed or any other information on her instrument panel. Of course, she took it straight to her servicing dealership and, in moments, they discovered that there was no problem with the vehicle. The instrument panel was dark simply because the dimmer switch had been dialed down all the way. It just so happened that she was due for service. So they went ahead and also did that for her, while adjusting her brakes as well. Does this story sound familiar? How many “check engine” lights have brought business to your service department?

 

With the technology we’re seeing develop, it’s possible in the future that she would never have to visit the service department in the first place, but only call the help desk at her manufacturer, who could then remotely diagnose and fix the problem. As this technology becomes better integrated into other areas of vehicles, other than just electronics (as is the case with Tesla), manufacturers could potentially fix minor physical problems remotely. Consumers will undoubtedly be thrilled by the ease and convenience this offers, but where does that leave dealerships and their service departments?

 

Technology is increasingly creeping into the automotive industry. It has been in retail and fixed operations for years, providing ways to track inventory, customers and transactional data. Every year it’s impacting the sales side of dealerships through increasing transparency and data availability to consumers. Now we’re seeing technology enter the service side of a dealership… not just technology that allows a dealership to create a more convenient and informed customer experience …  but the kind that doesn’t require a dealership.

 

...And that’s scary.

Views: 859

Tags: NHTSA, OEM, Tesla, automotive, fixed, manufacturer, ops, remote, repair, revenue, More…service, technology, updates

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Comment by Richard Holland on January 21, 2014 at 6:40am

Thanks for the great comments and compliments! 

Comment by Michael on January 18, 2014 at 10:04am

@Richard-Great insight and share. Thank You. Having watched passionately the evolution of the internet/digital realm to reach remotely via satellite for..., no suprise. And likely will continue from the OEMs in outreach to car owners for some modifications, but far from most. Being the Tesla is inundated with electric componentry the likelihood of this type line will allow more diagnostic capability for any OEM. Mechanically with combustible components as most vehicles are and will be in the future, C pay work in the shop will persevere. Frankly as a Dealer past, warranty work on a P/L basis in a silo is not lucrative. The OEMs over the past many years reduced the labor op allowances for warranty paid work, as many dealers know and acknowledge. As OEMs do further integrate diagnostics on cars from afar as STAR does to 'some' degree, it will come with a price, as with TESLA. If dealers would only focus on enhancing the current retention of customers post sale for servicing on New and Pre owned vehicles there stores' can easily reach 100% absorption.

Comment by David Ruggles on January 18, 2014 at 8:36am

Excellent piece here by Richard Holland!  The book is being written and who knows where things are going.  It IS a scary time to be a dealer with OEMs working to raise one's overhead while the CFPB and the Internet are putting downward pressure on margins.  I don't like the math of it all.  There's a lot of uncertainty out there. 

Comment by David DeSantis on January 18, 2014 at 7:34am

High end RV manufacturers, Marathon Coach, Prevost, etc have had the ability to do remote diagnostics, and remotely make changes to the coaches for a few years.  With new cars being rolling computers now, it's not surprising what Tesla is doing with their cars.  When you have someone with massive resources, such as Elon, and are a market disruptor.  I'm sure there's a lot of haters in the auto industry of what he's doing, however IMO, down the road he will greatly admired for for his contribution to the auto industry.  The industry needs more Elon's in their ranks.

Comment by David Addison on January 17, 2014 at 10:24pm

I can't imagine some caveman sitting around and saying, 'the wheel, fire, where does it all end?' It doesn't end. We have been a race of investors since we crawled out of the primordial ooze.  Technology has made life real good. This is an exciting time to live. The dealer business is going to change. We're ~15 years into the Internet. You ain't seen nothing yet. Here in 2014, we're driving the equivalent of a De Dion-Bouton ET Trepardoux. Technology is going to blow your mind in the decades ahead. Love it. Huge fortunes are made (and lost) during times of rapid change.  Tesla is making smart moves.

Comment by Timothy Martell on January 17, 2014 at 9:11pm

PS, I'll likely be ordering my first Tesla in 2014. 

Comment by Timothy Martell on January 17, 2014 at 9:10pm

Great article, Richard. It is scary, but sadly, I expect most dealers won't pay attention. This is very real. The game will probably change in my lifetime and for reasons like this, we do not exclusively cater to the automotive retail sector. 

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