Friday, 01 November 2019 21:43

Automotive Industry Faces Disruption Driven by Societal Changes

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“It is my belief that every aspect of the automotive industry value-chain will be disrupted in some way, shape or form. I also believe there will be a small percentage of existing businesses that will figure out how to be a disruptor, a large percentage of existing business that will be disrupted, and last but not least, there will be new companies that enter the automotive market as disruptors,” wrote industry leader Frank Terlep near the opening of his new book, Auto Industry Disruption – Who and What is Being Disrupted, and What To Do About it.

Since the earliest days of the collision industry trade magazines in the mid-1960s, columnists, editors, industry leaders and pundits have consistently exercised two themes to talk about the state of the industry. The first one is, “We have seen more change in the last five years than we saw in the previous 20.” The other is, “We are roaring into the future and evolutionary or revolutionary changes will be taking place. Get ready now for the future.”


Terlep’s book follows a similar theme, but the “intensity switch” is turned all the way up to its highest setting. It is not just the collision industry side of the business that is being affected. The entire automotive industry is changing, changing right now – changing before our eyes, in ways that are more profound than ever before. The changes are not evolutionary, not even revolutionary – but are best described as “a disruption” driven by technology, socio-economic and demographic change and the emergence of new business models.


Automotive technology is changing quickly. Cars are no longer cars but computers on wheels and technicians will need to learn how to properly repair, reset and recalibrate a damaged vehicle to make it road-worthy and safe again. Hardware technology is increasing computing power, miniaturizing it, and making components easier to install. Software technology is changing, allowing a vehicle to receive software updates on the fly without ever visiting a dealership. Broadband connectivity will disrupt car ownership models allowing ridesharing and provide the foundation for intelligent transportation systems.

Cameras are proliferating. Soon, six to ten cameras on a car will be the norm. So, while collision technicians debate the virtues of repairing sheet metal as opposed to panel replacement, the question becomes, “Will all ADAS systems components work as they should upon completion of repairs, and can the car still maintain internet connection?”


A Brave New World


Terlep’s vision of a “brave new world” of a disrupted collision repair industry includes:


  • ADAS systems and related technology will make cars safer to drive. This, combined with autonomous cars and concepts like ride-sharing and improved ride-hailing technology, and the socio-economic acceptance of using different means of short-hop transportation in an increasingly urbanized world means fewer cars on the road and fewer accidents.
  • The era of the “two-car” family is quickly dying. Given the expense, there is less and less reason for having a second car when so many other alternatives are emerging. Hence, less cars, less accidents.
  • Fewer accidents means a consolidation of all areas of the collision industry including the number of shops needed, along with the infrastructure to support those shops. This includes parts suppliers (including OE’s), as well as paint and equipment suppliers.
  • The proliferation of electric cars means less mechanical maintenance – good for vehicle owners as far as downtime and cost is concerned, a disruption for car dealers who depend on parts and service sales for a good portion of their gross profit and a disruption for independent mechanical shops and collision shops who will have to deal with technologies they are not familiar with.
  • The proliferation of electric cars and their attendant technology, some of which haven’t even been invented yet, will require shops to invest heavily in training and new tools and equipment – all of which will quickly become obsolete as technology moves forward at mind-numbing speed.


Sunrise – Sunset


As the disruptive climate grows and expands, some companies will be greatly consolidating or “sun-setting” altogether, while others will experience birth and meteoric growth. Just as innovative companies found a way to make vast improvements in internal combustion cars, emerging companies, through technology and innovation, will find a way to improve electric car performance, the experience of driving an internal combustion car, and enhance the customer experience in the transportation field overall. “Sunrise” initiatives include:


  • A company is already working on a headrest that can “sense” a driver’s physical condition including fatigue, drowsiness, stress, etc., and adjust the car’s ADAS systems accordingly … cutting down on vehicle accidents.
  • A system will be developed to electronically handle all aspects of a collision repair from the moment the accident occurs. Sensors will determine the physical condition of the driver and occupants, the extent of damage, order the appropriate parts, send them to the closest OE certified body shop, and notify the insurance carrier – all in a matter of seconds -- not hours or days.
  • A person’s daily commute will change into an end-to-end mobility experience with an interconnected ecosystem of multiple players and providers including one or more modes of transportation.
  • Connected cars and their attendant systems will generate vast amounts of data. Terlep calls this data “the world’s new oil.” Those that learn how to capture, control, manipulate and leverage all this data will be the big winners in a disrupted world. Of course, this data must be stored and used responsibly.
  • OE’s will use connected-car data to reverse its business model for designing and developing cars. Rather than build a car that executives think customers want and hope it sells, they will be able to capture how consumers use existing products and enhance that experience by providing products they know the customer will appreciate.
  • Autonomous cars that sustain minor collision damage will be able to drive themselves to a pre-assigned repair facility. Meanwhile, an alternative car will be dispatched to provide service in the interim. Once the first car is repaired, it will be placed back into service, the insurance claim will be processed automatically within minutes … and life will go on. Some company, yet to be founded, will be controlling this whole operation.


Auto Insurance Re-Invented


Not unlike the collision repair industry, the auto insurance industry is loath to change. However, as is the nature of “disruption,” time, technology, and consumer preference will eventually force their hand.


  • New players will emerge in the auto insurance space and provide products and services never before seen. Imagine paying a flat fee per month for basic fire and theft insurance, and then pay only for the miles you actually drive by logging into an app on your smartphone.
  • New insurance products may include cyber-security insurance to ensure against hacking and malware.
  • Consumers may be able to set their own prices... In other words, come up with a monthly premium that fits their budget, and then see what that will provide.
  • Consumers may be able to use “peer pricing” whereby they will apply for an insurance policy providing various characteristics such as year, make and model of car, ADAS characteristics, age, gender, family status, job, etc., and get a quote most commonly selected by their peers.
  • Insurance company adjusters will all but disappear being replaced with vehicle sensors, digital photos and artificial intelligence.


Exciting Times


“This is an exciting time to be part of the automotive industry. Innovation and creativity can be found almost everywhere, while new entrepreneurs, investors and incumbents are all jumping into the ACES (Autonomous, Connected, Electric, Shared) pool!” wrote Terlep. “The way to be successful in a disruptive climate,” he says, “is to keep innovating. Remember, innovation is NOT technology. Innovation equates to any way you or your business find a way to do more for a client than anybody else does.”


In his book, Terlep offers several ideas for collision repair shops, OE’s, car dealers and others to become the disruptor, rather than the disrupted. It’s not rocket science, but it does require a business owner to pay attention to what is going on around them, he said. In a telephone interview, Terlep noted, “If businesses don’t recognize these changes now and begin to adapt, they’ll be gone in five years.” As an example, Terlep noted the rather speedy demise of the Blockbuster video rental chain because they failed to realize the emerging streaming video business model of Netflix. By the time Blockbuster realized what was happening, technology and social change had occurred … and it was too late for them.


Terlep has been a key player, innovator and disruptor in several collision repair-related companies over the past 40 years including AkzoNobel and Mitchell International as well as companies he founded including Automotive Solutions, Car-Station.com, Summit Software and Summit E-marketing.


Terlep’s book can soon be found on Amazon and all e-book platforms. For a FREE copy of Chapter One of this informative new book “Auto Industry Disruption, what and who is being disrupted and what to do about it,” please visit https://www.auto-disruption.com/pl/109601.

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