Car dealers' missed connections could cost them billions
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Illustration: Aïda Amer/Axios
The built-in modem that delivers live traffic and streaming apps to the dashboard of most modern vehicles works the other way, too — if anyone actually uses it.
Why it matters: That untapped potential could unlock billions of dollars in revenue for car dealers looking to expand the most profitable part of their business — parts and service.
The big picture: New vehicle sales account for more than half of car dealers' revenue, but the margins are razor-thin.
- Servicing vehicles is far more profitable than selling them.
- But as gasoline engines and transmissions give way to electric vehicles with fewer mechanical parts, traditional repair work is expected to shrink.
- Car dealers need to expand their service offerings to keep customers coming back, so they're more likely to buy their next car from them, too.
Yes, but: Dealers are leaving tons of money on the table because they're not taking advantage of existing vehicle connectivity to expand their service business, says Bank of America automotive analyst John Murphy.
- "This is where the opportunity is for the industry" — not trying to push subscriptions for fancy features customers don't want to pay extra for, Murphy recently told members of the Automotive Press Association.
By the numbers: The nation's 17,000 auto dealers capture only about half of the $2.4 trillion spent annually on aftermarket service and parts, Murphy says.
- "There's another $1.2 trillion that gets away from dealers" — going instead to repair shops and auto parts retailers — because "calling and bugging the consumer has been incredibly ineffective" as a marketing tool, Murphy said.
How it works: Instead of spamming customers via email or text with generic service offers, automakers can tap directly into the vehicle to identify when it needs an oil change, warranty repair or other type of maintenance.
- Then they can nudge owners on the car's touchscreen, or via their vehicle app, to make an appointment with their dealer.
Between the lines: Some of the most innovative dealers are leveraging that connectivity to deploy remote service technicians for warranty repairs and routine vehicle maintenance at customers' homes.
- Replacing fluids, filters and wiper blades in a customer's driveway frees up service bays at the dealership for more value-added repair work, says Amit Chandarana, CEO of Curbee, a startup that helps dealers manage their mobile service operations.
- Customers are happier, and dealers get to grow their service business.
Zoom in: Warranty inspections and software recalls are easy mobile service jobs, adds Chandarana.
- While some software updates can be completed over-the-air, especially in EVs, many customers still need a dealer's help to update their vehicle or fix a software problem, he says.
What they're saying: Mobile customer service "is a no-brainer," Brendan Harrington, president of Autobahn Automotive, a Dallas-area car dealer, tells Axios.
- "We as dealers have to be ready for when motors go away and engines go away," he said.
- "All the stuff we ignored — wheels, light body work, customization, mobile service, vehicle wrapping, tinting — we have to get good at that. Or we can wait until it's too late, and your service business is dead."
Reality check: Tesla has been offering mobile service since the start, and other EV startups do, too.
The bottom line: Connected cars are a missed service opportunity for automakers and their franchised dealers.
