Internet-based vehicle maintenance causes turnaround in automotive land
Do you have a modern car in need of maintenance? Then it is increasingly likely that you can just leave it at the door. At least, if that maintenance involves the software, which is increasingly being updated over the air. This development brings about radical change and increases manufacturers' power over their customers. As car corporations overhaul their business models, that power is only getting stronger.
This article in five points:
Since connected cars are largely about software, they are increasingly being maintained and updated via the internet. For now, mainly smaller updates over the air performed. For a bigger 'software fix', you still won't escape a visit to the garage.
The ability to modify a car's software remotely not only offers manufacturers all sorts of advantages, it also creates great change, especially for numerous independent parties on the aftermarket. They, too, want to be able to install and update their own software in cars, even though manufacturers do not actually see that as an option.
Over the air is becoming increasingly topical, but in terms of legislation, there are still many unanswered questions. What is allowed and what is not? And does a car still conform to its original type approval after a major software update, for example?
Another development that is also shaking up the balance of power and dynamics within the car industry is the fact that almost all car companies are currently revising their business models out of cost-cutting. Car dealers are being downgraded to 'agents' who only deliver vehicles to customers. Cars are increasingly bought online, directly from the manufacturer's website.
Just as manufacturers would prefer to protect their cars from the software of third parties they do not work with, they tend to keep valuable repair and maintenance data mainly for themselves and their partners. The aftermarket and consumer organisations have been complaining about unfair competition for years.
How tiring would it be if you had to go back to the shop for every update on your smartphone, laptop or tablet? We know no better than that new software for such devices is usually downloaded automatically and you only have to reboot for installation. But that you can even just leave your car at the door for maintenance still sounds a bit unreal. Since a few years, it is possible, provided you have a connected car and the maintenance concerns the software inside. Like other devices that are part of the Internet of Things, modern vehicles increasingly allow themselves to be serviced and updated via the internet. Over the air (OTA), as it is called.
Since modern cars are largely about software and the security thereof, maintenance is also increasingly focused on that. Numerous sophisticated systems need constant revision. It would be impractical to make motorists come to the garage every so often, so the possibility of doing such a job remotely is definitely a solution. Currently, we are in an intermediate phase: these are mainly smaller updates that drivers do not have to worry about. At least, if you do not object to the installation of new software and do not refuse or postpone it. For the more thorough updates to a car's overall operating system, you won't escape a visit to the garage for the time being.
Such 'vital' updates take a long time and involve a lot of data transfer. This requires a fast and stable connection. The 5G network goes a long way, but it is not yet available everywhere and, in particular, older connected cars do not support this technology. Car manufacturers do not want to take any risks with some interventions anyway: updates that, for instance, are interrupted halfway through due to a bad connection could cause trouble. For a major 'soft ware' a vehicle in the garage can be hung on a digital drip for as little as a full day, or even two, and you are given a loaner car as a replacement. However, it is quite conceivable that even those kinds of updates will take place over the mobile network in a few years' time. The manufacturers at the forefront of this (the slightly more expensive brands) are the same ones that are pioneering driving assistance systems and switching to electric propulsion.
Just to clarify: OTA is one-way traffic, it involves updates going from the manufacturer to the car. OTA has two forms: updates to the software in the car's infotainment system, similar to updates to apps on your phone. This is called SOTA, where the S stands for software. Then there is FOTA, where the F is the abbreviation for firmware: the most basic code of devices that sits under the operating system. FOTA updates look at the fundamental software that controls the components in the car, from the transmission to the hydraulics, from the driving aids to the safety systems.
OTA has major implications (in the longer term) and potentially creates significant shifts within the automotive industry. The benefits for manufacturers are clear: it saves billions of euros in costs (especially for updates that used to require a recall), all models can be reached (virtually) at once, there is more control over vehicles over their lifetime (or at least as long as manufacturers support a vehicle with updates) and an infrastructure for new revenue models is being rolled out. For example, the range of additional services and features in a car that you can subscribe to is growing. From the massage function in seats to games in the dashboard. New services and features often mean new terms and conditions, and new terms and conditions can always result in different handling of personal data. Something for motorists to bear in mind.
In short, OTA increases the power of car companies over their customers, and parties on the aftermarket may lose out without rules of the game. In view of the overall quality of a car, cybersecurity, product liability, intellectual property as well as road safety, manufacturers are reluctant to allow other parties - at least parties they are not working with - access to a vehicle. They prefer to keep that access exclusively for themselves. In any case, if you can indeed just leave your car at the door for an update, a garage owner will not come into it.
It is currently looking at how new legislation from the United Nations on software updates for vehicles (R156) is best captured in European type approval. Ensuring a level playing field for aftermarket parties is one of the issues at the heart of this, just as it is with regard to legislation on access to repair and maintenance data which we will return to later in this piece.
For example, if motorists want to use a navigation system other than the one a car comes with as standard, it is desirable that they have that option, and of course that alternative system should also be able to be updated. However, if it were up to manufacturers to decide what is safe in terms of software (updates), they will soon label anything that does not come from themselves or their partners as unsafe. Instead of simply closing a car to third parties, it is about keeping it open to outside software (updates) in a safe way.
Performing updates or resets implies 'writing' into the vehicle, and that's where things can get dangerous. Conditions must be imposed on how this is done and who is allowed to do it. But what is allowed and what is not allowed? How long can you delay a necessary update as a motorist? How can you be sure that malicious software is not installed? Who is responsible if something goes wrong? When is a car still compliant with its original type approval? For example, you can check the brake pressure over the air increase, but that may affect the driving safety of a vehicle. How are recalls handled and how is it possible to know whether such a recall has or has not been carried out? In terms of supervision and inspection, what will RDWs in Europe do and not do? OTA is becoming an increasingly urgent issue but many questions have yet to be answered by the European Commission's Motor Vehicle Working Group.
Times are changing and so are the balance of power and dynamics within the automotive industry. The advent of OTA shows that. But there are more notable developments by which car manufacturers are increasing their power over their customers. For instance, private leasing has been booming in recent years: or car companies that rent out vehicles for a monthly service fee. It is a new revenue model where money is always coming in, even if nothing is sold. For some motorists it offers a godsend, but certainly in the long term, private lease is no more favourable than buying and the terms are often not soft. Before manufacturers give you a lease car, they require all kinds of personal data, including information about your income and financial situation.
Another development that we consider in the rest of this article is much more substantial in nature. During the corona pandemic, supply lines came to a standstill, factories had to close and car companies' sales dried up. Most brands are publicly traded and no turnover, among all sorts of other problems, soon meant grumbling shareholders. In an industry where margins are small anyway and the competition from China increasingly cut-throat, (Western) manufacturers were forced to re-examine their revenue models. It was decided to cut costs by, among other things, further downsizing the supply chain (also known as the brand channel). Importers and dealers - the two parties traditionally in the supply chain between the manufacturer and the customer, who pocket a large part of the margin on a car - are increasingly being sidelined.
Car importers have been losing importance for some time. Whereas a few decades ago they were truly stockists with large offices and many employees, they have gradually become little more than pass-through shutters. At most, they still do some marketing and warranty handling, but that's about it. In the Netherlands, most private importers have disappeared anyway. A few larger importers remain here, including Pon and Louwman & Parqui.
From franchise entrepreneur to agent
In comparison, the big change for dealers is only now taking place. A certain tiled floor, logos prominently displayed on the wall, specific lighting in the ceiling, a certain type of furniture in the corner where paperwork is taken care of - for a long time, it was all imposed from above, but those times may be coming to an end. Many a car dealer's showroom may soon no longer have to comply with a uniform and recognisable house style now that car companies have radically changed their business model in recent times.
Almost all of them take a for a move away from the model where their dealers are franchised businesses that, while having to cling frenetically to a corporate formula, sell cars independently based on their own prices, discounts and terms. In its place is the agency model: dealers become 'agents' who, in addition to providing a range of services, only have the thankless task of delivering a vehicle to the customer. In return, the agent receives a modest (probably hardly negotiable) fee per vehicle - say 500 euros or so. In any case, much less than the margin that was usual when agents were old-fashioned retailers, and they maintained contact with the customer.
To what extent that relationship remains intact under the agency model will vary from manufacturer to manufacturer. It could also be broken altogether, for instance in the not unthinkable event that a manufacturer opts for a universal car company that is well regarded and can deliver the car to the customer just as well. Proportionally, there will be far fewer agents anyway than there were actual dealers.
For as dealers are relegated to agents, car manufacturers themselves are becoming the new contract partners of motorists buying a new car. Vehicles are increasingly being sold online, directly through the car company's website. ''There is one SUV in your shopping basket. Would you like to add options or checkout?'' A test drive sometimes doesn't even come into it anymore.
Power over the customer
Manufacturers take on more tasks and responsibilities, but at the bottom line, they save costs by largely getting rid of middlemen. The fact that this also puts them in much closer contact with their customers is an added benefit for them. The influence that manufacturers can exert on their customers increases, as it does as a result of OTA. The move to the agency model and the advent of OTA are two parallel developments that coincide in some ways.
Car companies' hold on their customers as a result of direct sales is reflected in several ways. For instance, it provides (personal) data that provides new insights and better enables them to offer customised services and products to motorists. In addition, manufacturers may, for example, decide to disclose vehicle data only to car companies with which they are willing to do business, and more or less force their customers to turn to those (more expensive) parties for maintenance (insofar as, in terms of software, that does not over the air can, and as far as mechanical parts are concerned).
Under the franchise model, manufacturers by default gave their dealers access to vehicle data because they had delivered the car to the customer. It remains to be seen whether that will remain the case under the agency model. Then the data might only be provided when the car needs servicing. Or not at all anymore, if instead a deal is made with, say, a large wholesaler like Bosch Car Service, or an authorised specialist garage. With those parties, manufacturers can be confident that vehicle data will be handled properly, they say.
Yes, as a motorist, you can still go on your own initiative to a service provider of your choice (although you are often forcefully talked out of it in the warranty conditions), but they are not provided with the necessary data in advance and are struggling with an information backlog. Repair and maintenance information manufacturers are also only willing to share for a high fee, is the common complaint. In short, lucrative repair and maintenance data are mainly intended for authorised parties within the network of car manufacturers, leaving only the data crumbs for numerous other third parties in the aftermarket.
This situation confirms the perception that manufacturers have the directing vehicle data, while of course it should be up to motorists themselves to decide what happens to it. If others decide for you how and what your data is used for, you have no self-determination and it is an invasion of your privacy. After all, autonomy and privacy are an extension of each other.
It is also precisely this gatekeeper role of manufacturers that both the aftermarket and consumer organisations hate and fear because it threatens fair competition and the curtailment of motorists' freedom of choice drives up prices. On this front, Europe did take a step in the right direction recently. The so-called Motor vehicles block exemption regulation - which covers the retail of aftermarket parts and the types of contracts involved - was extended for five years last June and also updated. The most relevant change is that vehicle data that may be essential for the provision of repair and maintenance services, which are made available to authorised repairers, must now also be made available to independent repairers on a non-discriminatory basis (i.e. at the same price).
This is a boost for the aftermarket, which nevertheless remains critical and believes that further change is needed to achieve a level playing field. These include the desire for car data to be much more standardise. Now each car manufacturer keeps its own software and data formats which does not exactly make things easier for garage owners - especially the smaller 'on the corner' ones.
All kinds of other provisions on access to vehicle data are still being negotiated in Brussels. Those talks should lead to additional (sectoral) legislation relating to the automotive industry and belonging to the upcoming European Data Regulation. We covered this topic in an earlier article highlighted in detail.
Next time: the role of Big Tech in the automotive industry.