Autonomous or “self-driving” cars are widely expected to offer society a number of benefits. Most noteworthy is that they will be involved in significantly fewer accidents and will be safer than human-piloted vehicles. That’s good news for society, but bad news for original equipment manufacturers (OEMs) who will see a big dent in their lucrative collision parts business – fewer new fenders, hoods, and windshields that go to repair vehicles damaged in accidents.
What is at stake?
KPMG projects that OEM collision repair value, which was $5.6 billion in 2015, could drop to $2.7 billion by 2030 and dwindle to $1.4 billion by 2040.
Despite accounting for less than three percent of OEM revenues, collision parts make up on average 10 to 20 percent of operating profits. Given the expected lower crash rates, operating profit for OEMs could fall 4 to 9 percent by 2030, and 6 to 13 percent by 2040. Losses would be even greater in lean years.
And OEMs won’t be alone in feeling the effects of this trend toward fewer crashes. Other stakeholders in the value chain, including body shops, parts suppliers, salvage yards, and insurance companies will naturally face similar impact.
Alternate revenue opportunities
OEMs should investigate additional sources of profit from new services and business models, including:
Call to action
OEMs who think this challenge is still in the far-away future should be wary. KPMG’s analysis shows that increasingly sophisticated autonomous vehicle technology will become more widely available over the next five to 10 years. With this fast approaching disruption, OEMs should start evaluating and taking preemptive actions now to mitigate risk and align operations to the new reality that autonomous vehicles will bring. They must:
New organizational capabilities and skillsets will be required to remain competitive. The collision business is no longer simply about bending metal or extruding plastic; it’s now about learning new technologies – new systems around software and sensor integration, for example. OEMs cannot delay in addressing this imminent threat to a highly lucrative part of their business.