Autonomous Vehicles: On the Horizon? Or In Your Store Now!
Whether autonomous vehicles (AVs) are a good thing or bad won't be decided until public has the product. But their technology is already blowing like a Nor'easter into the dealer community, promising a blizzard of legal issues that may affect the nature of the OEM franchise. I'm concerned that the next great disruptor - the autonomous vehicle - may "jump the franchise," and decimate the distribution system that has served car buyers squarely for more than a century.
AVs are years away from your showroom floor, but AV tehnology is in your service bays NOW! I roll my eyes every time Automotive News quotes some pimpley CEO or tech analyst implying that, if it weren't for the cavemen in Detroit, we would already be launching an app and taking a nap while our car magically finds its way to the destination. That's many years away, but don't sleep on it. Intermittent assist features such as automatic braking, blind-spot detection, and adaptive cruise control, etc. are the precurser technologies of AVs.
Service requirements for these features are wreaking havoc in service departments. Techs are struggling to catch up with the complex replacement and calibration of numerous sensors, and writers are getting chewed out when customers learn that a replacement headlight assembly costs $1500.00. And these features represent only a fraction of the code strings, sensors, and servos that will be in these vehicles. Are front-end collisions going to clog your bodyshop while they get litigated? And who is responsible if there is an injury accident after the repair of one of these connected systems?
Autonomous vehicles could
radically change the nature of
the franchised dealer business.
We read daily about which tech companies are providing the layers upon layers of connectivity and interactivity that will make AVs possible. Tech companies are notoriously protective of their "killer app" intellectual property. While small innovators are being gobbled up by larger IT companies and OEMs, Ford can't buy Intel in order to bring Mobileye's technology in-house. Inevitably, there will be a lot of partnering, as Toyota is doing with Microsoft.
Partnering is well-understood in the automotive world, but these partners are from a different galaxy. The auto industry has grown up with a "closed-end" production (model year) philosophy that prioritizes validation and accountability. The IT world lives by an open-ended "patch it" development creed. If the New Model Year is going to be replaced by Anytime Update 2.1.7, what is the recall update/repair protocol, and who is responsible for it? Looking into the crystal ball, the Mayer Brown law firm says,
"It is by no means certain that the required changes to the [the independent dealer] model can be accomplished without changing the fundamental economics of the dealer/end-customer relationship."
Whatever alphabet soup rearrangement of "O-E-M" and "I-T"
bridges that philosophical divide, both sides intend to own more of the customer relationship - and to squeeze the dealer out of it.
Here are a couple of things to wonder about:
- If the model year is irrelevant, what happens to the sales cycle around which the industry orders its entire production and distribution?
- Between OEM satellite software updates and Right to Repair laws, what is the future Fixed Operations bottom line really looking like?
I'm taking these questions to this month's National Association of Dealer Counsel member conference. I'll let you know what answers I come back with.
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