BCG

WillConnectedCarsBe

aBoonorBustforthe

AutomotiveAftermarket?

APRIL2023

Suppliers

$13

$88

Distributors/

retailers

$21

$141

TheUSaftermarkethasbeengrowingby5%ayear,toitscurrentmarketsizeof$357billion

ALLFIGURES

IN$BILLIONS

FORFISCAL-YEAR

2022

Thenumbersin

whitearepro?t,and

thenumbersin

brightgreenare

revenue.

OEMs

$16

$65

DIY

$78

Dealers

$14

$103

Totalaftermarket

Pro?t=$80billion

Revenue=$357billion

Independentinstallers

$15

$175

Partsonly

Partsandlabor

Sources:S&PGlobal;USCensus;MEMAAftermarketSuppliersanalysis;BCGanalysis.

Increasedconnectivitychangeshowvehiclescanbeservicedintheaftermarket—whichwillreshapepro?tpoolsforaftermarketplayers

Increasingcapabilitytosupportconnectivityusecases

Vehicleconnectivity

Electricalarchitecture

Remoteservicecapability

Notconnected

Notconnected

Distributed,application-speci?ccontrollers

Diagnostictoolphysically

connectedintheservicecenter

Connected

Embeddedwirelesstelematics

Distributed,application-speci?ccontrollers

Limitedremotecapability

Software-de?ned

Embeddedwirelesstelematics

Centralized,high-performance

Uni?edsoftwarearchitecturethatcanbeaddressedfullyremotely

Source:BCGanalysis.

Note:Foreachusecasethatassumesaminimumsoftware-de?nedconnectivity,20%ofconnectedcarsareaddedtotheimpactedcarparcpopulation.

35%

64%

3%

24%

76%

66%

31%

Newcarsareincreasinglyconnected,andtheindustrymusttakestepsnowtocapitalizeontheemergingopportunity

USCARPARC(MILLIONS)

304

284

17%

83%

2027

2022

2%

317

5%

50%

45%

2032

USNEWCARSALES(MILLIONS)

141616

8%

83%

9%

2032

2022

2027

NotconnectedConnectedSoftware-de?ned

Source:IHSNewVehicleSales;ExperianCarParc,Premium.Bar-chartdataincludesinformationonpremiumcars,includingthosefromLexus,Mercedes-Benz,Volkswagen,BMW,Audi,Lincoln,Audi,Tesla,andPorsche.

Note:Figuresmaynotaddto100duetorounding.

Software-de?nedvehicleswillincreasetheoverallpro?tpoolfortheindustryby$2billion

Totalaftermarket

SUPPLIER

OEM

DISTRIBUTOR/

RETAILER

DEALER

INDEPENDENT

INSTALLER

CURRENT

PROFIT

2032

PROFIT

Changein

pro?t&revenuepervehicle:currentto2032

Pro?t

+$30(67%)

+$20(36%)+$5(7%)

+$5(10%)

–$25(50%)

$280

$315

(+13%)

Revenue

+$30(10%)

+$30(12%)–$20(4%)

–$25(7%)

–$75(12%)

Changein

industrypro?t

&revenue:currentto2032

Pro?t

+$1.3b

+$1.3b+$0.3b

+$0.2b

–$1.2b

$80

$82

(+3%)

Revenue

+$2.0b

+$2.0b–$0.7b

–$0.5b

–$3.6b

Source:BCGanalysis.

Notes:Pro?t-poolimpactsfor2032includedirectimpactsandupstream/downstreamimpacts.All2032impact?guresarebasedontheright-to-repairlegislationbeingpassed.

01

Diagnosticsand

updates

·Basicremotediagnostics:Remotediagnosticsbefore

appointmenttooptimizevisit

·OTA1softwareupdates:Remoteupdatestoreducein-personappointments

·OTArepairs:Over-the-airsoftwarepatchestoreducein-personhardwarerepairs

·Self-diagnosingvehicles:On-vehiclediagnosticsto

replaceservice-centertools

05

Maintenance

scheduling

·Smartphoneapp

appointments:One-click

serviceschedulingbasedonvehiclediagnostics

·Embeddedappointment

scheduling:Vehicleschedulesserviceautomatically

·Preventivemaintenance:

Vehicleschedulesservicebymaintenanceschedule

·Predictivemaintenance:AIproactivelyschedulesservicetoavoidbreakdowns

02

Newservicesandbusinessmodels

·Qualityassurancein

vehiclesales:On-demand

remotevehicleinspections

·Software/hardware

integration:Servicestoensureaftermarketpart

andaccessorycompatibility·Softwarefeatures:

Aftermarketsoftware

add-ons

04

Data

monetization

·Suppliermarketing:Promotepersonalizedupgradesbasedon

drivingbehavior

·Emergencyservices:

Coordinateresponseandrepairafterincidents

03

Operations

optimization

·Operationsoptimization:Increasesupply-chainandlabore?ciencyusing

vehicledata

·Supplieroptimization:Usevehicle-performancedatainproduct

development

Connected-carusecasesfallinto?vebroadcategories

Source:Industryreports;leadershipbeliefaudits;BCGanalysis.

1OTA=overtheair.

Usecaseswillhavevaryingimpactsonspeci?csegmentsoftheaftermarket(1/2)

IKEYPLAYERSIMPACTEDI

Theme

Usecase

Minimum

connectivity

required

Time

horizon

SupplierOEM

Distributor/retailer

Dealer

Independent

installer

Diagnosticsandupdates

·Basicremotediagnostics:Remote

Connected

diagnosticsbeforeappointmentto

optimizevisit1

Availablenow

·OTA2softwareupdates:Remoteupdatestoreducein-personappointments

Software-de?ned

Availablenow

·OTArepairs:Over-the-airsoftwarepatchestoreducein-personhardwarerepairs

Software-de?ned

Likelyin10years

·Self-diagnosingvehicles:On-vehicle

diagnosticstoreplaceservice-centertools

Software-de?ned

Likelyin5years

Newservicesandbusiness

models

·Qualityassuranceinvehiclesales:

On-demandremotevehicleinspections

·Softwareintegration:Servicesto

ensureaftermarketpartandaccessorycompatibility

·Softwarefeatures:Aftermarket

softwareadd-ons(e.g.,performancesuspensionsettings)

Software-de?ned

Software-de?ned

Software-de?ned

Availablenow

Availablenow

Likelyin5years

Upstream/downstreamimpact(-)Directimpact(-)

Directimpact(+)Upstream/downstreamimpact(+)

Source:Industryreports;leadershipbeliefaudits;BCGanalysis.

1BasicremotediagnosticsimpactonlyOEMs.

2OTA=overtheair.

Usecaseswillhavevaryingimpactsonspeci?csegmentsoftheaftermarket(2/2)

IKEYPLAYERSIMPACTEDI

Theme

Usecase

Minimum

connectivity

required

Time

horizon

SupplierOEM

Distributor/retailer

Dealer

Independent

installer

Operationsoptimization

·Operationsoptimization:Increase

supply-chainandlabore?ciencyusingvehicledata

·Supplieroptimization:Usevehicle

performancedatainproductdevelopment

Software-de?ned

Software-de?ned

Likelyin5years

Likelyin5years

Data

monetization

·Suppliermarketing:Promotepersonalized

Software-de?ned

Likelyin5years

upgradesbasedondrivingbehavior

·Emergencyservices:Coordinateresponse

andrepairafterincidents

Connected

Availablenow

Maintenance

scheduling

·Smartphoneappappointments:

Notconnected

Availablenow

One-clickserviceschedulingbasedon

vehiclediagnostics

·Embeddedappointmentscheduling:Vehicleschedulesserviceautomatically

Software-de?ned

Likelyin10years

·Preventivemaintenance:Vehicle

schedulesservicebymaintenanceschedule

Connected

Availablenow

·Predictivemaintenance:AIproactivelyschedulesservicetoavoidbreakdowns

Software-de?ned

Likelyin10years

Source:Industryreports;leadershipbeliefaudits;BCGanalysis.Directimpact(+)Upstream/downstreamimpact(+)Upstream/downstreamimpact(-)Directimpact(-)

Vehicle

connectivity

Vehicle

electri?cation

Tech-skilland

laborshortages

E-commerce

VehicleADAS1

penetration

27

19

14

12

Amongaftermarketexecutives,vehicleconnectivityisatoppriority

Response%

27

Aftermarketindustryleadersbelieve

connectivityandelectri?cationaremostimpactfultotheirbusiness,with27%

selectingeachasthemostsigni?canttrend

Response%

6762

3941

46434348

23

20

Diagnostics

andupdates

Maintenance

scheduling

Newservicesand

businessmodels

Operations

optimization

Data

monetization

CurrentlypursuingPlanstopursue

Approximatelyhalfofaftermarket

companiesarealreadypursuingusecasesforconnectedcars

Response%

43

59

39

28

16

12

2

2

Current

prioritization

Estimatedin

+tenyears

Low

High

priority

priority

Medium

priority

87%ofindustryleadersalreadyconsider

softwareanddatao?eringsamedium-or

high-priorityinitiative

Source:Marketresearchonmobility(MIIOS)survey,January-February2023.N=100CEOs,CTOs,COOs,andVPsfromUSautoaftermarketsuppliers,distributors,dealers,andretailers;BCGanalysis.

Note:Figuresmaynotaddto100duetorounding.

1ADAS=advanceddriverassistancesystems.

Tocapturetheopportunityinsoftware-de?nedvehicles,stakeholderswillneedtodevelopspeci?ccapabilities

Opportunity

Capabilitiesrequired

Aftermarketsegment

Supplier

Supplierscancapturemorethan$1billionofvalue

fromnewfeaturesandservicesenabledbytechnology

·Newsoftwareo?eringstocomplementhardwareparts

·Consumerinterfacesforkeyfunctions(e.g.,directmarketing,?elddataforproductdevelopment)

OEM

OEMscanmonetizemorethan$1billi