AutoPoint Blog

Tesla Demonstrates How OEMs Could Cut Into Service Revenue

Posted by Manuel Soto Wednesday, January 22, 2014

Everyone in the automotive industry is familiar with Tesla’s entry into the automotive retail business, however, not as many realize that they’re simultaneously spotlighting innovative functionalities that any manufacturer could use to make automotive service easier and more convenient for the consumer.

Tesla vehicles are all integrated with an AT&T chip that allows Tesla to make over-the-air updates to the vehicle. While there are many vehicles that are connected to the internet, the difference here is that Tesla is able to not only make software updates on the fly, but to also make physical changes to the vehicle.  For example, Tesla recently rolled out an over-the-air update following the National Highway Traffic Safety Administration’s investigation into the Tesla fires. Two of the three accidents were attributed to debris in the road. Through this update, Tesla was able to remotely reconfigure the vehicle’s suspension to allow increased clearance at highway speeds.

The technology and integration that allows Tesla to fix its cars remotely is something that any manufacturer could adopt. My guess is that there are many manufacturers that are watching this area of Tesla’s business, just as they are watching the consumer-direct sales battles that have been happening throughout states. According to a report by the LA Times, Tesla Motors “has generated the highest consumer loyalty of any car it has surveyed in years” receiving a ‘near perfect’ 99 overall test score. You can easily see why manufacturers are almost certainly paying close attention.

While most dealers are focused on how Tesla’s entry into consumer-direct sales could possibly affect franchise agreements and other manufacturers following suit, not many realize that the technology that Tesla is showcasing in it’s over-the-air updates is both innovative and scary. Think of all the business you get simply due to user error. Recently, the wife of an acquaintance of mine had the instrument panels on her Toyota Prius go dark. The car would run fine but she couldn’t see the speed or any other information on her instrument panel. Of course, she took it straight to her servicing dealership and, in moments, they discovered that there was no problem with the vehicle. The instrument panel was dark simply because the dimmer switch had been dialed down all the way. It just so happened that she was due for service. So they went ahead and also did that for her, while adjusting her brakes as well. Does this story sound familiar? How many “check engine” lights have brought business to your service department?

With the technology we’re seeing develop, it’s possible in the future that she would never have to visit the service department in the first place, but only call the help desk at her manufacturer, who could then remotely diagnose and fix the problem. As this technology becomes better integrated into other areas of vehicles, other than just electronics (as is the case with Tesla), manufacturers could potentially fix minor physical problems remotely. Consumers will undoubtedly be thrilled by the ease and convenience this offers, but where does that leave dealerships and their service departments?

Technology is increasingly creeping into the automotive industry. It has been in retail and fixed operations for years, providing ways to track inventory, customers and transactional data. Every year it’s impacting the sales side of dealerships through increasing transparency and data availability to consumers. Now we’re seeing technology enter the service side of a dealership… not just technology that allows a dealership to create a more convenient and informed customer experience …  but the kind that doesn’t require a dealership.

And that’s scary.


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