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Is The Vehicle Aftermarket Prepared For Electric Vehicles?

In 2010, only 17000 electric cars were sold globally. By 2019, this number had soared to 7.2 million. Evidently, electric vehicles (EVs) are expanding significantly, more recently with a 40% year-on-year increase for electric cars in 2019. China, Europe, and US are the largest consumers of EVs, owing to favourable policy announcements that include zero-emission mandates and fuel economy standards, and fast technological progress in the electrification of two/three-wheelers, buses, and trucks.

What is the impact EVs are creating?

Environmentally, EVs are making a favourable case, with only 51 million tonnes of carbon-dioxide emission globally in 2019, that too only because of the electricity generation required to supply the global electric vehicle fleet, as compared to 104 million tonnes that would have been emitted from an equivalent fleet of IC engine-based vehicles, and that includes on-road emissions.

And it’s not just electric cars that are picking momentum, but also the electric non-car segment. With almost 25% of all two-wheelers on the roads being electric, micro-mobility via electric vehicles like electric scooters, electric-assist bicycles, and electric mopeds is also on the rise in many large cities across more than 50 countries worldwide. China is making significant inroads in electric transportation with the bus fleets in many cities being near-fully or fully electrified. Outside of China, Santiago in Chile has the largest electric urban bus fleet with significant reductions in operational costs as compared to conventional buses along with favourable customer ratings.

More vehicle manufacturers are investing in the space – General Motors created a stir when they announced in January 2021 that they would not sell gas/petrol-powered vehicles after 2035. Volkswagen too has taken a strong stance to electrify its cars. This trend is bound to lead to a virtuous cycle – lower costs due to increased manufacturing, increased infrastructure such as charging ports, more awareness, and so on.

How will EVs impact India?

EV usage in India use can have positive macroeconomic and environmental impacts. The import burden per IC-engine car is 4.1 times higher for private vehicles and 5.7 times higher for commercial ones when compared to electric vehicles over their lifetimes, if we compare oil and battery cell imports by 2030. A steady transition to electric mobility can reduce oil imports, address urban air pollution, help meet India’s climate commitments by reducing the energy intensity of the GDP, and help grow new industries. EV transition can also add higher value than business-as-usual scenario if the EV components are indigenised. Consequently, India should look forward to taking aggressive steps to indigenise EV component manufacturing and private manufactures should focus on increasing the uptake of aftersales products and services.

India has taken initiatives in gearing up its EV initiatives such as the Faster Adoption and Manufacturing of Electric (FAME) vehicle policy and reduction of GST on EVs, but more may need to be done, especially from the private manufacturers point of view.

The aftermarket industry has to be prepared

Prima facie, the numbers look bleak. Deloitte, a consultancy, predicts that aftersales-related revenue could shrink by as much as a half by 2035. In fact, Tesla explicitly mentions that their vehicles do not need annual maintenance! But where there is disruption, there is also an opportunity. This change is not going to happen overnight, so OEMs and other players have time to adapt.

The servicing needs of EVs, which have fewer parts, are fundamentally different from those of ICE-based vehicles. For example, oil changes and break changes – two mainstays of aftersales service for ICEs – do not apply for EVs. At the same time, the latter have their own set of requirements and even skills. Reilly Brennan, founding general partner of Trucks VC (an American transportation VC company) wrote that the future of an electric-dominated auto maintenance world belongs to tyre and glass, remarking that “Tesla’s Model X panoramic glass costs $2,300 to replace — we’re entering an era of big, beautiful and expensive visibility.”.

The influx of EVs will pose all sorts of questions for incumbent players. New revenue streams, ownership models such as subscriptions, value-added services for customers, aftersales relationships beyond the hygiene servicing, manufacturing and supply chain cost optimisation, and so on.

While the above might seem daunting, it also poses an opportunity for those with vision and quick to get off the blocks. Maintaining a relationship with the customer will be vital. Deloitte lays this out as one of the four key points for OEMs looking to adapt: “Increasing the digital experience will be a significant part of success and retention in an OEM’s core business”.

How can 21 North help?

As a business, we are dedicated to helping OEMs and other players in the automotive industry focus on their core competence and decrease workload of ancillary activities. In that regard, what we offer fits in nicely with the upcoming EV boom.

For example, we make it easier for customers to book a service (or, in the future, any value-added service offered by service centers) and have one of our trained Ambassadors pick up and drop the vehicle. As EVs are likely to be adopted by those accustomed to technology-aided convenience first, we believe this could be important going forward. Additionally, we can optimise our technology for the specific requirements of electric vehicle owners different from that of ICE-based ones.

Additionally, we can handle internal vehicle movements for convenience offerings such as home test drives and delivery. Other custom requirements such as integration of charging networks, reserving slots etc can be done as well – making your customer’s experience with the vehicle delightful.

We believe that the upcoming EV revolution is a good thing – for customers, OEMs and ultimately, the planet. Companies that move fast and adapt will lead the next wave of personal transport – and digitisation is key to this.

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