Electrics, electronics and e-commerce transforming the aftermarket
Posted: January 29, 2019 by John G. Smith
John Blodgett of MacKay and Company says Canada’s heavy-duty aftermarket was worth about $4 billion last year. The business is also being transformed.
LAS VEGAS, Nev. – The repair and upkeep of Canada’s Class 6-8 trucks and trailers is no small matter. Analysts at MacKay and Company say the business is worth $4 billion a year and growing. And it’s being radically transformed before our eyes.
Suppliers and manufacturers alike face forces that promise to upend traditional business models — from evolving diagnostic procedures, to emerging vehicle systems, and even the way business is conducted.
Advancing telematics systems are bringing the trucking industry ever closer to the prognostics that can identify a part will fail before it actually breaks. Emerging electric vehicles include a fraction of the parts that make up a traditional diesel design. Further automation in the form of advanced driver assistance systems can reduce collision-related damage but introduce unique maintenance needs of their own.
Then there’s the threat of new competition from sources like Amazon, which are looking to secure a share of the existing revenue.
They were just a few of the changes discussed during the annual Heavy Duty Aftermarket Dialogue in Las Vegas.
Recent announcements about plans to electrify vehicles were clearly at the top of mind. Such trucks would see a shift from 12-volt systems to as much as 800 volts. Maybe more concerning to the aftermarket is that an electric vehicle might contain 7,000 parts rather than the more than 30,000 parts in a diesel-powered over the road tractor.
No more valves to replace. No combustion-related equipment at all.
Still, the electrification faces barriers of its own.
“There is no business case out there for electric,” stresses Roger Nielsen, president and CEO of Daimler Trucks North America, referring to the need to increase battery ranges and lower costs. His company has been among those to plan electrified test fleets in the coming year, but that’s in part because of another factor at play.
“We can make the business case with incentives,” he said, referring in particular to support available through California.
Meanwhile, emerging manufacturers like Thor, Tesla, and Nikola will need to establish aftermarket models to keep their vehicles running. Will they partner with existing OEMs or try to make it on their own?
“You absolutely have to have some type of service network,” says Ken Davis of Greentree Advisors, a former Eaton executive. “They’re going to have to work through how they’re going to service their fleet customers.”
Truck owners might be willing to wait for an expert to fly in to repair a prototype. Working fleets will have different demands.
Sandeep Kar, the chief strategy officer at Fleet Complete, suggests there’s still an opportunity for growth in natural gas engines as well. “Let’s not get blindsided by the rise of electrification,” he says. “I’m not saying it’s ‘either, or’. There’s a place for all these powertrain technologies.”
“There are going to be internal combustion engines on this planet for a long time,” Davis told the Aftermarket Dialogue crowd, many of whom supply related parts.
Automated and autonomous
Plans to introduce higher ever-higher levels of automation face their own barriers before the related equipment becomes commonplace.
When Freightliner tested its fully autonomous Inspiration prototype truck near the Hoover Dam in 2015, it required teams to paint special lines on a ramp so it would work. Those lines had to be covered the very next day. Davis even foresees the need for special sensors in the roads to help coordinate things like traffic lights.
For now, the limits seem to be in Level 2 controls – which can automatically apply brakes, or make minor steering corrections to help keep a truck in its lane. From an aftermarket perspective, the underlying systems can reduce damage related to certain collisions but also keep trucks in service for longer periods of time.
Not everyone will have a chance to repair the automated features, though. The trucks themselves require redundant systems with increasingly complex software that draw from radar, cameras, Lidar and ultrasonic readings. Admittedly that will be beyond the capabilities of most service bays, Nielsen says. “The days are gone where [the mechanic] is going to open up the lid of the box and start tinkering.”
Telematics and diagnostics
In the meantime, increasingly complex telematics systems are helping to reshape diagnostic procedures.
“We see more predictive maintenance, more Internet of Things,” says John Blodgett of MacKay and Co. “The trucks may identify the problems themselves and they bay be able to service themselves.” Over-the-air updates, for example, now alter electronic parameters without requiring a truck to enter a service bay.
Imagine a transmission being able to identify that it will overheat in 500 miles, Kar says. That information could allow a shop to keep a required part at the ready, charge a premium for it, and send the truck on its way before the unit is actually stranded at roadside. “We’re talking about a move from restrictive to prescriptive.”
Increasing integration makes it all possible. “That is the power of big data, which drives big knowledge, which drives big decisions,” Kar adds. “It’s creating volumes of data that the aftermarket can leverage.”
Nielsen says manufacturers will also need to “have the guts” to pull equipment in for warranty repairs while a truck is still rolling. And while CAN Bus signals have increased, the speeds will likely need to increase yet again by the time GHG 2024-27 engines arrive, he says.
There are also data privacy issues to consider here as well. While a truck’s operating environment can help to make equipment-related decisions, some fleets still hold GPS data tight to their chest, Nielsen says as an example.
Asks Mike Foster, the chief technology officer at Allison Transmission: “There’s going to be public data, there’s going to be proprietary data. Who’s going to want to be in charge of that?”
The Amazon effect
In the midst of it all, traditional aftermarket players need to consider the potential of new competitors including the e-commerce behemoth that is Amazon.
“Amazon is selling my product and I don’t sell it to them direct,” says Walt Sherbourne, vice-president of marketing at Dayton Parts. But that business model creates a challenge with returns, as Dayton personnel look to identify who actually sold a part. Amazon certainly doesn’t have the traditional expertise at the counter.
But customers are coming to expect ever-quicker deliveries and seamless business transactions they’ve enjoyed with consumer goods.
The increasing demand for ever-quicker deliveries is already reshaping the location of distribution centers. Stefan Kurschner, senior vice-president – aftermarket at Daimler Trucks North America, refers to his company’s commitment to turn trucks around in 24 hours or less.
“Product availability is always a struggle,” adds Carl Mesker, SAF Holland’s vice-president of sales – Americas. “Distributors can no longer stock your entire product line.” The focus instead is on tailoring inventories for existing customers, and drawing on support from suppliers. “This is why we have distribution centers we didn’t used to have.”
While some of those parts transactions require consultations, there are some that simply require a part to be delivered at a specific moment, he says. Amazon is using its transaction-related expertise to secure that niche.
Blodgett throws the concept of 3D printing into the mix. With that parts could be produced on demand, if not exactly while a customer waits. Then blockchains could offer yet another business model that pre-qualifies who is allowed to service a truck, tow it to the shop, and complete the transaction.
Dayton’s Sherbourne refers to the “omnichannel” sales model that could affect things sooner than that. Retailers like Lowes now allow online shoppers to pick goods up at a store. “Is that going to come to us? Probably in the near future it will,” he says.
“The customer always makes the choice of where to order and how to fill an order,” Kurschner agrees. But there are also customers who still like to work with fax machines.
“The aftermarket has to serve both sides of the equation.”