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5 trends affecting original equipment suppliers and automotive aftermarket


Current changes in automotive technology will affect the component fit rates and service requirements in the auto aftermarket in the years ahead. Advances in alternative fuels, electric drive and fuel cells will add new powertrain options. Original equipment manufacturers (OEMs) are introducing increasingly sophisticated software and vehicle controls. All of this activity challenges both OE suppliers and auto aftermarket service providers to prepare now for the new service requirements to come.

RSM and Schwartz Advisors co-sponsored a roundtable for automotive executives that focused on the ways technology is driving change in the automotive aftermarket. Guest speaker Derek Kaufman, managing partner of Schwartz Advisors, shared what he believes are five leading technology-based trends that pose valuable opportunities for OEMs and the aftermarket:

1. The momentum toward alternative fuels is slow but real.

It took a while for the Model T to replace the horse and a network of roads and gas stations to arise. That evolution is similar for vehicles powered by natural gas and other alternative fuels. Although development has been slow largely due to infrastructure costs, it is coming. OEM giants Toyota, Honda and Hyundai are investing heavily in hydrogen fuel-cell cars, largely for Asia and China—where the majority of future sales growth will occur—but also for the North American and European markets. Other OEMs are working on natural gas programs, supported by infrastructure companies that are developing home-filling and commercial-fueling solutions and more efficient vehicle tankage designs that will bolster natural gas applications within the next decade. Monitoring the progress of all of these initiatives is imperative if aftermarket and OEM supply companies are to be properly positioned in the future.

2. Battery and inductive-charging technologies are expanding capabilities for electric-drive cars.

While the energy ratings of batteries grew very slowly during the first 150 years of battery development, the need for smaller batteries with extended run times for use in laptop computers and cellphones spurred the introduction of the first lithium-ion batteryy in 1991. Today, the evolution continues as batteries approach 400 watt hours per kilogram (Wh/kg) and head toward 600 Wh/kg in new designs. This trend, coupled with a number of major companies' investments in inductive-charging infrastructure, will expand the range of electric-drive cars from about 100 miles to 300 miles or more in a wide variety of operating conditions.

That's a trend worth noting for several reasons. First, smaller, more powerful batteries will make electric drive feasible for larger vehicles, such as SUVs and pick-up trucks. Second, as battery prices fall relative to gasoline over the long term, electric cars make more economic sense. Vehicle owners in the United States hold on to their cars an average of 11.4 years, so the switch to electric (or alternative-fuel) cars will be gradual. Advancing technology, and pending federal regulations mandating 54.5 miles per gallon in new cars, however, signal a forward trend that can affect companies throughout the automotive industry.

While the news on electric drives has focused primarily on traction control, there will be significant growth of other electrically driven components such as turbo chargers, air conditioning compressors, start-stop systems and steering gears that require sensors, and electric drive for the new lane departure and autonomous control technologies. This high level of change will generate opportunities for component suppliers and aftermarket service providers that are investing in the new technology.

3. Telematics is leading to full automation, greater safety and handheld control.

Sensor-based telematics technology is advancing from location-based services to vehicle-to-vehicle (V2V) communication, and eventually will lead to intelligent transportation systems (see table). Today's lane departure and GPS positioning systems will evolve into extended “road trains” of commercial vehicles and eventually to fully autonomous vehicles.

While some OEMs offer fully embedded telematics for tracking vehicle maintenance and diagnosing issues, companies such as Automatic Labs and Aftermarket Telematics Technologies have been developing technology that turns smartphones into interfaces with vehicles, offering their owners information they can use to direct service to the provider of their choice. A simple onboard diagnostics module that transmits fault code analysis and provides an automated link to roadside or 911-emergency assistance is also available.

Automotive telematics are evolving  
Available now In development
GPS tracking Road conditions monitoring
GPS navigation Biometric driver scans
Hands-free cellphone interface Diagnostics and maintenance prediction
Lane change and brake monitoring Parking locator and payment
Roadside and 911 assistance Continuous vehicle-status scans
Entertainment and infotainment Local retailer advertising
Service updates and information Vehicle-to-vehicle communication
Pay as you drive insurance Intelligent transportation systems with autonomous vehicles and congestion sequencing

4. Government mandates will continue to drive technology adoption.

The automotive industry can expect the federal government to establish requirements for telematics and other rising technologies for future vehicles. The National Highway Traffic Safety Administration (NHTSA), for example, is mandating back-up cameras and is actively evaluating the use of lane-departure and collision-avoidance technologies and pedestrian-protection systems in programs that roll out through 2018. NHTSA also is considering regulations for black-box crash detection (the U.S. equivalent of the European eCall emergency system), V2V communication and telematics that capture incidents of vehicle component failure automatically rather than depending on manual reporting by vehicle OEMs.

Going forward, the Environmental Protection Agency's CO2 monitoring will result in an entirely new set of regulations that will require new technological advances as well.

5. Sensor technology will set the pace for even more change.

Sensors and software are where many of the most significant technological opportunities will occur in the future. Hundreds of small companies are developing products to support the aggregation of sensor-generated data in the cloud. The collective data from millions of cars will make big data a driving force in the servicing of vehicles in the future. This makes data analysis an essential part of automotive component suppliers and aftermarket service providers' go-to-market strategy. It holdsthe power to revolutionize inventory management and component longevity going forward.

Supporting the entire life of a vehicle

OE component makers and aftermarket companies play a key role in maintaining the reputation of an automotive brand. With the average vehicle on American roads for more than a decade, the ability to diagnose and service it for a long period of time will be challenged as the sophistication of technology increases. Studying and adapting to the changes in that technology will be central to the strategy of OE suppliers that make the parts and the aftermarket companies that service them going forward.

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Steve Menaker 
National Industrial Products Practice Leader



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