DETROIT — Dan Davis, a service technician at LaFontaine Buick-GMC-Cadillac in suburban Detroit, runs a diagnostic check on an ADAS-equipped Cadillac CT6.
The advanced driver-assistance systems that have migrated from luxury vehicles to less expensive mass-market cars have the potential to cause major financial disruption to the dealership service department's traditional business model.
If the systems significantly reduce collisions, as predicted, fewer repairs and lower parts revenue could diminish dealership profits.
Advanced driver-assistance (ADAS) technology is designed to prevent accidents. It includes most of the building blocks of tomorrow's self-driving vehicles: Lane-departure warning, automatic braking, blind-spot detection, adaptive cruise control and pedestrian detection are among the features, as well as others that rely on cameras, radar, lidar (which uses lasers and sensors to measure the distance to an object) and a variety of other sensors.
The technology also incorporates older technologies such as antilock brakes, traction control and electric power steering. Eventually, all of these systems will be tied together with powerful computers and software that will enable a car or truck to drive itself safely, without the need for a human driver.
Some vehicles already on the road, such as the Cadillac CT6 that showcases General Motors Co.'s Super Cruise system and Tesla Inc.'s electric vehicles with Autopilot, already can handle braking and steering in some situations, though human drivers still remain responsible for vehicle operations at all times.
Nearly every new vehicle has at least one advanced driver-assist feature. Research company Gartner Inc. estimates that as many as 250 million vehicles with such features will be operating throughout the world next year.
Still, the average age of the 276 million cars and light trucks on America's roads is a record 11.8 years and increasing. It will be many years before vehicles equipped with the advanced features are in the majority.
That gives dealership fixed ops directors time to prepare for changes in the vehicle mix. And those changes may eventually hold unique opportunities to win business.
Along the way, though, service departments could see revenue drop for two key reasons.
First, the 37% of franchised dealerships that operate body shops are likely to get fewer accident-damaged vehicles to fix. With advanced driver-assistance systems, fender benders are projected to decline and the severity of crashes is expected to be reduced by automatic braking systems that can detect unavoidable collisions and slow a vehicle before impact.
A joint study this summer by the Insurance Institute for Highway Safety and the Highway Loss Data Institute shows that vehicles equipped with a forward-collision warning system and automatic braking reduce rear-end crashes by half compared with vehicles that don't have these systems. Auto makers that sell 99% of new light vehicles in the U.S. have pledged to make forward-collision warning and automatic braking standard equipment by 2022.
Second, dealerships that don't operate collision centers but do sell repair parts to independent body shops are likely to see those sales decline along with crashes. Some electronic repair parts will be more expensive, but fewer accidents will likely result in lower sales overall.
Professional services firm Ernst & Young Global Ltd. (EY) is studying how advanced driver-assist will affect dealership profitability. Two opposing trends have emerged, EY automotive principal Hanno Lorenzl said.
Because the systems are complicated, Mr. Lorenzl said, service customers are more likely to seek factory-authorized repairs from dealerships than go to independent shops. Dealerships also could see more customer-pay service business from drivers of such vehicles because there will be far fewer fixes that do-it-yourselfers can perform.
What isn't yet known, he added, is how much dealership maintenance such vehicles will require. Some fixes to connected cars will be made by over-the-air software updates provided by automakers. Even as dealership repairs of those vehicles increase, he says, body shop revenue is in danger of being dented.
"As ADAS penetration grows, repair and collision work should go down," Mr. Lorenzl told Fixed Ops Journal. "We are building a model to estimate the impact of those factors on the dealer's profit and loss. We're not quite at the point where we can say what the trend is. But certainly, I think there is going to be a little bit of balancing."
Dealerships can recover some of the revenue loss from collision-damaged vehicles in other ways. The key to preparing for the disruption, according to Lee Harkins, CEO of fixed-ops consultancy M5 Mangement Services, is to persuade customers to return to the dealership for service even after factory warranties expire.
"Dealers have to start with the customers they have now and start promoting maintenance by offering a menu of services," Harkins says. "The misconception about automated cars and electric cars is that there is no maintenance, but that is not 100% true. You still have tires and brakes. It all comes back to the same thing: retention."
Almost all franchised car dealers have invested in service technician training, facilities and diagnostic and calibration tools to repair vehicles equipped with advanced driver-assistance systems. As the electronic complexity of the systems continues to grow, though, these investments will become even more vital.
Auto makers are first to offer technician training and the latest tools for their vehicles' newest technologies. Technical schools such as Universal Technical Institute, along with the National Institute for Automotive Service Excellence (ASE), which tests and certifies technicians, are adding advanced driver-assist and EV repair instruction to their curricula.
To offset a predicted loss of repair and maintenance revenue as cars and trucks with advanced driver-assistance systems and electric and autonomous vehicles proliferate, industry consultants say dealership service departments can take these steps:
Increase shop operating hours to compete with independent and chain-store service providers.
Target service customers whose vehicles are 6 to 10 years old and out of warranty — they will pay for their own, costlier repairs and may be in the market for a new vehicle.
Offer customers a menu of "good-better-best" repair parts so that owners of older vehicles on tight budgets can buy less expensive parts.
"As this technology and usage become more mainstream, we expect our manufacturer and employer partners will require these skills in their entry-level technicians," Walt Langley, UTI's vice president of industry alliances, said.
"UTI will work directly with them to integrate brand-specific training into our program curriculum."
Trish Serratore, a senior vice president at ASE, said that as more and more driver-assist features roll out, fixed-ops directors must decide which technicians have enough experience and skills to service the equipment. Some auto makers with which ASE haven't given clear guidance about who should be trained in such repairs, she added.
"It's still a bit shaky as to who does what," Ms. Serratore said. "Is it simply a calibration test, or does it require the higher-level skills of a master tech?"
Robert Bosch, the auto industry's top global supplier and a major manufacturer of ADAS, warns that even repairs to parts of a vehicle that do not directly involve driver-assist equipment — such as a radiator or windshield — still need properly trained technicians to calibrate driver-assist components.
For instance, a camera mounted in a grille or sensors installed in a bumper might have to be disconnected and removed to provide access to a damaged or faulty part in an advanced driver-assist array. These parts must be reinstalled and then correctly positioned and calibrated.
Some dealerships employ specialists who work solely on vehicles equipped with the technology. At each of LaFontaine Automotive Group's 17 dealerships, a specialist tech either makes repairs or works with other technicians on those jobs, company spokesman Max Muncey said.
LaFontaine, of Highland, Mich., uses the same strategy at its seven collision repair centers, Mr. Muncey added. Advanced driver-assist specialists work on multiple brands of vehicles. They have the highest level of certification from the Inter-Industry Conference on Auto Collision Repair.
Not all techs need to be proficient in driver-assist diagnosis and repair, EY's Mr. Lorenzl said. But he notes: "You need some master techs who understand the technology really well and who don't just depend on the error code that the car spits out."
Service departments can take several steps to offset projected revenue losses once advanced driver-assist, autonomous and electrified vehicles start to sell in large numbers, according to Mark Colosimo, vice president of data and analytics at Urban Science Inc., an automotive consulting firm in Detroit.
Urban Science projects there will be 18.7 million or so EVs operating in the U.S. by 2030. Because they will require less service than internal-combustion vehicles, they will drain around $5 billion in annual revenue by 2030 from dealership service departments — roughly $450,000 per store, Mr. Colosimo estimates.
Like M5's Harkins, Mr. Colosimo said dealerships can compensate by persuading more customers to continue to come to the dealership for service when their factory warranties expire, usually after five years or so.
"The sweet spot for vehicle ownership we want to get back for service is really six to 10 years," Mr. Colosimo said.
"They are out of warranty at that point. The owner has to make a decision to come to us for service. That gives us an opportunity to sell them their next new vehicle, plus they are going through bigger repairs. They need tires, batteries and brakes — things that are much more expensive than oil changes."