Tesla Demonstrates How OEMs Could Cut Into Service Revenue

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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Comment by Richard Holland on January 20, 2014 at 11:30am: Thanks for the comments! @William - actually, the Prius customer, during her first visit, was told that it was the dimmer switch. Turns out the same thing happened a week later. Through Google, she discovered that there was actually a service bulletin on this issue with the EXACT symptoms her car was displaying. It was such a huge issue that Toyota warranted the part for UNLIMITED MILEAGE. Had the service advisor been more knowledgeable or had a system that assisted him in accurately diagnosed the problem in the first place, the customer wouldn't have had to discover the problem herself online, inform the dealer, have the dealer pull the TSB himself, then reschedule her to come back and keep her car for a week. That doesn't sound very efficient to me and it certainly hurt the dealership's credibility in her eyes. She's still astounded that she could find the answer as easily as she did but they blamed her dimmer switch. It even said in the TSB that the dealer may not be able to duplicate the problem as it was intermittent and that they were to fix it anyways upon customer complaint.

As for your second scenario (text, car drives itself, etc.), what if technology could get to a point where the car could fix itself? Then where does that leave dealer service departments?

@Daniel Who gets the monthly fee for service? My guess is the OEM would since they'd be monitoring and providing the service, and updates, themselves. It may be brilliant for consumers but it would be bad for service revenue.

Comment by William Phillips on January 20, 2014 at 11:20am: Interesting look in to where we are going and a great article. Some day when the water pump is bad we will get a text to ok the repair, it will then lift the garage door and drive it self to the dealer for the issue and return. The thought of this much information,intrusion or control over my personal life is another issue for another article. (ie NSA.)

Personally have 2 people I know who have the car and are not having the consumer experience mentioned in this article. The people who bought this car are a part of a group who would praise the car because of their belief system even if it is failing. Like our current leadership in the US. I personally own a high line car (I wont mention the name) that has extremely high marks in consumer experience. I am on my second one because I could not believe how bad the first one was. I soon learned that the consumer experience with this type of car is based on people who drive them very little because it depreciates them. So they really don't know how these cars do with regular use. Obviously not so with me. I drive mine, and its most likely my last.

If Tesla smartened up, and let dealers assist them in marketing this car and working the bugs out, the consumer experience would be verifiably valid. The Prius customer in this article needs to learn to use email, google for answers or just call. This was most likely combined with a poor delivery at the moment of sale. (poor process) or desire to get the consumer to the store for income opportunities.

Living in LA, I would love to own one of these Tesla's just for the carpool benefit I will not, for the respect of my dealers they are trying to go around.

The concept of the article is great and Im sorry if I went off the reservation.

Comment by Daniel Tegeder on January 20, 2014 at 11:13am: The just need to charge a monthly fee for the service at time of purchase or in the service department its brilliant