ADAS: The Aftermarket Technology Growth Opportunity Happening Now
By Paul McCarthy, President & CEO, MEMA Aftermarket Suppliers
Advanced Driver Assistance Systems (ADAS) is the revolution that is here now for the automotive aftermarket industry. ADAS is the catch-all phrase for vehicle automation technologies that help make driving cars easier, safer and more appealing to drive.
Over the long term, the greatest opportunity for the aftermarket may be increasing vehicle technology. It may also represent the greatest threat for those who are unprepared or not agile enough to shift to take advantage of the opportunities.
There has been so much focus on electric vehicles we aren’t talking enough about the technology revolution happening now in the aftermarket: ADAS.
MEMA Aftermarket Suppliers members released a study in 2022 that projected ADAS will exceed a billion-dollar market for replacement parts (repair + collision mechanical) by 2030.
To be clear, we are not talking about “robot cars.” Remember 10 years ago when the media and investors were telling us the SAE Level 5 fully autonomous robot cars were here? You would see an example of the cute Google car making all the headlines. As Elon Musk put it in 2015: “Autonomous driving is a solved problem.” Well, not so much. Some experts have said the full, all-conditions, all-locations robot cars are likely not happening in our lifetime.
But that shouldn’t take away from the great driver assistance vehicle automation technology that is making drivers’ lives safer, easier, and making our time in our vehicles even more appealing.
Opportunities for the Aftermarket
The real story for the next generation is driver assistance: level 1-3 automation – and it is a huge aftermarket opportunity.
These are systems from the relatively simple – parking sensors, blind spot monitoring systems, emergency braking systems (now on all new vehicles), lane keeping warning, adaptive cruise control – to more advanced systems like GM’s Super Cruise or traffic jam assist, where you can drive hands off, conveniently, in limited circumstances like on in-state highways or in low speed traffic jams.
Putting some numbers around this, virtually every new vehicle has some form of driver assistance systems. And the share of the vehicles in operation will grow fast, as shown in this analysis from MEMA Aftermarket Suppliers Aftermarket 2035 study released last year. In that study, Roland Berger projected that by 2035 nearly half of the vehicle parc will have level 1-3 ADAS systems, with even more possessing L0 technologies like lane keep warning and collision warning.
All this driving automation introduces a lot of expensive parts. Every one of these new technologies may break or need calibration or maintenance. And ADAS is helping drive the sensor revolution that is exciting to aftermarket businesses as it presents additional revenue opportunities.
We believe this huge increase in vehicle technology content bodes well for the future of aftermarket repair orders. And the story of increasing vehicle content is not just ADAS; it is not just EV. The huge increase in new vehicle prices demonstrates the lifecycle revenue opportunity. When new car prices hit $30,000 a decade ago, there were huge concerns about affordability. Now, the average new price is close to $50,000. And while some of that is near-term supply and demand, increasing vehicle content has driven a strong, underlying long-term price trend.
Remember aftermarket history: every time we have seen new technology, there are projections that the aftermarket will suffer, but every time we see problems and failures and the aftermarket thrives.
Think of early generation fuel injection, electronic ignition, tire pressure monitoring systems – or for that matter, back to automatic transmissions and power steering or brakes. Auto engineers are not perfect, and the real world is a very difficult operating environment. Every time we have had new technology, we have found it to be good for the aftermarket – and we are looking at a wave of new technologies unlike any we have seen before.
Broadening our view, ADAS will also be positive for overall demand for automobility and miles driven. And when miles driven goes up, the aftermarket thrives.
ADAS makes it easier to drive. Easier to drive longer distances or in traffic. This is allowing Americans to spread out where we live; if it is less taxing to drive or commute, we can live a bit further from where we sometimes need to be, closer to where we want to live. We can drive longer as we age. It reinvigorates automotive competition with mass transit like planes, where drivers may choose to drive what they used to fly.
In economic terms, making our “good” of automobility easier to use, and easier to use more, will expand the market. It also means there are now technologies that people just do not want to live without: just ask anyone who has experienced blind spot monitoring if they want to drive a vehicle that doesn’t have it. The biggest takeaway? Vehicle automation is growing our market.
This trend and opportunity – which is taking off but has a lot of growth ahead of it – comes back to the importance of the AAPEX Show.
AAPEX is where you can see the new technology, and Joe’s Garage is where you can see the new technology at work. See the new products that suppliers are bringing into the ADAS space. It is where you can get the training in these cutting-edge technologies that are making us one of the most exciting technology industries to work in. For example, last year at AAPEX, I had the pleasure of speaking to a three-store shop owner who had come to AAPEX to find the best new ADAS calibration tool for this chain. He said he found what he needed, and the show was fantastic. He found it so valuable and exciting that not only was he coming back next year, but he will also bring his son and the manager of his biggest shop.
In our view, and as on display at AAPEX, the aftermarket should not be afraid of the future.
We believe that if we approach what’s next with the classic aftermarket entrepreneurial spirit, technology and content will bring opportunity.
The aftermarket is now living the famed ‘Innovator’s Dilemma’ everyday: the challenge of managing two businesses. One, maximizing the returns from our existing business, which has a very long, fat tail. While in parallel growing new, innovative businesses prepared to take advantage of the aftermarket opportunities of electrified, automated and connected vehicles.
In our view, the aftermarket is well positioned in both the old and new industries.
Paul McCarthy is the president and chief executive officer of MEMA’s Aftermarket Suppliers group. McCarthy leads the organization that champions the aftermarket industry and advances the business interests of MEMA’s members, working toward supporting a growing, profitable, innovative, and influential aftermarket supplier industry. MEMA Aftermarket represents automotive, commercial vehicle, and remanufacturing suppliers that provide the parts, tool, chemicals, diagnostics, and technologies that keep vehicles running safely and affordably throughout their lifecycle.
May 9, 2023