According to John Waraniak, Vice President of Vehicle Techonology at SEMA, his organisation represents “the grass roots of the auto industry and everything you don’t necessarily need, but everything you want”. The aftermarket business is an industry worth around US$31bn a year, and the annual SEMA Show is the largest gathering of small businesses in the US. “It may be a small portion, perhaps 10%, of the overall automotive aftermarket,” says Waraniak, “but it’s the high margin, performance brands, products and accessories that people – particularly automotive enthusiasts – want on their vehicles.”
Has the interest in performance and customisation changed in recent years?
Over the last ten years the automotive industry has gone from commoditised to customised, and mass markets have shifted to more fragmented customer segments. Ten years ago, the breakeven point for a US assembly plant was around 80,000 vehicles. In terms of customisation, 80,000 is off the scale. Most niche, low volume special editions, like a Chrysler SRT or Ford SVT, are runs of fewer than 5,000. There is a tension in the line – you’ve got to have enough pull from consumers that want those vehicles. Ideally you would never want to produce one more than is wanted by consumers.
Many of our SEMA members work with the OEMs’ performance and aftermarket organisations to put their parts and systems on original vehicles. Successful companies and brands form emotional connections with consumers. SEMA companies like Eibach, Kicker, Hurst, Magnaflow and Nitto have tremendous brand equity, so when Ford, GM, Chrysler, or Toyota designs and builds a special edition vehicle, they typically reach out to the SEMA member companies to provide those authentic brands and performance parts for them, so they’re actually on the vehicles when they are purchased new.
It used to be that buyers wanted the fastest and best performing cars. Horsepower and performance are still important, but now they also want the smartest cars. Smart vehicles give a lot of street credibility and provide the cool factor to Gen-Y and millennials in particular. The Fiesta movement at Ford, as well as Scion are great examples of experiments in how to do things differently. Scion started off with 13 SEMA aftermarket companies providing accessories and grew to over 135 under the Scion Optomize programme. If you didn’t want a radio in the vehicle, they left the it out, so that you could put in your own head unit or audio system. That was the first experiment and a lot of auto manufacturers have taken notice of the lessons learned from Scion.
That leads on to the personalisation aspect of customisation. Mini offers a high level of personalisation. So does the Fiat 500, and Opel has the Adam, for which there are a multiple different configurations. How do you view aftermarket personalisation and OEM personalisation?
Personalisation is big, and certainly Gen-Y or Gen-O, the Optimisers, grew up digital but many consumers want cool vehicles that connect with their lifestyles, not just younger buyers. Millennials as well as Boomers want to take their digital lifestyles into their vehicles. They may not be performance enthusiasts, but they certainly are lifestyle enthusiasts so they want the latest personalisation products and systems in their vehicles.
The automotive industry has been notoriously slow to respond to developments in consumer electronics. Is this somewhere that an organisation like SEMA can take a massive step ahead of the mainstream auto industry?
Absolutely. There is a battle for the future of the car between Silicon Valley and Detroit; it’s a healthy battle, raising the bar for everyone. The product development cycle in consumer electronics is about six to 12 months. In automotive, it’s anywhere from 12 to 36 months. So, how do you bring those two industries together? That’s where Silicon Valley and automakers collaborate to create the services, features and functions for the connected space, which is fantastic, because electronics are 30% of the vehicle content and cost today.
The automotive industry can only bring connectivity to market in new vehicles, but there are millions of cars already on the road that need to be connected – what can be done to bridge this gap?
I call that the Aftermarket X-Factor. In the US, there are about 250 million vehicles on the road today. OEMs, in a good year, could probably produce 15 to 16 million new vehicles, and let’s say 30%-40% have connectivity systems in them. It will take the OEMs 15-20 years to reach a critical mass of vehicles that can talk to one another.
With the Aftermarket X -Factor, we can get there in half the time by retrofitting existing vehicles with here-I-am devices which can prevent forward and rear collisions, lane departure warning systems, backup cameras and so on. Being able to retrofit connected-vehicle systems is a huge advantage, and the US government and the Department of Transportation are working with the aftermarket to get those devices into vehicles faster, in addition to putting them on-board new vehicles.
In terms of infotainment in general, do you see a future for built-in devices or do you think everything will be brought-in?
I think it will be a hybrid, a blending of built-in, brought-in and beamed-in. Some people do not want a built-in factory installed system. They want the latest aftermarket consumer electronics solution. If something really cool and innovative comes out, and it’s shown at the SEMA show this November, people will want it in their vehicles in December.
Do you think it is true that young people are less interested in cars than cell phones and personal technology?
As a whole, yes, perhaps younger people are less interested in driving than previous generations have been due to the freedom their phones and computers provide, but, with that said, they’re interested in driving the new types of vehicles and want connectivity, performance and smartness in their vehicles. The industry is changing to cater to their lifestyle needs. For some, arguably, yes, 4G is more important to them than a V8, yet they still will need a vehicle as they progress through life. They want those amenities and convenience features and systems in their vehicles. Even though fewer young people may be traditional automotive performance enthusiasts, the market will continue to increase because people still will find driving is one of the best ways to actually have some freedom
What can be done in terms of business models to ensure that people can afford the rising prices of cars
Connected vehicles must connect with consumers’ lifestyles and experiences. If the cost of advanced vehicle technologies and systems goes past the demand, even though it’s something they want but can’t afford, they won’t put them in their vehicles. You may see more leasing of services, or even bundling the service with the vehicle. Perhaps you sign up for a service and the vehicle and the service provider work together to get you the car or truck that fits with your lifestyle and needs.
You want to take the same systems that you have on your phone and integrate those with your car, so if you already have the service with your phone, why can’t you take that into your vehicle? We’re just not there yet in terms of open systems, interoperability and systems integration. For example, let’s say your phone works with your particular Ford, GM, Chrysler, Hyundai or Toyota and you want to make sure that it will work in another brand’s vehicle when you rent a car. We’ll see more of that as platforms and architectures evolve.
Cars, phones and computers have changed our lives and that order or priority has changed. 20-30 years ago the car was the first thing people looked at for freedom and motivated them to get their driver’s licence. To some the phone or the computer comes first, but, a vehicle is still part of that lifestyle that has to fit in.
Martin Kahl is the Editor of Automotive World
