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Autonomous vehicles will shrink U.S. auto OEM collision repair revenue by 48% by 2030: KPMG


May 18, 2017   by Canadian Underwriter


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Original equipment manufacturers (OEMs) in the United States will see a 48% dent in their lucrative collision parts business as a result of self-driving cars, a new report from audit, tax and advisory firm KPMG.

The report Will autonomous vehicles put the brakes on the collision parts business? was released by the KPMG U.S. Manufacturing Institute Automotive Center on Wednesday. It projects that OEM collision repair revenue, which was US$5.6 billion in 2015 could drop to US$2.7 billion by 2030 and dwindle to US$1.4 billion by 2040.

KPMG said in a statement that despite accounting for less than 3% of OEM revenue, collision parts make up, on average, 10-20% of operating profits in the U.S. Based on the revenue impact, OEMs can expect a 4-9% reduction in operating profits by 2030 and a reduction of 13% by 2040. “Furthermore, car owners typically have a high willingness to pay for collision parts (compared to maintenance parts) thanks to insurance coverage,” the report said.

“OEMs have already begun to deal with the design and engineering challenges related to autonomous vehicles,” Gary Silberg, KPMG’s U.S. Automotive leader, said in the statement. “And while their focus may be on bringing the first self-driving cars to market, OEMs need to contend with the decline in demand for collision parts that these safer, autonomous vehicles are expected to bring by reducing driver error and lowering accident rates.”

According to KPMG, “most OEMs expect to be selling fully self-driving vehicles between 2020 and 2025, if not sooner.” As advanced driver assistance systems (ADAS) become more prevalent in vehicles, KPMG projects crash rates could decline by more than 60% by 2030 and 80% by 2040, which in turn could result in a 50% decline in the overall collision repair market within the next 15 years.

“OEMs need to implement aggressive plans to right-size collision parts cost structures and identify new revenue streams,” said Tom Mayor, head of Strategy for KPMG’s Industrial Manufacturing practice, in the statement. “This will keep their shareholders and dealer partners whole, while maximizing showroom floor support for ADAS and autonomy.”

KPMG suggests that OEMs start evaluating and taking preemptive actions to mitigate risk and align operations in the new reality that autonomous vehicles will bring. The firm recommends OEMs: understand and quantify the risk to their own business, as well as identify suppliers, dealers and regions that may also be subject to substantial risk; analyze and anticipate the declines in the types of collisions (rear end, blind spot, etc.) and their impact on the business as autonomous vehicle technologies are introduced; and develop a plan to right size their collision parts business and variabilize costs efficiently in response to a shrinking market.