1-1 Repair in the automotive sector – Fair value repair of vehicle components in the vechicle segment II+

Author:
Patrick Lasslop
Date:
12/03/2021

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Executive Summary
In the past, the success of car manufacturers was measured largely by the sales of new cars. However, the topic of „mobility“ has changed significantly in recent years and owning one’s own vehicle is increasingly moving into the background, especially for young people. Furthermore, during the financial crisis and the accompanying decline in new vehicle sales, it became apparent that the aftersales market generates stable profits and thus makes a major contribution to the sustained success of the automotive industry.

Spare parts are an important component for every Original Equipment Manufacturer (OEM) and it is necessary to constantly monitor buyer behavior and derive new offers in the spare parts segment from this. With the expiration of the legal warranty period and the goodwill period on the part of the automobile manufacturer, the number of price-sensitive customers increases massively. Constant adaptation to market needs to maintain customer retention is therefore essential for the automotive industry in this age segment.

The reman offering (remanufacturing of defective components) of OEMs, which is already established in some cases, is a first step toward expanding the portfolio. The focus here is particularly on mechanical components that fail due to wear and are very price intensive.

However, due to the increasing number of electronic components in vehicles, it is essential to take a closer look at the topic of component repair. High acquisition costs for control units (ABS, window regulator module, etc.) often induce the end customer to purchase used components or to resort to replicas from the Far East to ensure the continued mobility of the vehicle. Particularly in the case of a safety-relevant component, this step is associated with a high risk for the customer and is not recommended at any time. In the event of an accident, this circumstance can even lead to a loss of reputation for the OEM.

A repair certified by the OEM offers the possibility of repairing components removed from the vehicle at the series supplier / selected specialist and then reinstalling them for the end customer. The advantages for a customer are mainly a cost saving of about 50% due to the lower purchase price and unnecessary coding, as well as an additional warranty of two years on the repair work performed.

In addition to the benefits for the end customer, the issues of security of supply and CO2 savings are playing an increasingly important role for OEMs. Due to discontinuations of components (chips, relays or capacitors) or insolvencies of the original equipment suppliers (OES), spare parts backlogs at the end customers are increasing. These supply bottlenecks can lead to vehicle downtimes, which automotive manufacturers need to avoid. Particularly in order to ensure long-term customer loyalty. This customer loyalty can be further strengthened by a conscious and sustainable approach. This is reflected in the OEMs‘ claim to be a CO2-neutral company in the future.

The future expansion of repair into a platform business offers a sustainable and value-creating interaction between OEM and repair service provider and can make a significant contribution to achieving the targeted goals in aftersales.

What is a 1-1 repair?
The existing range of spare parts for older vehicles in aftersales is largely manageable. New parts are often still the only solution option in the event of a defect. With the introduction of cheaper remanufactured parts, the retention of end customers of older vehicles to visit an authorized workshop has increased. However, the Reman portfolio currently primarily targets classic mechanical components such as turbochargers, transmissions, or starters/generators.

With the increasing electrification as well as networking of vehicles, there is a huge portfolio of electronic components. This gap to a new part can now be closed by repairing components in line with their current value. The 1-1 repair makes it possible to have the component removed from the customer’s vehicle repaired by a series supplier and/or selected specialist and then reinstalled in the vehicle. This cost-effective solution is particularly interesting for the vehicle segment II+ (4 years and older), since the price of a new original part in most cases exceeds the value of the vehicle and thus replacement is not worthwhile for the customer.

Figure 1: Aftersales offers

Acceptance by the end customer is crucial to the success of this offering. This acceptance is created primarily through the pricing of the repair solution. A saving of up to 33% of the costs compared to a replacement part is possible if this is available. This can be realized primarily through the component-specific repair of a component, savings in coding costs and eliminated storage costs. The general warranty of two years on the repair work carried out gives the customer the security of being able to turn to the dealership if problems arise.

In order to counteract the migration of customers to the independent aftermarket (IAM), component repair is a target-oriented extension to support the expansion of an OEM’s aftersales portfolio. At the same time, component repair can also cushion supply bottlenecks but not completely prevent them.

Repair process in detail
A repair of electronic components requires a specific diagnosis of the cause of the fault. To this end, the implementation of the repairable fault codes at the authorized repair shops is an important criterion, so that the possibility of a repair is already pointed out during the diagnosis.

The development of a standardized procedure for the repair of components is usually implemented by a repair service provider and secured and documented by the OEM by means of process acceptance.

Figure 2: 1-1 Repair process

To ensure the functionality of the component after the repair, in some cases an additional transmission of further vehicle components to the repair store is required. Examples include the radio remote control and the control unit for the immobilizer.

The component sent in by the authorized dealer to a certified repair service provider is subjected to a second fault diagnosis at the start of the repair. In this step, in addition to the fault code determined by the authorized workshop, a more detailed damage picture can be determined.

Following the analysis, the test technician repairs the detected defect using defined work steps. The repair is carried out in compliance with the soldering guidelines (IPC-7711C/7721C DE) applicable in the automotive sector for work on electronic components. All necessary repair steps and the components to be replaced are clearly defined and quality assured. The newly soldered-in components must meet the specifications of the series specification book or a separate release from the OEM.

To ensure the complete functionality of the repaired component, a so-called end-of-line (EOL) test is necessary. This is based on the requirements for a new part and ensures the fault-free function of the component. By comparing the parameters of a new part with those of the repaired component, OEM-approved quality can be achieved.

Advantages of the 1-1 repair
In addition to the benefits for the end customer, the advantages for the repair service provider and dealer also play an important role in realizing the acceptance and expansion of the offer. In the following, the advantages for the OEM are examined and explained in more detail. Four essential elements can be derived by implementing a repair solution in the OEM’s aftersales business.

Competitive products: By repairing various high-priced vehicle components in line with their current value, it is possible to offer competitive products on the open market.

CO2 savings: In contrast to the production of new parts, the repair of components enables not only costs but also CO2 emissions to be reduced. More than 50% of kilograms of CO2 equivalents can be saved per repaired component.

Ensuring parts supply: The effects of part discontinuations and supply shortages can be mitigated by 1-1 repair. Here it is possible to avoid expenditures for component redevelopment (redesign) and storage costs.

Customer loyalty: An attractive product portfolio offers OEMs the possibility of retaining customers for longer and generating potential cross-selling effects.

Figure 3: 1-1 Repair elements

The security of supply of components has played an increasingly important role for automotive manufacturers in recent years. The increasing shortage of semiconductors for the automotive sector poses a major challenge to all OEMs. The main reasons for this are the increasing technical equipment of vehicles, the growing pressure to innovate and the rising prices of components (chips, relays or capacitors) due to a shortage of these on the world market. The Corona pandemic reinforces this effect and shows the extent of the lack of alternatives. With no quick fix in sight, repair can play an important role in securing supply and getting older vehicles back on the road.

Expanding the repair solution into a platform business creates the possibility of an overarching level for selling services of all kinds. Expanding this sales concept makes it possible to shape the future of aftersales for yourself.

Current market situation
Repairing valuable components not only makes economic sense, but also conserves resources. More and more companies are discovering the field of repair, which was completely unknown a few years ago, for themselves. The right use of pricing and marketing measures is necessary to win back customers and to limit the purchases of untested used parts via Ebay or the like.

Predominantly independent repair service providers (e.g. Glaubitz GmbH & Co. KG as well as ACtronics GmbH) and some OES (Robert Bosch GmbH and Continental AG) have specialized in the repair of individual vehicle components in recent years. The range of services offered by automotive manufacturers is still limited and is expected to increase over the next few years.

The repair of electronic components from various vehicle manufacturers is the main business of independent repair service providers. Their product portfolio often includes the repair of control units, instrument clusters and modules. The environment of these service providers has nothing to do with the term „backyard workshop“. Rather, the equipment of the stores includes professional clean rooms, testing equipment and special tools that fully meet the requirements of automotive manufacturers. Specially developed end-of-line tests as well as measuring equipment safeguard the repair and provide an insight into the vast know-how of the individual companies. The high requirements in the field of component repair are also reflected in the service providers‘ certifications (ISO and DIN).

Figure 4: Independent repair service providers and OES

As one of the largest OES, Bosch has already established a repair offering for some of its own products. A major advantage in the repair solution is the use of synergies from already established reman processes. The high know-how of manufacturing processes in series, methods to open a glued housing or features about original components (relay, capacitor, etc.) are important aspects for the implementation of the repair.

In the meantime, well-known premium car manufacturers are also venturing into the very extensive field of repair. Most of these OEMs are now establishing the repair of components in their aftersales program in addition to the existing spare parts business with new parts and the reman parts that have been known for some years. Since 1-1 repair is still in its infancy at the automotive manufacturers and the necessary system-side and logistical adjustments cannot be made overnight, a non-negligible degree of adaptation is required.

Outlook for the future
In addition to the repair of electronic and mechanical components, 1-1 repair also offers automobile manufacturers the opportunity to implement new repair concepts. Various remanufacturing projects are conceivable and are described below.

Figure 5: Expansion of the platform business

Establishing a platform business to expand the product portfolio is not only future-oriented, but also an important instrument for increasing customer loyalty of a vehicle brand. This business model deals with the reciprocal relationship between repair service providers and the OEM and the goal of complete transparency in repair solution offerings. The following features characterize the platform solution concept:

  • Value-added interaction between non-company providers and the vehicle manufacturer offers the possibility of rapid identification of the cause of the fault and its elimination.
  • Creation of an infrastructure for the ordering/handling process and monetary flows after repair completion.
  • Creation of network effects through a conventional business extension of the supplier logic.

The goal of such an aftersales solution is the continuous expansion of repair concepts and the empowerment of new suppliers. Intelligent algorithms use the broad data base to create an optimal matching of platform participants. Repair is performed outside the platform by a variety of service providers.

A platform becomes more attractive the more participants it can have. An infrastructure that has already been created can thus be easily scaled. This approach allows network effects to emerge. The refinancing of costs for the OEM is based on the exponential growth of the aftersales portfolios.

The success of a new solution is always dependent on customer acceptance. The advantages listed are promising and, with the right use of pricing and marketing measures, form an important new product line for shaping the aftersales of the future.

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