Premise
- Vehicle and equipment repair in many industries will open further under pressure from Right-to-Repair (R2R); OEMs should prepare for the inevitable. Even those skeptical of R2R, will benefit from looking closely at mitigating downsides and capitalizing on opportunities of R2R.
- R2R expansion lowers the share of maintenance and repair services performed by OEM-franchised dealers (gradually), as service performed by fleets and independent repair facilities climbs. Wholesale parts trade – increasingly via eCommerce – allows OEMs and their dealer networks to retain a valuable slice of business that could otherwise also be lost. Half a loaf is better than none.
- Responding effectively to R2R will require OEMs to:
- Implement (or upgrade) parts eCommerce with CX (Customer Experience) top of mind – likely partnering with superior technology providers. Automakers will see their dealer networks sell $5B in OEM parts via eCommerce in 2020 via buyer-focused, partner-provided solutions.
- Make EPCs more buyer-friendly via UX/UI improvements, added data sets, functionality and new workflows (including advanced search, predicative analytics, parts availability, integration with service and warranty solutions).
- Select from several paths to R2R compliance – again, technology partners with experience and expertise will be key.
Context / Scope
Right-to-Repair (R2R) is one of several regulatory forces impinging on OEM fixed operations and Service Parts Management (SPM) solutions – others include (1) substances of concern notification, (2) privacy and data ownership and (3) accessibility. R2R – the focus of this post – is the one with greatest impact on OEMs, dealers and their service and parts businesses.
Conceptually, Right-to-Repair (R2R) is about owners of durable products – products worth maintaining and repairing – having options to keep those products running well. In practice, R2R is about rules that OEMs must follow – rules guaranteeing product owners and their preferred ISPs (Independent Service Provider) access to (1) OEMs’ technical parts, service and vehicle data, (2) diagnostic tools and documentation, (3) parts and service tools including software in use at dealerships, (4) telematics – the IoT communications between OEMs and vehicles/equipment they built. R2R also often ban restrictions on genuine OEM parts sales to product owners and ISPs and may facilitate manufacturers and importers of non-OEM – aftermarket (AM) – parts.
Why this is Important
The impact of R2R on parts and service revenues will be huge – shifting billions ($) from some firms to others. Additionally, R2R will impact SPM solutions: experienced, multi-OEM solution providers will prevail as R2R will drive OEMs to solutions that are resource-intensive with high economies of scope and scale. R2R also may result in significant potential unintended consequences in product safety, emissions and warranty – potentially resulting in legal and financial liabilities for OEMs and possibly dealers.
Stakeholder Conflict
Wikipedia frames R2R in terms of legislation:
“The Motor Vehicle Owners’ Right to Repair Act, … would require … manufacturers to provide the same information to independent repair shops as they do for” franchised dealers.
R2R has been contentious for two decades; current North American hot-spots include automotive (including commercial truck), Farm Equipment & Electronics (primarily smartphones). It is the only fixed-operations data/solutions issue raised in the 2020 presidential contest: Senator Warren’s campaign has a Farm Equipment R2R plan.
The premise of R2R is that OEMs use their market-power to block vehicle-owners and Independent Service Providers (ISPs) so as to monopolize service of products that the OEMs build with the intention of boosting new product sales (by making product maintenance and repair more expensive and less convenient) and to sell replacement parts at higher prices. The opponents of R2R push back by pointing out the costs and liabilities for the OEMs and their dealer networks.
R2R is a struggle between key stakeholders which is framed below as a ‘fight card’:
Main Event: Vehicle and Equipment owners against OEMs.
Under-card:
- ISPs against OEM dealer networks
- Aftermarket parts makers, importers, distributors & retailers against OEMs and their dealers
- Aftermarket publishers against limitations on rights to OEM technical parts and service data and restrictions on republishing derivative works
History
“First considered at the federal level in 2001…” in the U.S., no R2R provisions were “… adopted until the Massachusetts legislature enacted Right to Repair … on July 31, 2012. This law was …” followed by a “referendum which appeared on Massachusetts’s statewide ballot …” which passed with overwhelming voter support. Those two laws were reconciled and “signed into law on November 26, 2013. Early in 2014, the Automotive Aftermarket Industry Association, Coalition for Auto Repair Equality, Alliance of Automobile Manufacturers, and the Association for Global Automakers signed a Memorandum of Understanding (MOU) that is based on the Massachusetts law and which would commit the vehicle manufacturers to meet the requirements of the Massachusetts law in all fifty states” according Wikipedia. (R2R started in Europe for automotive with the ‘Block Exemption Regulation’ – ‘BER’ – in 2003.)
“Both the light duty and heavy-duty MOUs state vehicle manufacturers must … provide access to OE-level data to consumers and the aftermarket. This includes access to diagnostic and repair information, at the dealer level for 2002 and newer [light-duty] vehicles or 2010 and newer [heavy-duty] vehicles.” according to Vehicle Service Pros.
Now
In the U.S., automakers have provided online access to libraries of service procedures and related technical repair information often available online without charge. EPCs are often excluded – but, in the U.S. sufficient parts catalog content is provided by automakers for independent publishers to generate all-makes online parts catalogs. (European and some U.S. non-automotive practice is to license the same EPCs used by dealers to ISPs and consumers.)
The R2R struggle is also subject to Intellectual Property law including copyright and patents. However, courts have provided exemptions to copyright protections under the DCMA (Digital Millennium Copyright Act) and DRM (Digital Rights Management). While copyright is proving to be no brake on R2R, patents are protecting some OEM parts. In July 2019 of a Federal Court of Appeals in Automotive Body Parts Association v. Ford Global Technologies, LLC came down firmly on the side of the car manufacturers. Finally, ‘hacking’ of vehicle or equipment firmware or electronics to defeat environmental or safety regulations – whether intentionally or accidentally – is prohibited and often accessibility is limited.
New Front
R2R proponents have won on (1) access to parts and service information and (2) diagnostic tools – at least in the U.S. and Europe for the automotive industry. The only exception is a partial victory for opponents on patenting some parts. Now a new front has opened: telematics. The Massachusetts Right to Repair Coalition announced this December “Sufficient signatures to ensure an initiative petition to enact … [an] update to the …Right to Repair law reaches the 2020 ballot .. which will “give car owners access only to the diagnostic and repair data generated by their car, and they could opt to provide access to any dealer, repair shop, or automaker that they choose during the lifetime of their car.”
Specifically: all telematics vehicle information for cars and trucks starting in model year 2022 must be available online on a real-time basis to vehicle-owners and the shops they designate. Earlier vehicles continue to be covered by the first round of R2R. This second round of R2R for automotive and commercial trucks presents significant new challenges.
Why this is important
Smart vehicles detect and even predict failures, immediately transmitting sensor data to the OEM wirelessly (“telematics”). OEMs can diagnosis vehicles via telematics data and direct drivers to franchised dealerships. A McKinsey study reveals that approximately 60 percent of drivers would follow their vehicle’s repair-destination recommendation. OEMs may also call offering to schedule an appointment for the necessary service work at an authorized facility. ISPs want vehicle telematics to go to only them – or at least to have simultaneous access.
Concerns
Opponents argue that this R2R phase could allow aftermarket parts manufacturers to improperly access patented information to reverse-engineer replacement parts and note that none of this data is needed to repair vehicles. Also, of concern: warranty and safety problems if OEMs could be blocked from accessing vehicle telematics data.
Conclusions
R2R is inevitable – the timing and rules will vary by industry and country. Parts eCommerce will help OEMs and their dealer networks partially mitigate shifts of service away from franchised dealerships caused by R2R. OEMs will find that his complex, broad and enormous sea-change in their parts and service business is best handled by partnering with solution providers offering multi-OEM, suites of integrated parts and service solution platforms – due in part to high economies of scope and scale.