It is widely accepted that the auto insurance industry will be majorly impacted by the autonomous vehicle market, whether in the next decade or later. Another industry affected will be the replacement parts market, according to a new report by KPMG.
Original equipment manufacturers (OEMs) will experience a 48% drop in the collision parts market in the United States. Self-driving vehicles will be the main major contributor to this decline, warns audit and tax advisory firm KPMG. In a new report titled Will autonomous vehicles put the brakes on the collision parts business? KPMG U.S. Manufacturing Institute Automotive Center estimates OEM collision repair will fall to US$2.7 billion by 2030 and US$1.4 billion by 2040.
This will be a significant decrease from the US$5.6 billion industry recorded in 2015. In a statement to accompany the report on Wednesday, KPMG points out that collision parts are a major part of OEM profits (10-20%) despite only accounting for 3% of all revenue.
“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 the technology grows and improves, cars will become more capable and be involved in less collisions. KPMG says the rate of crashes could fall to as much as 80% by 2040.
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.”