Over-the-air vehicle updates can help dealership service departments

We've known for a long time that over-the-air updates (OTAs) — software reflashes transmitted directly to connected vehicles — will migrate from luxury to mainstream brands. We just didn't know which mass-market automakers would press the button first.

Now we do: Ford, General Motors and Volkswagen.

In October, Ford announced that starting next year, all of its new or significantly redesigned vehicles will be able to receive OTAs for most onboard computer modules. Initially, Ford will use OTAs solely to update and add features to a vehicle's infotainment system.

Eventually, Ford says, over-the-air reflashes will include fixes that respond to recalls and update critical safety systems. Such repairs now require customers to bring their cars and trucks to a dealership's service department.

GM says it will expand OTAs beyond infotainment systems with the new electrical architecture that debuted this year on the Cadillac CT5 and will appear on the 2020 Chevrolet Corvette. GM says it will be able to deliver OTAs to most of its vehicles by 2023.

Volkswagen's rollout of OTAs starts next year on its electric vehicles.

The arrival of OTAs on mass-market vehicles will disrupt dealership service departments. Fewer owners will return to the shop for reflashes. But several experts I spoke with say OTAs are not a threat, should not be feared and might even boost service revenue if they're managed properly.

Electric vehicle maker Tesla pioneered OTA technology nearly a decade ago. When a Tesla is parked, software can update its powertrain and infotainment system wirelessly, like an update to a cellphone or laptop computer. In April, Tesla extended the driving range of its Model 3 with an OTA.

Luxury brands such as Audi, BMW, Mercedes-Benz and Volvo have used OTAs to update some systems, mostly infotainment. Jaguar Land Rover will offer OTAs next year on several models.

Automakers are moving to OTAs because consumers demand the convenience of having their vehicles updated without needing to schedule a service appointment at a dealership. OTA updates for safety and emissions systems also benefit automakers, says Sam Abuelsamid, principal analyst at Navigant Research.

"As more and more of the systems within the vehicle are dependent on software, it's going to be important to do updates in a timely manner," Abuelsamid told me. "Fiat Chrysler and others have had issues where they send out recall notices and it's up to the customers to come in" to the dealership.

"The [recall] regulations require them to hit a certain percentage of the fleet, and if they don't, they get fined," he said. "With an OTA, any OEM can push out the update and have it done properly, especially if it is a safety-critical system. It's important to get those done quickly."

As OTAs proliferate and owners can avoid the dealership, service departments will have fewer opportunities to inspect vehicles and recommend oil changes, tire rotations and general maintenance work. At the same time, the service drive will be less clogged with customers who show up without an appointment for safety-critical updates that require only new software.

That change, says Lee Harkins, CEO of the fixed ops consultancy M5 Management Systems, will open service bays and free technicians to do higher-profit repair work. But it also will require fixed ops directors to step up their marketing to win service business from independent providers, he adds.

"Dealers shoot themselves in the foot when a customer has to wait two hours for a 10-minute flash," Harkins told me at last month's Fixed Ops Journal Forum in Orlando. "It just reinforces in the customer's mind they were smart for leaving" the dealership.

Don Butler, Ford's executive director of connected vehicles and services, says the automaker is working with Ford dealers to help define how OTAs are carried out. The company has not disclosed OTA plans for Lincoln vehicles.

"From a dealer's perspective, it might seem like something is being taken away," Butler said during a Ford event to introduce Sync 4, the infotainment system in Ford brand vehicles that will enable OTAs. "We've had very good conversations with the Ford dealer council about this.

"We agree that if we satisfy the customer and make the vehicle better over time, we are going to drive more business back to our dealerships, for new-vehicle purchases as well as for general maintenance," Butler says.

Hanno Lorenzl, an automotive principal for the professional services firm EY, predicts that dealership service revenue will initially decrease when vehicles under warranty are updated with OTAs. But he says he believes dealers can more than make up for that loss by targeting service customers with out-of-warranty vehicles that are about 6 years old.

The average vehicle on America's roads is 11.8 years old. Lorenzl says older vehicles give dealership service departments a strong opportunity to book high-value customer-pay repair work.

Still, OTAs offer "reason to be nervous," says Mark Colosimo, vice president of data and analytics at the Detroit consulting firm Urban Science.

"We are dealing with new technologies and new products," Colosimo said at the Fixed Ops Journal Forum.

"In the short term, we've got to plan for them. We've got to know what's coming down the road so we can be ready, especially in fixed operations."