“AI will lead to increased interest in digitalization of all processes, including in the IAM”

Alexander Gruzdev: The US automotive sector is still expected to continue its recovery, with light vehicle and light truck sales going up, and they will most likely reach pre-pandemic levels. Dealers are generally doing fine. But this year, one major digitalization event stunned the sector: in June 2024, CDK Global was hit by back-to-back cyberattacks by the BlackSuit hacker group, which led to a shutdown of their entire network! This outage affected over 15,000 auto dealers across North America. During this downtime, many dealers had to revert to manual processes, such as using pens and paper. The restoration took several days to retrieve essential functions and even longer to get back to full working order. The event raised additional concerns about cybersecurity and slowed down the process of digitalization. 
The independent aftermarket, which wasn’t affected by the attack, is still willing to continue digitization processes further. A growing but aging car parc is a plus for the IAM: the older the parc is, the more technical repairs it needs. However, people are still doing their own maintenance - in fact, in increasing numbers. Inflation and the economic climate are affecting motorists and prompting them to save money on repairs. As a result, parts demand is moving to marketplaces and online stores, which poses additional challenges to traditional retailers and workshops.

A. G.: With the new administration, we will likely see the discontinuation of the government’s $7,500 tax relief programme, and that will lead in turn to a short-term slowdown in electric vehicle sales. However, Elon Mask is very close to this administration, so I don’t think he will “shoot himself in the foot” and electrification should still continue in the longer term. A lot of investment has already been made, so sales of EVs will continue to grow. It must be said, however, that geopolitical tensions worldwide are leading to prohibitive energy costs that further complicate the situation. Many world leaders have realised that to switch to EVs and the demand for electricity that comes with them, they need to increase the number of power plants. In addition, the recent promises from Donald Trump to turn the US into a leading crypto country will compound the energy consumption issue by creating additional competition. In short, EVs, crypto and AI all will significantly increase energy demand, and the US is behind China in this perspective. In recent years, China has been heavily investing in various power supply solutions such as solar, wind and nuclear power plants. The US has to do the same to keep those new industries growing. 

A. G.: Overall for the whole industry, the key challenge is competition with Chinese manufacturers of both EVs and ICE vehicles. The Chinese market is suffering from insufficient local demand – they can produce more than they can sell locally, so Chinese manufacturers are exporting all over the world. Aided by government protection and subsidiaries, Chinese manufacturers can offer lower prices, even with logistical costs added on. We can see this in Mexico, where there have always been the Big Five manufacturers dominating the rest of the pack. In the space of just two years, the situation has changed quite a lot, and now Chinese carmakers are playing a very important role on the Mexican market. It’s the same story in the Russian market, where Chinese manufacturers are now accounting for a 50% market share in new car sales.

A. G.: A labour shortage! The lack of skilled technicians continues to be a significant issue, impacting service quality and customer satisfaction. The thing to remember is that being an automotive technician is a good job, and the rise of AI and all other digital tools is unlikely to affect this part of the industry much. Manpower is still in great demand. But this means that salaries must be increased to compete with other industries, with the knock-on effect of higher labour costs and therefore higher overall prices charged to the customer. The other challenge is continuing supply chain tensions, and the new administration won’t solve them if, as promised, it introduces tariffs. Increasing geopolitical tensions with China also will call for different sourcing strategies.

A. G.: I think it is better to talk about a four-year forecast, given the new administration! Competition from China will affect the market from all angles. A trade war with increasing tariffs will start, and we will likely see some issues with component supply. That will lead to increased costs, for repackaging or local manufactured parts. All the media hype about AI will lead to increased interest in the digitalization of all processes, including in the IAM. We will probably see industry specific AI tools that should help with planning, customer follow up, etc. But it won’t help alleviate our manpower shortage. The increasing complexity of vehicles, especially with electronic components and the growth of EVs, will create a new generation of technicians who need a tablet/laptop and programming skills, instead of a wrench. It is this generation that will help improve the overall image of the automotive profession and convince new talent to join their ranks.

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