How OEMs Can Avoid Costly Recalls with Smartphone Technology

November 3, 2015  |  By Michael O'Shea  |       

oems-save-from-recalls-with-smartphone-technology
Consumers are welcoming connected car technology for the added entertainment value, better mapping, and other features that connected car capabilities bring to the driving experience. However, OEMs have even more to gain from connected car systems, especially in the event of a recall. With the ability to gain direct remote access to cars, OEMs can maintain systems software and fix many problems remotely, thus eliminating the cost of an expensive recall. The question today is how to provide that access, through an on-board modem or via smartphone?

In 2014, General Motors spent an epic $4.1 billion on automotive recalls. The expenses include the cost of repairs, damages paid to consumers, and expenses managing and recording recall repairs. General Motors recalled 30.4 million cars and trucks in 2014, most of them for a flawed ignition switch that is connected to at least 51 deaths. The biggest expense was for $2.8 billion in repair costs, followed by another $400 million paid to victims of faulty systems. The company also took an $874 million charge against the cost of future recalls.

Toyota and Nissan recently issued new recalls and are the latest OEM to have to issue a recall for its airbags from Takata, citing moisture affecting its function. This is going to cost Toyota and the over 10 automakers and their shareholders a considerable sum to manage recall and repairs, although if these recalled vehicles were equipped with in-car modems for remote diagnostics and communications, they could have saved a fortune in recall costs.

Recall Economics

Consider the economics of orchestrating a recall of the magnitude that Takata is facing. With over 25 million recalled vehicles from over 10 automakers, they have taken a $247 million net loss this past year. Then there is the cost of having to notify all the vehicle owners at an estimated $2.00 each for handling and postage. Those costs alone can add up to big numbers over time.

With connected car technology, the recall notification process could be completely automated. Any car affected by a recall could be notified remotely, so drivers get a message through their infotainment system and on their smartphone, with reminders until the repair is made and certified. That’s an immediate savings of $22 million. If the defect can be resolved via a software update, it can be handled remotely. There is no need to even bring the car into a dealer, and the cost of the recall is nominal, the cost of developing and wirelessly distributing a software patch.

Over the air (OTA) software updates are already being used by Tesla for vehicle operating software. BMW and Hyundai are offering with OTA mapping systems, and Toyota and other OEMs are experimenting with OTA entertainment systems. As more cars become connected, more OEMs are going to find ways to issue software updates remotely.

Hurray for OTA

Unfortunately, we are still far from equipping every car on the road with an on-board modem. Even though we have had technology such as OnStar for some time, still relatively few cars feature two-way communication on board.If you were to equip every car with a modem, the question becomes, who is going to pay for connectivity?

Most modems are installed to manage safety and security first. They provide telematics, crash monitoring, and other features directly related to safety. The costs of the additional bandwidth required for streaming video, music downloads or OTA could be prohibitive.

Smartphones to the Rescue

Smartphones offer an ideal hybrid approach. Consumers are already using their smartphones to stream entertainment content in their cars. The smartphone hands data downloads for applications such as streaming music, and a Bluetooth handshake connects the smartphone to the car’s infotainment system. The same strategy could easily be applied to vehicle-critical software updates.

Rather than forcing car owners to take their car to the nearest dealer for a recall update, they can use their smartphone as an interface to load new software to their connected car. The advantage of using the smartphone is that it comes with its own data plan and access system, allowing all vehicles, including the majority of vehicles without an embedded modem, to be updated. The smartphone can provide the two-way communication to transmit and verify any firmware updates.

As connected car technology continues to evolve, connectivity is going to continue to come in different forms. OEMs are going to continue to look for new and innovative strategies for connected car communications that are effective, safe, and inexpensive. Leveraging the user’s personal phone for OTA is an important part of that strategy.

How else can OEMs avoid costly recalls with smartphone technology?

Topics: Connected Car - Technology

Michael O'Shea

Michael O’Shea is the Founder and CEO of Abalta Technologies. He is responsible for all aspects of executive management of Abalta and a direct participant in many client engagements, particularly in management advisory projects.

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