Wednesday, March 22, 2023 | Spring 2023
BY FRANK TERLEP
WE HAVE ALL HEARD, "IF YOU DON'T PLAY THE LOTTERY, YOU CAN'T WIN." If repair shops don't get into the ADAS services, calibration, and validation game soon, they may miss the opportunity to compete — or even win — in one of the most significant business opportunities the automotive industry has seen in over 20 years!
As many of you may know, ADAS (Advanced Driver Assist Systems) technologies have been installed on vehicles for many years. In 2000, some Cadillac Devilles had "Night Vision" while a few Toyota models had "Dynamic Laser Cruise Control," better known as Adaptive Cruise Control. Fast forward to today and, depending on who you talk to, it is estimated that there are more than 100 million vehicles in operation (VIO) with ADAS technology.
Because of agreements between the OE manufacturers and the government, more than 98% of vehicles produced from 2022 on will include some ADAS technology. The industry will see 14 million to 17 million new ADAS-equipped vehicles sold to consumers annually,depending on recent car sales. This means by 2026, there will be 140 million to 150 million ADAS-equipped vehicles on the road.
So, what does this mean for the automotive aftermarket, precisely auto collision, glass, and repair shops? Based on our calculations, by 2026, there will be more than seven million ADAS calibration opportunities worth more than $2.1 billion in revenue. Present ADAS service and calibration business models offer 60% gross margins on annual sales of $500K or more.
While the ADAS service, calibration, and validation opportunity is growing, the industry has several challenges to overcome, including a properly designed and equipped facility. To properly perform a vast majority of static calibrations, facilities need at least a 50-by-50-ft space with a flat floor, controlled lighting, and proper floor and wall painting.
In addition to proper design, a facility will need special equipment and tools. To perform static calibrations, a business will need targeting systems and accessories plus OEM-approved diagnostic tools or access to these tools. They should also have an alignment system because proper ADAS sensor operation depends on a properly aligned vehicle.
Detailed documentation is another critical component of performing ADAS services, calibrations, and validations. Because ADAS technologies directly affect acceleration, braking, and steering, every aspect of the process should be documented as if the business were required to be in court tomorrow.
What should the documentation include? What are ADAS systems on the vehicle? What services were performed? OE repair procedures support the service and how it was completed. Pre- and post-scan reports, an alignment report, a post-calibration results report, and a post-ADAS safety system validation test drive report all validate that the vehicle's ADAS systems operated as the OE manufacturer states they should.
Because of these requirements, industry data tells us more than 80% of existing auto collision and glass facilities do not have the necessary space, facility design and equipment to perform ADAS calibrations.
So, what can a shop do today to take advantage of this HUGE opportunity?
- First and foremost, a business must decide if they want to be in the ADAS service, calibration, and validation business.
- Once a business decides they want to compete in this segment, they need to evaluate its existing business, the market they compete in, the VIO (vehicles in operation), and any potential competition. This process is typically called a SWOT (strengths, weaknesses, opportunities, and threats) analysis.
- Since most businesses are not designed or equipped to operate an ADAS service, calibration, and validation business, the next step is to create a business plan and budget that will likely include a facility redesign or a new facility, new calibration and alignment equipment, aftermarket and OEM diagnostic tools, new personnel and/or training, an ADAS service, calibration, and validation business operating, management, and documentation software platform, and more. Shops should expect to spend $150K to $250K to open a properly designed and equipped ADAS service, calibration, and validation business.
- Finally, before making a final decision, I strongly recommend finding and speaking with other existing ADAS service, calibration, and validation business owners. They have experienced most of the highs and lows a new business owner will encounter.
While operating a successful ADAS service, calibration and validation business requires a different facility, equipment, personnel and training, it also requires the same business basics: excellent customer service, experiences, and communication, documented processes, well-trained employees, detailed sales, marketing, operational and financial management, good management, documentation and validation software solution, and great support from your vendor partners.
Frank started his automotive career as a student at SIU Automotive College in Carbondale, IL. During school, he worked as a brake and alignment technician. Presently, Frank is a serial entrepreneur that recently sold his last company Auto Techcelerators to OPUS IVS, where he is now the Vice-President of ADAS Services.