Viewpoint on AV Ecosystem
Industry players and markets

Viewpoint on AV Ecosystem

Sunday, 28 July 2019

“Remanufacturers may experience a once-in-a-century opportunity to become a major force in the AV ecosystem,” says Ron Giuntini, Founder of G35 Software.

The current worldwide annual production value of light vehicles (LVs) is estimated at more than $2 trillion, which is joining an installed base whose replacement value is thought to be more than $20 trillion. With an estimated $30 billion annual global spend on remanufactured parts, the reman industry remains a relatively ‘small’ player.

The current business model of original equipment manufacturers (OEMs) has remained basically the same for over 100 years: build for efficiency and quality, sell to dealers and support the dealers. But with the introduction of autonomous vehicles (AVs), the OEMs will require a new business model. Why? Because AVs will most likely never be owned by the passenger, but by enterprises that will provide subscription-based, on-demand mobility services employing large fleets of AVs.

If so, AVs will be employed eight to 12 hours per day to optimise return on investment, versus that of the current private-ownership legacy LV employment of one to two hours per day. As a result, either the subscription-based providers will be required to replace assets every one or two years - or a new AV design will be created with a longer economic and operational life. This is where remanufacturing comes into play.

It is quite apparent that by remanufacturing an entire $150,000, designed-for-disassembly/modifiable AV (that would enter a a reman process two or three times during its five-to-six-year life) the asset cost per passenger mile would be less than 50% of a subscription service business model employing a legacy LV.

In lieu of manufacturing new AVs to meet demand, supply would be replaced by remanufactured AV asset exchange pools, with reman spend equivalent to 50-60% of the cost of building a new LV. Given my estimates, the reman community would experience a five- to ten-fold increase in demand for their services. One canary-in-the-coal-mine that suggests others foresee the same future is the acquisition of reman enterprises by private equity firms.

So, all enterprises and associations engaged in the LV remanufacturing community should carefully follow the AV sector, and especially how OEMs will be driven by the ultimate buyers of AVs - the subscriber service providers. The manufacturing world may be unrecognisable in the next 30 years and remanufacturers could experience a once-in-a-century opportunity to become a major force in the AV ecosystem.

Ron Giuntini,
Founder of G35 Software


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