A strong preference for vehicle emission control and the evolving regulatory landscape is propelling the on-board diagnostics (OBD) aftermarket forward.
From personal vehicles to commercial ones, OBD solutions continue to see demand as the expanding auto industry adopts newer technologies to make vehicles more efficient and sustainable. Automotive trends such as connected cars and electric vehicles demand advanced diagnostic tools for managing and controlling high-tech vehicle components.
With expanding opportunities in areas such as telematics, carsharing, and fleet management, the on-board diagnostics aftermarket is projected to hit an annual valuation of US$4 billion by 2026. Nonstop technological innovations and the rising trend of automotive IoT will create a promising outlook for aftermarket players worldwide.
Evolving OBD regulations
On-board diagnostic technologies are fast gaining traction across North America, and especially in the U.S., where a substantial number of vehicles are manufactured and sold each year. With the growing role of OBD in telematics and fleet management, the U.S. OBD aftermarket is anticipated to thrive over the next few years. Supportive regulatory scenarios promoting the need for emission control solutions will create tremendous opportunities for providers.
OBD requirements were first introduced in the U.S. back in the 1990s. Today, they apply to all light- and heavy-duty vehicles under the federal EPA requirements. In July, the California Air Resources Board (CARB) members had unanimously approved amendments to the OBD regulations for light-, medium-, and heavy-duty vehicles.
Reportedly, the new regulations will require more data to be stored by an OBD system, benefiting vehicle owners by ensuring that malfunctions are promptly repaired. CARB plans to update the standardization requirements for OBD systems to help address the limitations of existing solutions that can eventually lead to improved real-time diagnostic performance.
User-based insurance (UBI) is also emerging as a key area of application for OBD tools to mitigate risk. In March, fleet management software provider Azuga had rolled out the SafetyIQ platform which uses AI and machine learning to analyze vehicle telematics data to lower insurance costs, reduce the number of claims filed, and reduce risk. The platform also analyzes driver behaviour, commercial vehicle performance, and risky events, helping both fleets and insurance providers mitigate risk.
Continuous technological and collaborative efforts by aftermarket players will benefit the OBD aftermarket significantly. Upsurge in the adoption of carsharing and UBI services is likely to be a major trend supporting the industry. It is estimated that global UBI market size will go beyond US$125 billion by 2027, suggesting tremendous scope for OBD tool developers.
How can on-board diagnostics assist in EV maintenance and repair?
Canada, the U.S. and Europe all saw considerable electric vehicle sales last year.
For electric cars, on-board diagnostic applications expand to the need for monitoring of charging efficiency, thermal management and any other factors that may influence the performance of an electric powertrain and overall battery life. Remote diagnostics is seen as a suitable way to assist in vehicle maintenance, since EVs are equipped with an array of IoT components and feature strong connectivity solutions.
Since a majority of mechanics and service providers rely on traditional OBD tools to cater to fossil-fuel based vehicles, OBD aftermarket companies have an opportunity to tap the remote diagnostics domain while the EV trend is gathering pace. A gradual shift towards these innovative scan tools is required to allow service providers to become future-proof. Mobile applications will enable faster access to vehicle data and let mechanics figure out maintenance requirements.
COVID-19 and the future of OBD aftermarket
Last year brought several socio-economic challenges for the automotive sector. While new vehicle sales have surged in some regions, the pandemic has led a vast number of people to hold on to their older vehicles and seek to keep them running for as long as possible. This, in turn, could result in an increased demand for on-board diagnostics services.
CarMD Corporation, a provider of vehicle diagnostic and maintenance information, had recently released its 2021 Vehicle Health Index, an annual overview which highlights engine light-related costs, repairs, and trends. According to the report, the replacement of oxygen sensors, catalytic converters, spark plugs, ignition coils, mass air flow sensors, and fuel caps was identified as the most common repairs in the U.S. during 2020. Each of these problems can impact fuel economy and keep a vehicle from meeting the regulatory standards.
During 2020, a fall in repair costs was also observed due to the increased competition among aftermarket service providers and the rise in DIY automotive repairs. However, given the material shortage and the widespread shutdown-related supply chain problems, could the impact on diagnostic and repair costs last longer?
As the COVID situation alleviates, developments in the auto sector such as EV production, connected vehicle testing, and autonomous vehicle manufacturing are anticipated to gather pace. Despite the slowdown of automotive production and repair activities during the pandemic, the OBD aftermarket is set experience fairly steady growth in the years to come.