Business Model Innovation in the Automotive Aftermarket: Implications of the Transition to Electric Vehicles A case study at an Automotive Manufacturer

Abstract

With the automotive industry’s transition from internal combustion engine (ICE) vehicles to battery electric vehicles (BEVs) several areas of the business model for original equipment manufacturers (OEMs) will change, one of these areas is the aftermarket. Where BEVs incur a drop in demand for current aftermarket products and services, such as spare parts and maintenance, compared with ICE vehicles. This master’s thesis investigates which challenges and opportunities are related to the transition from ICE vehicles to BEVs from an OEM’s perspective. This study used a qualitative single-case study, using semi-structured interviews with employees from an OEM in the midst of such a transition. These interviews make up the data used for analysis. From the interviews, five specific key challenges the OEM is experiencing were presented: adaptation and change in existing aftermarket business model, new challenges and strategy related to the remanufacturing of battery, capturing residual value for end-of-life batteries, logistics challenges related to the increased battery centric business model, and organizational misalignment, along with six opportunities: develop service and maintenance-agreements, provide additional Add-on services, expand accessories offerings, develop over the air diagnostic capabilities, supply chain localization, pivot the subscription offering toward a premium offering From the challenges and opportunities this thesis also presents an updated business model via an academically widely recognized business model framework, the Magic Triangle of Business Model Dimensions. The four dimensions of the Magic Triangle of Business Model Dimensions: Target customers, Value Proposition, Value Chain, and Revenue Model were all covered to together serve as an updated proposal of a business model for the aftermarket. The overall conclusion from the study is that the OEM’s aftermarket division will experience change mainly related to lower revenue and profits. However, there are areas in which the value proposition could be pivoted, providing new and additional products and services using existing resources and capabilities, providing additional and new revenue streams for the aftermarket for OEMs. By tackling the most prominent challenges in the value chain, a more competitive cost structure could be realized to further mitigate the profit impact. Providing a more stable and diversified, albeit lower generating, revenue model.