Tires and glass emerge as dominant consumables of the EV era oving from internal combustion to electric power does more than reduce tailpipe emissions: it will fundamentally shatter today’s auto maintenance and service sector
The decline is mathematical. With one-fifth the number of powertrain parts and an almost total elimination of oil (a), the typical automotive dealer will suffer 35% declines in maintenance and service revenue, or roughly $1,300, for an EV versus an internal combustion engine vehicle over a five-year period (b).
But this disruption is not even. Two of the top three maintenance items — oil changes and brake service (24% and 5%, respectively, of all maintenance transactions in the U.S. market) — are reduced or eliminated entirely by the move to EVs (c).
Why are brakes impacted? EVs often use a process called regenerative braking, which slows vehicles down while also saving energy. The reduced wear on pads and rotors is striking: some Toyota Priuses are still operating on their first set of brake pads after more than 100,000 miles of use, whereas you’d normally assume pads would be replaced after about 30,000 miles.
EVs eat tires faster
One of the beneficiaries of electrification will be tires, with multiple positive tailwinds: cars are driven more each year. Vehicle Miles Traveled (VMT) is 3.25 trillion annually in the U.S. and is growing at about 1% year over year. Because consumers are keeping cars longer (11.1 years on average), this results in more replacement tires consumed throughout the ownership period (d,e).
The other significant growth lever for tires is the secondary effect of the powertrain: EVs consume tires at a much higher rate than internal combustion vehicles. They’re heavier and create near-instant torque off the line. You don’t need to hunt for long to find a Tesla owner who’s replaced their tires after a mere 10,000 miles. One of our portfolio companies, Zohr, an on-demand tire replacement service, sees its EV customers coming back for tire replacements 30% more frequently than traditional internal combustion vehicle owners. While EVs have less of a need to visit a service shop, they’ll need tire replacement more often.
Tires are also a key line of defense in maintaining high fleet uptimes. Aperia Technologies, another of our tire investments, can auto-inflate commercial tires from inside the wheel itself. Keeping a tire optimally inflated reduces heating and flexing in the sidewall, a primary cause for blowouts. This prevents severe accidents, expensive road service calls ($600+) and fines for late delivery.
For opportunities in the tire market, we are keeping an eye on convenience and efficiency. But we’re also interested in how that impacts the tire distribution ecosystem. This could translate into a service business (like Zohr, or Costco) white labeling its own tires, offering them on a subscription model or offering a guaranteed uptime policy. We believe this will take hold in both commercial and passenger vehicles, although possibly on different time horizons.
Glass and visibility
The core growth drivers of the glass category are similar to tires (increased VMT and vehicle age). We include all visibility products (windshield glass, wipers, cleaning fluids, headlights and bulbs) in this grouping, as they are increasingly tied to on-board technology like sensors and cameras. As more vehicles add sensors for advanced driver assistance features (ADAS), they won’t operate unless they’re kept clean. One of our companies, Seeva, was designed around visibility and sensor cleaning as a core enabling technology of tomorrow’s vehicles.
Electric vehicles also have more demanding cooling needs. They need to be incredibly efficient when cooling the cabin, careful not to impact vehicle range. The first line of defense against these thermal losses are more efficient glass structures and materials. Coupled with the increasing trend of larger windshields and moonroofs — note Tesla’s Model X panoramic glass costs $2,300 to replace — we’re entering an era of big, beautiful and expensive visibility.
Visibility is one of the most exciting areas for innovation and investment. Frankly, it’s always been a profit center for suppliers like Valeo (which makes things like wiper arms, blades and motors) and chemical companies that sell consumables like washer fluids. Technology is likely to drive down the profits of those traditional areas — consider how a thin film or hard coating might mean fewer sprays of fluid and fewer passes of a wiper blade — but will increase overall the total amount of profit potential across the whole vehicle.
This is due to the far greater surface area we now consider to be the domain of visibility — what used to only mean the windshield and headlights will soon mean dozens of sensors and surfaces that require clear, machine-verified visibility.
The automobile business is highly interdependent, and no more so is this felt than the $500 billion after-service market (f). We expect more big investments across tires and visibility in the years to come. And you can bet that entrepreneurs who previously found fortune in quick lube shops will shift to tires and glass as the market moves beneath them.
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