MAPConnected Q/A: Harnessing EVs to unlock service revenue streams

Last month, warranty leaders and industry innovators gathered in Detroit for the Vehicle Service & Warranty Lifecycle Summit by MAPConnected. During the summit, the "Harnessing EVs and Digital Innovation to Unlock New Service Revenue Streams" panel explored how connected vehicle data and digital services can generate ongoing revenue opportunities for electric vehicles (EVs).

Panelists from Circuitry.ai, Xalt, and Mentor shared their insights and addressed audience questions.

Here are our answers to key questions about AI's impact on warranty processes and revenue streams.

Harnessing EVs and Digital Innovation to Unlock Service Revenue Streams Q&A

1. How do you see EVs changing the revenue models for service contracts or any data-based services? 

With their autonomous driving capabilities, increased software content, and connected features, EVs are increasingly viewed as tech products. This shift opens up new opportunities to adopt revenue models inspired by leading tech companies like Apple, which generates $85 billion annually in service revenues, surpassing the $17 billion generated collectively by automotive companies in service contracts, according to Warranty Week.

Service revenues for EVs can be categorized into five main types:

• Financial models: Leasing or subscription-based ownership alternatives.
• Risk protection plans: Break-fix extended warranties or maintenance contracts.
• Usage-based subscriptions: Pay-per-use services like autonomous driving features.
• Adjacent services: Offerings tied to the product, such as mobility or energy solutions.
• Platform models: Connecting consumers with suppliers, creating ecosystems.

EVs significantly reshape these revenue streams. With fewer mechanical components, EVs can integrate sensors to monitor performance and predict maintenance needs, enabling outcome-based services focused on specific results, such as maximizing vehicle uptime.

Additionally, EVs' ability to support over-the-air (OTA) updates and autonomy makes these models even more viable. Companies like Tesla are leveraging these capabilities to increase subscription revenues by reducing vehicle purchase prices to attract more users to pay for software and service packages. This evolution positions EVs as a transformative force in how service contracts and data-based services generate value.

2. How can EVs help with subscription-based revenue models? 

EVs can drive subscription-based revenue models by providing ongoing value in several areas. Subscriptions work well when customers see continuous value in a package, much like SaaS models that combine software licenses, hosting, maintenance, and upgrades.

Subscriptions can address concerns about obsolescence for EVs by including regular software updates and feature upgrades. Battery health is critical, so "Battery as a Service" subscriptions can ensure optimal range and performance. Charging networks could shift from pay-as-you-go to subscription models, while in-car entertainment could follow a model like Apple’s premium services for news and games.

Maintenance and care can also be offered as subscriptions; in some cases, the car itself—like robotaxis—could be provided as a service.

3. What future business models do you see now that Tesla introduced with no dealer network? Is existing dealer service network benefit or hurt other Automotive OEMs? 

Tesla’s direct sales model, which operates without a traditional dealer network, has introduced a new approach to automotive business models. For other automotive OEMs, the existing dealer network could actually be an advantage if leveraged effectively. Dealers can handle essential services like maintenance, charging, and even robotaxi management, allowing OEMs to meet customer needs locally.

As the volume of EVs grows, these services will still be in demand, and a robust dealer network could help meet that demand more efficiently.

Tesla, on the other hand, faces challenges with its service capacity, sometimes leading to wait times of up to a month for customers. This highlights how a well-utilized dealer network could benefit other OEMs by offering more effective and timely service options.

4. How is service delivery changing with EVs? How is warranty management different for EVs as compared to ICE vehicles? How do you see warranty evolving as EV adoption increases?  

Service delivery and warranty management are changing significantly with the rise of EVs. EVs generally have fewer mechanical components than internal combustion engine (ICE) vehicles, leading to reduced warranty costs and fewer repairs.

Automotive companies increasingly offer mobile service to perform most service jobs at home rather than customers driving to a dealer or service center. More updates and recalls are also done via OTA software upgrades, reducing mechanical repairs.

With fewer moving parts, the volume of warranty claims is lower, but each claim tends to be of higher value, often involving specialized components. Additionally, issues related to lack of maintenance, like oil changes, are eliminated, further reducing common warranty claims.

As EV adoption grows, we can expect warranty models to evolve to focus more on high-value, EV-specific components and technology.

5.   How are service costs and profit margins impacted by EVs?

Service costs and profit margins in the EV ecosystem are influenced by several unique factors. While EVs reduce some traditional service costs (e.g., engine-related repairs), they introduce new challenges related to battery management, high-tech component servicing, and workforce training. Effectively navigating these changes is essential to sustaining profit margins.

The battery pack is the most valuable and expensive component of an EV. Managing battery health, repairs, and replacements significantly impacts overall service costs. This requires specialized tools, facilities, and expertise.

EVs introduce high-voltage components, necessitating advanced training for technicians. Companies must invest in upskilling their workforce to handle these components safely and effectively. AI-powered service advisors can play a pivotal role in streamlining this transition, onboarding technicians, and training them efficiently.

Traditional cost contributors—parts, labor, and logistics—are reshaped in the EV context. With fewer moving parts and less frequent servicing needs, the emphasis shifts to diagnostics, software updates, and high-tech repairs. Managing these aspects effectively is critical to maintaining service profit margins.

For both dealers and OEMs, preserving service profit margins in the EV landscape requires innovation in cost management. Strategies like predictive maintenance, remote diagnostics, and leveraging data analytics to optimize parts supply chains can ensure profitability.

6.   The Warranty Week EV report said service costs are actually higher. What can warranty and service leaders do to prepare for increased adoption of EVs?   

To address the higher service costs associated with EVs, warranty and service leaders can take proactive steps to prepare for the shift toward electric mobility.

Service centers must be equipped to handle EV-specific requirements, including facilities for battery diagnostics and repairs, high-voltage equipment, and specialized tools for electric components.

Training technicians in EV technologies is essential. This includes expertise in battery management, software systems, and high-voltage components. Upskilling can be expedited with AI-powered tools and learning platforms to ensure technicians are ready for the transition.

Parts inventories and supply chains need to adapt to the unique needs of EVs, focusing on high-value components like batteries and specialized electric parts. Efficient logistics systems must also support rapid and reliable part availability.

Connected EVs generate vast amounts of data, which can be used to streamline warranty claims. Real-time data monitoring enables faster and more accurate claims validation, helping to control costs and improve customer satisfaction.

As warranty claims and quality data grow more complex, AI can play a critical role in analyzing patterns, identifying root causes, and making informed decisions about warranties, quality improvements, and recalls.

While early-stage warranty costs for EVs may be higher due to the newness of technology, companies have opportunities to refine processes and systems over time. Proactive investments in predictive maintenance, quality control, and connected solutions will help stabilize and manage warranty expenses effectively.

By adopting these strategies, warranty and service leaders can address the challenges posed by EV adoption, ensuring readiness while controlling costs and maintaining customer trust.

7.   What impact does AI have on EV sales, service, and usage? What role does software play in EVs as compared to hardware?  

AI and software have a major impact on EV sales, service, and overall usage, shifting the focus from hardware to digital capabilities. In EVs, software plays a central role in managing energy efficiency, especially in optimizing battery performance.

Unlike traditional vehicles, EVs are often viewed as "computers on wheels," where advanced software is as important, if not more so, than the hardware. AI-driven features like advanced driver assistance and autonomous driving rely heavily on software, making EVs increasingly dependent on digital systems.

AI-powered advisors, analysts, and agents can improve warranty and service outcomes for companies by providing guidance on usage and service, insights from analyzing the digital data captured from the EVs, and automating service operations for higher efficiency.

8.   How is the relationship with suppliers changing with EVs? How does it affect Tier 1 component suppliers and their revenue streams and margins?  

The relationship with suppliers is evolving as EVs become more prominent. Since EVs require fewer mechanical parts than traditional vehicles, the need for a wide range of suppliers is reduced, which changes the role and number of Tier 1 component suppliers.

This shift can affect their revenue streams and margins, as fewer parts mean fewer traditional supply needs. However, for battery suppliers, there’s an opportunity to expand their role by managing battery performance and health, creating new service-based revenue streams beyond just component supply.

9.   How do you deal with obsolescence in the evolving technology of batteries and other parts of EVs?  

Dealing with obsolescence in the rapidly evolving technology of EV batteries and components is crucial. One approach is to offer subscription models, allowing customers to access regular upgrades and replacements as technology advances.

Another strategy is to design EVs with a modular architecture, enabling easy replacement of outdated parts without overhauling the entire vehicle. This approach helps keep EVs up-to-date and aligned with the latest advancements.

10. What innovative revenue models do you see merging. E.g., Do you see EVs providing power storage for houses? Or act as an AI server as Tesla is envisioning?

EVs can open up new and innovative revenue models by serving multiple purposes beyond transportation.

For example, EVs can become part of a larger network of computing devices. When they’re not being used for autonomous driving, their computing power could support AI tasks, as Tesla envisioned. EVs can also act as energy providers, supplying power back to the grid in what’s called Vehicle-to-Grid (V2G) systems.

11. How will autonomy and introduction of Robotaxis affect the industry and service revenues?  Would commercial contracts have a better attach rate and be more profitable? 

The growth of autonomous robotaxis will change the industry, especially for service revenue and commercial contracts.

As fleets increase, businesses using robotaxis will want service contracts to keep their operations running smoothly. Since commercial clients are focused on reliability, they may be willing to pay more than individual consumers, making these contracts more profitable for manufacturers.

By offering services that deliver real value to business customers, manufacturers can capture more of the market. Plus, with robotaxis expected to be used more frequently than personal cars, service contracts based on mileage will provide better value for these high-use vehicles.

Why Circuitry.ai?

Circuitry.ai combines decades of experience in developing leading warranty software with cutting-edge AI technologies to deliver practical and innovative solutions to optimize warranty outcomes. Missed us at the Service & Warranty Lifecycle Summit? Schedule a personalized demo and see Service Advisor in action.