In a recent article the Economist declared that Data has surpassed Oil as the world’s most valuable commodity. Ironically, this value transition is also occurring in the automotive industry where oil still fuels the cars on the road but key data, such as vehicles in operation (VIO), now fuel decisions faced by automotive parts suppliers, distributors and retailers who are increasingly competing on analytics and supply chain efficiency.
For those not familiar, VIO is the name used to describe the census of vehicle ownership registrations which include details such as year, make, model and other attributes. Most large companies in the $300B+ Automotive Aftermarket market license these data in one of two flavors, “Experian” or “Polk”. I don’t know who is winning the market share battle between the two but I do know the Aftermarket is paying a hefty premium due to inadequate competition. Buyers can choose the geographic unit of reporting (national, state, county, ZIP, census tract or perhaps even block group) with prices going up with each increase in geographic resolution. I don’t have details on pricing but, from what I can gather, you’ll pay around $20-30k for County level, maybe $40-50k for ZIP and possibly over $100k for data at census tract or block group level. In exchange for this hefty price tag you get a pile of DVDs or a monster CSV file to download, and not much more.
Originally, R.L. Polk & Company had, essentially, a monopoly on the VIO data licensing business and they used their profit margins intelligently, acquiring Carfax in 1999. Then, around 10 years ago Experian (yes, the same Experian who recently exposed the private data of 123 million American consumers) entered the market. I assume this duopoly improved the competitive landscape a bit for VIO buyers but I think there’s still plenty of room on the field. In 2013, IHS-Markit acquired R.L. Polk & Co for the tidy sum of $1.4 Billion. Having been through a couple of acquisitions myself I suspect some of the Polk brain trust has cashed-in most or all of their Earnout and moved on, either literally or figuratively.
So, now we have two enormous companies running the VIO market. Experian (EXPN.L) and IHS-Markit (INFO) had annual revenues of $4.3B and $3.6B, respectively, in 2017. Neither company is really focused on automotive, let alone the aftermarket, yet they’re soaking the industry for (I’m estimating here) around $100M annually in exchange for cobbling together data that’s actually paid for with your vehicle registration tax dollars and should be freely available.
The profits for this service, by the way, ultimately land across the Atlantic in Dublin (Experian headquarters) or in London (IHS-Markit headquarters). So much for buying American.
So, what does the future hold for VIO and the business of licensing VIO data?
Eventually, VIO data will be freely available for download, like demographic data from the US Census bureau or climate data from NOAA. But it will take time. Probably a long time. Maybe a decade, maybe longer. It’s difficult to predict with any confidence since government agencies will dictate the pace.
Currently, the only freely available VIO in the US is provided by the State of New York as part of their open data initiative. The open data movement is much bigger than New York and several other states, counties and municipalities are following suit. But, initially, most government entities are providing only data that constitute low-hanging fruit in terms of ease of upload and maintenance. Due to the volume and complexity of VIO data, it won’t be at the front of the queue any time soon. That said, as early adopters (like the Dutch Transit Authority and their open data portal) figure out how to provide open VIO data efficiently and how to measure the benefits, it will become easier for similar government agencies to follow their blueprints.
In the meantime, companies and analysts who can’t afford the high price tags charged by Experian and Polk will turn to statistical methods to generate estimates of VIO and the associated demand for aftermarket parts and other products. It shouldn’t come as a huge surprise, but many demographic variables (freely available from the US Census Bureau) are strongly correlated with VIO populations. And, while only New York is providing VIO data free of charge, there are many states who are willing to sell their VIO at reasonable prices.
I expect the open data movement to continue to gain momentum. As a result, I expect more states to follow New York’s lead in making VIO freely available for download. And, over time, this should drive down the cost of licensing ready-to-analyze VIO. Eventually, VIO will be seen as a “raw material” used in production of analyst-ready VIO and the market will be paying for “value-add” features and services (maybe for ease of access, maybe for robust forecasting, visualization and other analytical enhancements) as part of the VIO purchase decision process.
Here at Aftermarket Analytics we are taking this long-term view and that’s why we’ve created Inventory Analyst. We hope to add value to the aftermarket by building easy-to-use software that includes VIO along with analyst-friendly features to remove some of the headaches usually associated with wrangling these monster data sets. In doing so, we hope to help the entire Aftermarket save money, both on analytics and inventory expenses.
Perhaps we can help you?