Predicting the future of any industrial sector has it’s challenges but as keen obervers of the Automotive sector we like to think that our lens is well trained on what might happen in the coming years.
Automotive is particularly exposed to “megatrends” and the CASE framework has been applied for some years.
C onnected
A utonomous
S hared
E lectric
We at Autoflows are more concerned with how these megatrends impact on the customer journey. And we have identified four key areas which we think are critical.
20 years ago, the customer journey in automotive was linear and predictable. They would by a car magazine, be influenced by TV ads and what they saw their boss or neighbour driving leading to multiple dealership visits and eventually a purchase. Today customers zig and zag online and offline sources of information in a quest for knowledge and transparency. The fully utilise mobile technology and are constantly petitioned by third party brokers or aggregators who offer to help secure the best “deal”.
Technology has brought complexity instead of simplification. Journeys are fragmented. Data is shared across multiple platforms, and no single party has the ability to unify systems and create the frictionless experience that customers crave and indeed receive from other sectors.
OEMs think that the solution to this lies in a Direct Sales model and some have implemented agency sales via their dealers. This addresses some of the fragmentation, but early adopters have generated friction in other areas of the transaction and risk short term market share losses. In five years we believe more OEMs will be employing the direct sales model, particularly in the premium sector of the market where margins are healthier and less impacted by new entrant brands.
Communications with customers have trended towards the generic and impersonal despite significant investment in IT systems and technology. This is however changing and we can look forward to a time when the potential of AI, Connected car and humans interface to create a far more personalised ownership experience for drivers.
Communications will start to feel like service or support and not marketing with timely interventions that build genuine value in the eyes of the customer. This is a significant opportunity to arrest the decline in loyalty and build brand values that step beyond the performance of the vehicle.
Connected cars have been in the market for ten years but only Tesla seems to have best leveraged the technology to reduce operating costs and improve customer satisfaction. For most OEMs the implementation of connected car is in its infancy. Yes, software updates are being deployed OTA, customers can unlock additional functionality and even power but we are not utilising the full data output from the dozens of sensors that are measuring, recording and sending 25gb /hour to OEM cloud storage.
Progress in incremental and there is a tension between the OEM and the dealer in terms of the future commercial revenue sharing in aftersales. OEMs need dealers to handle customer problems, perform service, maintenance and warranty work but dealers need to have a viable business model when EVs are the majority of the vehicle parc. We expect that within the next 5 years connected cars really accelerate in their customer utility, driving more mobile service and potentially greater levels of retention as technology advances abd the OEMs develop their software capabilities. Workshop visits will fall and communications will become more personalised to the individual car.
The franchise distribution model has allowed limited flexibility for dealer to develop new revenue streams. Innovation towards more “usership” models has been slow despite moderate demand for simpler subscription style services. The problem remains that whilst customer find the model and convenience attractive the economics are challenging for OEMs and dealers which means pricing chokes demand at around 5% of the market.
We do not expect this to change anytime soon. EVs are still too expensive to manufacture and dealers face reducing margins in sales and aftersales. There is little scope for testing new models when the risk is high and current earnings are under pressure.
We do expect to see further development in bundled aftersales services and greater complimentary service penetration. AI will unlock this as it helps shape CRM away from blanket marketing to value generating communications with a customer.
What do you think about these trends and their impact on dealerships over the next few years?