The future of car buying - part 2

14 February 2019

Industry Insights

The electric car

If technology continues apace then in 10 years’ time the majority of vehicles being sold will probably be electric, driven by political pressure, regulation and more importantly, customer choice based on the cost of ownership.

BP estimates that by 2040 there will be 12 million EVs on UK roads, up from around 135,000 in 2017, that was the rationale for them acquiring Chargemaster in June 2018. As the press release stated:

‘BP believes that to accelerate the adoption of EVs, customers will require convenient access to fast and ultra-fast charging. BP’s UK retail network is well positioned to provide this access with over 1,200 service stations across the country. A key priority for BP Chargemaster will be the rollout of ultra-fast charging infrastructure, including 150kW rapid chargers capable of delivering 100 miles of range in just 10 minutes. BP customers in the UK can expect to access BP Chargemaster chargers on forecourts over the next 12 months.’

An all-electric car has significantly less moving components than a combustion engine, 18-20 compared to over 2,000. So, servicing intervals for electric vehicles will be less with reduced time to service.

Purchasing a car in the next 5-10 years

1) Here is an idea as to how the new car buying experience might develop in the not too distant future:

2) You choose the vehicle model in the comfort of your own home using VR headset and voice commands

3) If you want a test drive a model is brought to your home or place of work at your time and convenience (already successfully tried by Hyundai)

4) You are assisted in your own home by an AI application that guides you through the finance options

5) You commit to the model and the finance package

6) The car (all electric) is delivered to your choice of address and time

Servicing is done at pre-determined intervals, the car arranges with your diary for a convenient date and time, informs you, arranges a courtesy car and liaises with the service support department. This could be either a local mobile service unit to attend to the vehicle at your home or place of work or a collect and return service appointment.

Hassle free, convenient, flexible, tailored around you. Car buying focussed around the customer not the dealer or the product.

Another trend could be that people don’t own a car at all but can order a self-driving car via an app and use it for a journey and reorder it when they need it again. Mobility as a Service (MaaS) is the integration of various forms of transport services into a single mobility service accessible on demand. A MaaS operator can offer a menu of transport options public transport, car, bike, taxi or car rental / lease.

Where does this leave car retail?

According to the SMMT in 2018 UK private registrations fell by 6.4% compared to 2017 due to ‘regulatory upheaval and continued anti-diesel policies, adding to the ongoing decline in consumer and business confidence.’

With a declining market this leads to increased competition.

And when you consider the scale of the capital investment in the dealership showroom and network, it begs the question will this be the way to purchase a car in say 5-10 years’ time?

What is the ‘value add’ provided to the customer buying experience or journey and if so what, where and how?’

For example, how often does the dealership contact you during your purchase process, do they understand your particular needs and wants and are they serving the right information to you at each appropriate point in the sales cycle?

Do they approach the customer journey as another sales transaction or the building of a relationship and long-term value?

And how well are they at keeping in contact particularly after your purchase?

According to EY’s ‘Future of automotive retail’ ‘automotive retail will shift from a product driven to a customer centric approach to drive customer loyalty and to adapt to changing customer behaviour and expectations’.

Customer retention must be the focus of car retailers and manufacturers, ensuring their brand remains prominent in the mind of the customer. This entails an integrated approach to marketing based on how the consumer prefers to obtain their information, what their preferences are and how and when they want to be kept up to date.

For example, aftersales activities in this market produce reported margins that are higher than those from vehicle sales. It is fundamental to securing these margins that high levels of customer satisfaction are maintained to ensure loyalty, repeat business and referrals.

That means manufacturers and dealerships should view every customer as a brand ambassador.

Marketing is critical to the business, but not just as a business function. A strategy that adopts a customer focus has to permeate the culture of the organisation across all functions not just the marketing department.

This in turn necessitates asking fundamental questions about company values, behaviours, recruitment, training, and appraisal and reward systems.

To become truly customer focussed, all strategies in the business, marketing, HR, Service, sales, finance, IT have to cascade from the corporate mission, objectives and strategy.

For there are market challengers to the traditional way of ‘doing things’ consider Tesla’s sales model which is to sell direct.

PWC’s report adds to this view by commenting that ‘changes in the distribution system should ultimately aim to cut costs by minimising the number and expense of retail outlets’.

Whilst EY’s concludes that ‘to maintain profitability traditional retail networks may need to be pared down with investment focussed on re organising the floor space to complement the digital experience. And new distribution strategies such as direct selling, test drive centres and mobile stores will gain importance.’

These issues relate to corporate strategy and necessitate dealerships to question what shape their business will be in 5-10 years’ time. What new services will be demanded by the customer, by technological change and market disruption that require investment and which will need divesting?

As ‘Cars on Demand’ comment:

‘dealerships cannot only ensure success and necessity in the future, but can also provide customers with a unique buying experience which eclipses any standard showroom or website. However, it is up to the dealerships to remain vigilant and make these changes where necessary as falling behind in our rapidly evolving world may not just spell disaster for a business but the end of it.’

Conclusion

Today’s OEM’s and dealerships should be planning for the possible scenarios that will occur over the next 5-10 years creating strategies that mean they will be in control of their destiny.

And this must start by appreciating the consumer buying process and the steps they take along this, particularly having an intimate understanding of who the customer is and all the communications platforms used both online and offline. Essentially moving away from a product focus to a customer centred one.

Shaping marketing communications focussed on providing information to the customer in a tailored, timely and consistent manner, the objective being to build a two-way communication flow, a relationship. And one that doesn’t stop after the supply of the vehicle.

Business models including distribution strategies will need to be reviewed and assessed and changing to reflect the changes in consumer buying habits. Adding value, removing complexity with a focus on the customer, not the product, nor the dealership’s needs.

Technological innovation and the impact it will have on car sales needs to be planned for, particularly changes in transportation methods such as MaaS and the growth of electric vehicles.

One thing is for certain, the automotive industry is facing changes on a scale not previously seen.

References:

2015 Future of automotive retail, EY

2017 Automotive Industry Trends, PWC

2017 How Hyundai changed the course to improve the customer journey, Dean Evans, Think with Google

2017 Cars on demand, Car buying trends

2017 Weve Primary Automotive Research

2017 The Guardian Car finance: the fast lane to debt?

2018 BP press release BP to acquire the UK’s largest electric vehicle charging company

SMMT Motor Industry Facts 2018

Volvo website

MaaS website