How technology is disrupting the automotive industry

Guide

Keeping up with the speed of technology


Technology is changing the way we live, so it comes as no surprise that it's also changing the way cars are bought, sold and made. According to Mary Barra1, CEO of General Motors, "the auto industry is poised for more change in the next five to ten years than it's seen in the past 50."

Recent studies show that by 2020, 80 percent of car buyers will use multiple devices to shop for a car online. The majority of car buyers want to start their negotiation on their own terms (56 percent), with 45 percent stating a preference to remain anonymous until the deal is locked in. While digital technology plays an increasing role, there’s still a strong preference for a real life test drive with 88 percent of buyers saying they wouldn’t purchase a car without one.2

So will this digital disruption create any casualties?

Buying into the online shift

Lachy Wharton, Product Owner of www.MotoMe.com.au, says the changing nature of car buying is already evident. He says “Nowadays, car buyers do an average of 11 hours of online research, across up to eight different sources, before they even step into a dealership.”

Consumers are high on information and low on time. In response, MotoMe set out to make car buying easier– by putting everything on the one site – and more enjoyable, by taking out the awkward conversations. “You can explore and compare cars or even ask us to suggest a car for you. Once you have chosen, we arrange the test drive, negotiate the price, and even organise payment, upfront or as a lease”, says Lachy Wharton.

Wharton believes they’ve found a market for this new approach to car buying. Customers appear to be more comfortable buying their cars completely online. Customers can now obtain deals that they may not have been able to negotiate themselves, and have the car delivered to their door in the timeframe they need; all with very little effort.

Shifting gears on the dealer's role

Executive Director at Macquarie Group Jon Moodie believes technology has definitely changed the relationship and the dynamic between buyers and dealers. He says: “Dealers who embrace the opportunities and adapt will flourish, and those who fight it will struggle.”

To capture the 80 percent of car buyers2 who will be shopping online by 2020, dealers need to really focus their energies on their digital showrooms – their online presence needs to be strong enough to influence buyers in their direction.

Consumers are arriving at dealerships ready to buy. There is less tolerance for the old-school car dealers who know less about the product than the customer.

“Dealers are having to move towards the Apple Genius model where staff are not sales people, they are information sources. They need to know everything there is to know about their cars so they can answer the questions customers can’t solve online” says Moodie.

“A dealership is no longer a sales yard. It has become an information centre, and the place to go for a test drive and a car service.”

A traditional accompanied round-the-block test drive is likely to become a thing of the past. 81 percent3 of car buyers say they want something different. They prefer home test-drives, or test drive centres that allow them to drive different makes and models, or “unlock” test drives that allow them to visit the dealership at their convenience to do a test drive on their own.

Statistically four out of ten people who buy a car do so without a physical test drive.4

Some are comfortable with a virtual test drive. Jump in the car in the showroom, strap on a virtual reality headset and take control.  While you’re there you can virtually build your own car as well. See for yourself how the white leather seats compare to the black, and what difference those mag wheels might make.

While the car industry’s bigger players find it difficult to change quickly due to the cost of tooling up factories, they appear to be keeping up with consumers’ expectations so far – connectivity with Android and Apple devices, and Cloud syncing. Cars also offer hard disk storage and act as their own wireless hub.

“Manufacturers are working on enabling dealers to 3D print their own parts! Servicing turnaround times will become much quicker. There’s no need to wait for a part on order when you can just press print for a custom made bolt,” Moodie says.

Manufacturers are starting to tap into the potential offered by digital services like vehicle diagnostics and predictive/preventative maintenance. Getting it right presents an opportunity for a lucrative recurring services model and customer loyalty long after the sale.

Building lasting relationships with drivers

You could be forgiven for thinking that technology will do away with the middleman, the dealers, but that’s not on the cards for the car industry.

Both ends of the chain – from manufacturers to online platforms like MotoMe – respect the role of the dealer and are working with them to improve the experience for all.

Modern dealerships have adopted the view that technology can be a partner, rather than a competitor. Progressive car dealers, such as Tesla, recognise the need for digital innovation to streamline and augment their current sales process. By engaging digital channels throughout the purchase journey, dealerships can leverage data to nurture their customer relationships.

Regardless of how many hours are spent researching online, a vehicle purchase is a significant investment and some customers will always take comfort in the physical interaction of a dealership – and that is the relationship dealers can build on.

Moodie says manufacturers are spending up big to help dealers with their relationship management. “Take Mazda for example. Mazda has strong sales and a very good reputation. They have a very strong CRM function that sits at a manufacturer’s level and it effectively completes a lot of functions on behalf of the dealers that they normally have to do themselves.

“This expertise is quite valuable and I think we will see other dealers taking more control of the CRM process now they’ve seen that it does work.”

What will the future look like?

If Ford's recent announcement5 this month is anything to go by, the future could look a lot more like the 1980s animated sitcom, The Jetsons.

Ford has gone public with a commitment to have fully autonomous vehicles in commercial operation for a ride-hailing or ride-sharing service beginning in 2021. That means no steering wheel, no gas pedals, no brake pedals – and no need for a driver!

McKinsey & Company’s 2016 report6 suggests advanced driver assistance systems (ADAS) will play a crucial role in preparing regulators, consumers, and corporations for the medium-term reality of cars taking over control from drivers. It projects a progressive scenario which could see 50 percent of passenger vehicles sold in 2030 being highly autonomous and 15 percent being fully autonomous.

Moodie agrees we will get to driverless cars, however they will be limited to metropolitan areas where regulation and infrastructure can be put into place.

“The probability of autonomous cars is strong, but there are still enough questions from a safety and regulatory point of view that they’re still many years away.”

It seems that all the talk about digital technology putting dealers out of business by connecting the buyer and the manufacturer is unfounded. While dealers may need to change and adapt, technology also provides more opportunities for them to get closer to their customers.

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*McKinsey & Company, Automotive revolution – perspective towards 2030. January 2016

1 http://www.mobileworldlive.com/apple-says-car-ultimate-mobile-device

2 http://agameautotrader.com/files/agame/pdf/2015-cbotf.pdf

3 http://www.prnewswire.com/news-releases/autotrader-study-shows-that-car-buyers-are-more-decided-on-vehicle-when-they-first-visit-a-dealership-300023712.html

4 http://www.caradvice.com.au/345569/i-bought-a-new-car-without-a-test-drive

5 https://media.ford.com/content/fordmedia/fna/us/en/news/2016/08/16/ford-targets-fully-autonomous-vehicle-for-ride-sharing-in-2021.html

6 http://www.mckinsey.com/industries/high-tech/our-insights/disruptive-trends-that-will-transform-the-auto-industry

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