Auto:Motive 20/20 A Clearer View of The (Very Near) Future Of Auto-Mobility
An eBook by
1 LADIES AND GENTLEMEN, START YOUR ENGINES
For at least the past seventy years, the automotive industry has been among the most remarkably stable industries in the history of business. There have been some notable disruptions, but the basics of how the automotive industry works have remained consistent since the 1950s. This relative stability has led some to complacency regarding the likelihood of dramatic change, and now is the worst time for cynicism or a lack of urgency. The automotive industry is undergoing a massive metamorphosis — a transformation driven by evolving demographics, shifting consumer behaviors and expectations, breakthrough technological advancements, and the emergence of a new echelon of major mobility players. Simply put, the automotive industry as we have known it is dying.
That doesn’t mean that “automotive” is dead. Far from it. For the companies and businesses that recognize this shift and pivot to it, the future of mobility is bright — perhaps brighter than it has ever been. It’s just going to be different.
Consider that within the next ten years, driven by a number of technological and societal factors as well as customer expectations, the following related changes will dramatically alter the face of the industry. (Not “might.” Will.)
1. Flex models, subscription models, and ride-sharing will account for at least one third of the vehicle market by 2030. This shift has already begun, and will result in a permanent lowering of the SAAR (Seasonally Adjusted Annual Rate) to below 10 million vehicles sold in the US annually.
2. OEMs will increasingly control and own the customer relationship. This sea change will be made possible by technology and will disrupt how vehicles are obtained, used, and serviced.
3. By 2030, two thirds of the auto dealerships as they exist today will be defunct. The automotive dealership as we know it is in the team photo of businesses whose industries rendered dead or near obsolete: typewriter maintenance, record stores and cathode ray tube television repair shops. Dealers and automotive retail will still exist, but it will certainly look different than it does today. Those dealers remaining in operation will increasingly rely on selling and servicing pre-owned vehicles in order to survive. As the size of the new vehicle market declines and OEMs take their place at the front of the customer relationship, dealers will find that pivoting effectively to a model focused on the pre-owned vehicle market is the surest path to ongoing success.
4. The aftermarket space will see a shift away from hardware and DIY to a software-based market led by the OEMs five to 15 years from now; dealers and third party aftermarket providers may be digital sherpas rather than parts providers. This has dramatic import for the parts industry as we know it, and even the concept of the salvage yard.
In the next few pages, we will explain why these changes are happening, how it’s happening, and most importantly what your business — regardless of which industry subset you belong to — can do to prepare for the changes moving the industry forward.
2 A WHOLE NEW WORLD: THE LANDSCAPE OF 2020
Broader cultural trends provide deeper context for how customer behaviors are changing and how these will affect our patterns in mobility. To begin with, the United States is increasingly urbanized. According to the 2010 Census, 80.7 percent of Americans live in urban areas. America and its driving environments are increasingly urban, with less distance between our destinations, more competition for parking, and more congestion on city streets.
Demographically, America is changing too. Already by 2015, more than 40 percent of the American public was considered to be “digital natives” — those who have spent at least half of their lives with the Internet and “mobility” service options as a ubiquitous reality. This familiarity with digital media and products is transforming how customers shop — indeed, it is changing what consumers expect of the overall commerce experience. Business Insider’s research arm, BI Intelligence, forecasts that by 2020, 45 percent of the US e-commerce market — $284 billion dollars — will happen through mobile devices. And a 2016 survey by Alliance Data reported that 63 percent of Millennials shop on their phones every day. And a 2017 survey by Accenture found that “73 percent of Gen Z shoppers are interested in curated subscription-type offerings for fashion, 71 percent are interested in automatic replenishment programs, and 38 percent are willing to try voice-activated ordering.”
This explosive growth in online and mobile commerce has impacted customer expectations, as consumer have begun to anticipate that all interactions will reflect the convenient, personalized and very simple “click to buy” dynamics that they find online and on their devices. A 2016 IBM Institute For Business Value report found that:
• 81% of consumers demand improved response time • 76% of consumers expect organizations to understand their individual needs • 68% anticipate organizations will harmonize consumer experiences
These trends are already affecting how people shop for vehicles — which should give mobility companies pause. According to Google,1
• 95% of vehicle buyers use digital as a source of information; twice as many start their research online versus at a dealer. • 60% of all automotive searches come from a mobile device. • Nearly 25% of all automotive searches are related to parts, service, and maintenance.
With consumers demanding that all retailers provide a more personal and mobile-friendly experience, the automotive industry — with its multiple in-person touchpoints, inconvenient interactions, layers of complexity, and its general consumer unfriendliness — is an outdated outlier, a relic of a bygone retail era vulnerable to significant disruption by new players less encumbered by “the way we’ve always done it.”
1. Google Report, “The Auto Dealer’s Guide To Moving Metal In A Digital World,” December 2017 https://www.thinkwithgoogle.com/marketing-resources/auto-digital-retail-trends/
3 A SHARP TURN: TRENDS IN AUTOMOTIVE BEHAVIOR
For decades, it has been a foundational concept of American life: Automobiles represent freedom, independence, and success itself. But the numbers indicate that this foundational mindset may well be shifting.
It starts at the earliest ages; getting a driver’s license is less important to today’s teenagers than it used to be. Not only are people today in less of a hurry to drive, they’re also in less of a hurry to buy a car. In June 2017, the Wall Street Journal reported that for every age group but 55 and over, the number of new vehicles bought per 100 people has dropped significantly over the past fifteen years (see figure 1). Due to better quality across the industry as well as changing values, people today keep their cars longer; on average, a driver keeps their car for 6.5 years in 2015, while just a decade earlier that number was 4.3 years2 — which means people look for a new vehicle purchase a full one third less often than they used to. And among Millennials even past their teens and well into their driving years, enthusiasm for new car purchases has waned; the Los Angeles Times recently reported that a survey for personal finance site NerdWallet revealed that 43 percent of Millennials regard owning a vehicle as “a hassle.”
Fewer people clamoring to get their driver’s licenses, fewer people buying new cars, people keeping the cars they have for longer, and more people regarding vehicle ownership as a pain. These are four indicators of an impending groundswell shift in driving and buying behavior. And there are equally visible trends that indicate what might be taking the old model’s place.
2. IHS Automotive U.S., 2015.
4 A SHARP TURN: TRENDS IN AUTOMOTIVE BEHAVIOR
Ride-Sharing Since its founding in 2009, Uber has given more than two billion rides From Mutual Mobile worldwide. Its primary competitor, Lyft, tripled its completed rides from Flexdrive: “Forget loans and leases, 2015 to 2016. — totaling 162.6 million rides in the United States in 2016. In subscriptions are the new way to Car.” December 2016 in the United States alone, the two ride-sharing giants Flexdrive is a vehicle subscription and services completed almost 96 million rides. A May 2017 Reuters/Ipsos poll indicated platform that enables dealerships and/or fleet owners that 39 percent of Americans had used ride services and that 27 percent of to offer vehicle subscriptions as a third option that group did so at least several times per week. More tellingly, the same alongside buying and leasing. survey found that nine percent of all Americans who had traded in or sold For consumers, Flexdrive solves the problems of their vehicle in the past 12 months had opted not to purchase a new one, buying, owning and disposing a vehicle. With the but instead to use ride-sharing services when they needed a vehicle. Flexdrive mobile app, consumers can subscribe to a According to the poll, about the same number indicated intention to trade in car within minutes and drive away with insurance, ownership for ride-sharing in the next twelve months. That response, if maintenance, and roadside assistance included in behaviors bear it out, means that already, one tenth of the annual market their subscription fee. Eligibility requires a credit card, for new vehicles is eliminated in favor of ride-sharing — and that’s still in a valid driver’s license and a good driving record. the relative infancy of ride-sharing; it is not hard to extrapolate that these Subscribers can choose whatever car they want from numbers may increase, especially in urban areas. hundreds of vehicles in their area with the ability to swap at any time to provide flexibility without the Flex Models commitment of a long-term contract. Flexdrive partners with car dealerships and/or fleet Flexible fleet membership models — in which users pay for vehicles only owners by licensing its platform. By the end of 2018, during the times that they use them — have become increasingly popular. Flexdrive will have tens of thousands of vehicles Major OEMs, including General Motors (Maven), BMW (ReachNow), and under management, with over a hundred thousand by Daimler AG (car2Go), have joined the space to compete with established the end of 2019. For dealers and/or fleet owners players like ZipCar. And subscription models — in which users pay a Flexdrive provides a new recurring revenue model as monthly fee for access to multiple vehicles without ever actually owning an well as a program that aligns with current customer individual vehicle — are also becoming popular. On the OEM end, players needs, thus reducing marketing expense. like Cadillac (Book By Cadillac), Lincoln, Porsche, and Volvo are Developed on a cloud based micro-services structure, experimenting with monthly subscriptions for users. And third parties like the Flexdrive platform is highly scalable and flexible to FlexDrive are rapidly gaining favor with users who don’t want the hassle of support any use case. As an example, recently a large a credit check or owning a vehicle but want the flexibility and mobility of automotive conglomerate in the EU entered a having regular access to one. But it’s not just changes in how we’re driving licensing agreement with Flexdrive and was able to or using vehicles that threaten the status quo. There are significant launch their subscription service within 90 days. The changes coming in how we buy or acquire vehicles as well. program currently has over 250 beta users and is adding 100+ new members per week. This organization has been importing and selling vehicles The Tesla Effect at dealerships for more than 100 years and they Tesla has attracted attention for its swanky electric vehicles (EVs), and its recognize the paradigm shift taking place in car aggressiveness has forced the traditional automotive industry out of its ownership. The subscription model provides a new inertia on EVs. Yet it is perhaps not Tesla’s EVs that are its most revenue stream and attracts new customers they transformative or threatening influence to the industry status quo; Tesla’s wouldn’t be able to acquire through traditional business practices and models are perhaps the biggest harbinger of the purchase and leasing options. The company expects to have over 6,500 cars on the road by the end of changes to come. Tesla proposes to radically alter the traditional 2018. dealership model, having gone to court repeatedly and in many states challenging franchise laws for the right to sell vehicles direct to the Flexdrive is a joint venture between industry titans consumer, without a dealership network. It would provide significant Cox Automotive (Autotrader, Kelley Blue Book, Manheim Auctions) and Holman Enterprises (Holman portions of its service over-the-air via software update; if other OEMs follow Automotive Group, Kuni Automotive, ARI Fleet suit, this would have a massively disruptive effect on both dealer and third Management). Through deep industry expertise, party service providers. The dealer industry has so far been somewhat insights, and resources, Flexdrive is positioned to lead successful in staving off legislative challenges to franchise protection laws, the market through their proprietary technology and but this will not last forever; consumer demands will eventually force a new services to deliver solid financial results to dealers political reality, and the law will catch up to how people want to buy. The and/or fleet operators that use the platform. question is whether the industry will continue to pour its resources and To learn more about Flexdrive, visit energy into fighting disruptive change, or instead expend that energy on www.Flexdrive.com preparing for a future in which vehicle sales aren’t their exclusive domain -- in part because vehicles aren’t sold or even used the same way.
5 ZERO TO 2020: THE TECHNOLOGY OF THE MOBILITY INDUSTRY
Other technological developments will impact the future of the industry, not just behavioral trends. What is technologically possible today has significant impact on how the industry is evolving.
Electrification Only a decade ago, major manufacturers offered a hybrid or two among their product line and only Tesla was positioning itself as a manufacturer of mainstream pure EVs. But by the end of 2016, nearly 30 EV options — including hybrid electric vehicles, plug-in hybrid electric vehicles, battery electric vehicles (fully electric) — were available in the US market from most of the major OEMs. Nearly 160,000 EVs were sold in the United States, with five models (Tesla Model S, Tesla Model X, Chevrolet Volt, Nissan Leaf, and Ford Fusion Energi) selling more than 10,000 units each. EV sales in 2016 surged 37 percent year over year from 2015.
Governments from California to Europe are mandating Zero Emissions Vehicles (ZEV) or considering banning all fossil fuel-based vehicles by 2040, and OEMs are both noting this and dramatically adjusting their production plans to accommodate the shift. Additionally, battery technology — critical to the true mainstreaming of EVs — is poised for significant advancement in the next few years that will increase the range and capabilities of EVs to the point where any remaining consumer uneasiness about reliability should be easy to refute. The momentum is so strong, from technology advancements to increased focus from OEMs to the regulatory environment, that Bloomberg predicts in its 2017 Electric Vehicle Outlook that by 2040, more than half — 54 percent — of new car sales in the United States will be EVs.
This transition to majority electric vehicles will have a significant impact on the automotive industry — but especially on dealers, whose service revenue will see significant declines as EVs require far less maintenance than traditional gasoline powered engines; there are fewer moving parts to fall into disrepair, and there are next to none of the issues caused by today’s challenges with inconsistent fuel and errant engine maintenance that altogether drive the majority of income for dealerships and third-party garages and service centers. Fixed absorption rates for dealers are threatened by electrification, which in turn presents yet another challenge to mobility retailers beyond declining new vehicle sales.
6 ZERO TO 2020: THE TECHNOLOGY OF THE MOBILITY INDUSTRY
Connectivity Perhaps at one time, the vehicle was an escape from the rest of your life. Those days, however, are long gone. Whether on vacation or along a daily commute, being connected while in vehicle is a consumer demand of modern life — so much so that it has almost become common to refer to cars and trucks as the largest of mobile devices. Apple (CarPlay), Google (Android), Microsoft (Embedded Automotive) operating systems and onboard systems such as GM’s OnStar are each creating peer-to- peer connections between vehicle owners and OEMs.
SMS and MMS text messaging, email, and streaming audio (or video for passengers) are all routed to people inside the vehicle through in-vehicle wi-fi or onboard entertainment systems — and that umbilical cord back to non-vehicle devices and content represents “connectivity” to many consumers today. But to take full advantage of the promise of connectivity, the industry must think about connectivity as more than just WiFi in the car. Increasingly, connectivity means frictionless personalization; it means seamless interaction with other vehicles and other IoT devices to improve not just convenience but safety (both in driver-led and driverless operation); it means incorporating new interfaces (voice, visual) with the rest of a user’s information and life. Connectivity means becoming a provider not of transportation for the vehicle user but of experiences to her. And from the industry side, connectivity means lakes and mountains full of customer data to process and integrate, providing far clearer pictures of driver and passenger behavior and — used properly — to influence purchasing and spending behavior. Some OEMs are already planning for this, just as Ford’s $200 million investment in an advanced data center to support the company’s mobility efforts.
7 ZERO TO 2020: THE TECHNOLOGY OF THE MOBILITY INDUSTRY
Autonomous Autonomous vehicles — called “self-driving cars” by many in the media — have made the leap from the realm of science fiction writers and futurists to impending reality. Not only are traditional automotive players like BMW, Audi, General Motors, Ford, Bosch, and Volvo hard at work on autonomous vehicle research and testing, but upstarts such as Tesla, Uber, nuTonomy, Aurora Innovation, FiveAI, Baidu and others are also making significant progress. Demonstrating the true upheaval of the industry, tech giants like Google, Apple, and Intel are also betting big on developing autonomous technology — and even partnering across the traditional industry to advance the progress, with Intel recently teaming with FCA, BMW, and Israeli camera and sensor company Mobileye NV to further develop autonomous technology, pairing technological might with the mass production capabilities of the OEMs.
While these makers of self-driving technology and vehicles are most obviously impacted by their emergence, the ripple effect from the arrival of autonomous vehicles is significant for every level and association with the automotive industry. This includes everything from purchasing behaviors, servicing, financing and insurance sectors and more. And, it bears special emphasis that autonomous technology will drive massive scaling of fleet development for and the adoption of flex/subscription models; when customers can easily hail a vehicle when they need one that drives itself, ownership becomes a unnecessary luxury at best and an unnecessary expense at worst.
To be sure, there is some skepticism about the imminence of the autonomous future’s arrival — some believe it to be a reality further in the future than others — and the discussion around its timing is valid. But in no case is anyone arguing that autonomous vehicles aren’t coming. It’s not a matter of if; it’s when. Players in the industry are well advised to adjust for that eventuality before it’s upon us, if they wish to leverage it when it does arrive.
8 ZERO TO 2020: THE TECHNOLOGY OF THE MOBILITY INDUSTRY
Service As A Service: What “SaaS” means for automotive
For right now, the vehicles in market still require a human driver. But even these vehicles are incredibly complex and advanced machines that are more like rolling computers than the cars and trucks most of us first learned to drive. Today’s vehicles have on average more than 150 electronic control units (ECUs), computerized subsystems powered by a CPU or processor — and the vehicles of the next few years will only become even more powerful and capable of new functions across passenger comfort, navigation, entertainment and safety.. And the more computerized a vehicle is, the more likely that vehicle will be serviced via over-the-air updates — software patches, fixes, improvements, refinements and adjustments that can be automatically and remotely directed from the OEM and won’t require the driver to visit a service center to address.
As OEMs realize that their costs decrease and their margins improve the more they are able to service vehicles through software updates rather than getting under the hood, the model of how vehicles are serviced will have to change. This has obvious and considerable implications for the segments of automotive involved in servicing vehicles; when vehicle owners have less need for in-person servicing, can a service provider shift their model fast enough to accommodate decreases in service volume and cadence? And how quickly will the trend accelerate in which those employed in vehicle service must have as complex an understanding, if not a deeper knowledge, of computer Figure 2: An example of just how quickly systems as the mechanics of an internal combustion engine? and easily updates can be done.
9 ZERO TO 2020: THE TECHNOLOGY OF THE MOBILITY INDUSTRY
New Players For three quarters of a century or more, the automotive industry has been defined by the same basic structure of players: OEMs, multiple tiers of suppliers, financing companies, dealers, insurers, and aftermarket providers. But as everything from autonomy to electrification to connectivity promises to change the in-vehicle experience, the playing field is about to broaden and widely fragment the industry for the first time in decades.
For starters, “the Four” — Amazon, Google, Facebook, and Apple — now have to be considered major automobility companies; between their work on autonomous vehicles, their role in promoting connectivity to “the car as device,” and their significant financial clout, these four companies will have demonstrable, change-driving influence on the industry — either as benevolent partners or as outside drivers and even threats to the status quo.
In the areas of AI and machine learning, the four giants who will most influence the evolution of mobility are the MAGI: Microsoft, Amazon, Google, and IBM. These four have the tech platforms upon which most third parties will build their autonomous services and solutions. The MAGI, too, are now players in mobility.
And beyond these global heavyweights, other technology players — from giants like Cisco and Intel, to intriguing emerging powers like Mobileye and Nvidia, which brings visualization tools and systems and deep learning from gaming to mobility — must also now be considered part of the automobility industry. Their work on connectivity and autonomous vehicles, or in some cases the Internet of Things, makes them as influential to the future of automobility as any OEM.
All of these things will change mobility needs and the consumer experience in the vehicle; while the nature and full extent of these changes is still being written, the idea of fundamental change itself is a given.
10 THE “SO WHAT?”: WHAT THIS ALL MEANS
At the beginning of this ebook, we made several statements about what’s going to happen in the industry in the next decade. After discussing the change drivers in the industry, it’s time to explore how they’re going to realize the metamorphosis we have predicted.
Vehicle ownership As we’ve seen, vehicle possession is increasingly shifting to the shared ownership models; customers will increasingly buy into autonomous fleets, subscriptions, and ride-sharing services directly from OEMs. This shift is already underway, and increasing urbanization as well as demographic trends will only speed that shift. In fact, we predict that flex models, subscription models, and ride-sharing will account for at least one third of the new vehicle market by 2030. Such a shift would decrease the SAAR in the United States to approximately 12 million vehicles, which we also predict by 2027, dropping to 10 million by 2030.
On-demand shared vehicle programs and subscription services will comprise the biggest portion of this shift; we predict at least 20 million drivers will be members of such services before 2030 rather than owning their own vehicles. Autonomous vehicles still need a serviceable infrastructure to develop feasibility around them (similar to how an infrastructure — including paved roads, filling stations, and mechanics — was needed to support the full explosion of the automobile into American culture a century ago), but there will be more than a million autonomous vehicles on the road by 2030, serving multiple passengers each day. Ride- sharing with human drivers may still outnumber the autonomous vehicles, however, taking their place as the second largest factor in the permanent decline in the SAAR.
This will have dramatic pressure on dealers, certainly (more on that in a moment). But a less obvious but more impactful outcome will be the change in ownership of customer relationships.
Customer Relationships As the relationship between consumers and their vehicles shifts, so too must evolve the selling and vehicle service environments. No longer will most profit be product driven, transactionally measured by number of vehicles sold; increasingly, the success of the automotive industry will be relationship-driven, with a battle looming between OEMs, dealers, and aftermarket fleet providers for control of the overall customer relationship.
We predict that OEMs will be the ultimate winner of this war, and that OEMs will increasingly control and own the customer relationship. OEMs will have direct access to the customer (and customer preference data) through connected vehicles and subscription services; OEMs will have the ability to transmit exclusive long-form content to their subscribers and buyers; OEMs will be able to control the servicing communications and do more maintenance via over-the-air updates (another data source to the OEMs). As both the customer touchpoints and control of customer data shift to OEM control, and the number of people visiting dealerships to either buy or be serviced declines, the natural outcome will be that the OEMs own their customer relationships for the first time in generations.
11 THE “SO WHAT?”: WHAT THIS ALL MEANS
Whither the dealer? Obviously, these trends do not favor the dealership model as we know it. There are two interminable facts threatening the existence of every dealer in America — from the most successful metropolitan dealership groups, to the most rural of lots: first, that far fewer new vehicles will be purchased in America in the coming two decades; and second, the issue of OEMs encroaching on the customer relationship. Dealers whose models depend on selling the maximum number of vehicles per month will struggle in the new world of mobility. In fact, we predict that by 2030, two thirds of the auto dealerships as they exist today will be defunct.
We do not predict a complete end to the dealership. However, we do see technology and behavioral tends on a collision course with the model as it exists today, and we believe that if dealers do not change their models and behaviors to match these new realities, those that do not will be pruned from the industry.
Some will be rendered irrelevant because they are unable or unwilling to adapt to changing consumer expectations for frictionless, convenient interaction, while some of their competition more efficiently pivots to meet those expectations. Some will survive changing expectations only to be forced out of business as declines in service revenue and new vehicle sales erode their profitability. But others will heed the warnings and changing environment, and will thrive well into the future. Success is all dependent on the urgency and depth with which they approach the need to change.
An example from another industry worth considering is how Best Buy responded to the changing environment that has crippled many other retailers. Not long ago, Best Buy was seriously threatened by the same winds of change that have mortally wounded retailers like Sears or Borders Books. But by reducing inventory to focus on higher-end items that digital may not serve as well, and by significantly stepping up its service game by expanding Geek Squad support and service team, Best Buy has been able to withstand the threats that crippled many other brick and mortar retailers, and has achieved significant profitability even as others in the retail industry are shuttering stores or worse, declaring bankruptcy.
Companies like www.MakeMyDeal.com are creating a new experience for the consumers. No longer are people willing to accept the traditional haggling sales methods of dealerships. Consumers are demanding more transparency, have access to more information, and want to use third party tools to create a more level playing field.
Those dealers remaining in operation will increasingly rely on selling and servicing pre-owned vehicles in order to survive. Some of these will focus on the pre-owned vehicle market and the drivers that haven’t yet moved to other models, as well as the millions of traditional vehicles still on the road — though new environmental regulations in Europe and in some US states may reduce pre-owned vehicle inventory substantially. Others will find their niche in providing exemplary servicing to ride-share drivers, while some may manage and service subscription fleets for OEMs on a local level. And a few dealerships — those that most successfully and smoothly incorporate mobile interactions and meet customer expectations for frictionless purchasing, financing, and servicing — will survive as purveyors of new vehicles.
But much as the airline industry responded to competitive pressures by consolidating and witnessing the dissolution, acquisition, or bankruptcy of major players, the coming decade will witness a significant contraction of the automotive retail industry.
12 THE “SO WHAT?”: WHAT THIS ALL MEANS
Aftermarket Perhaps the subset of the industry with more to lose than any group but dealers, aftermarket providers — from those that sell parts for home DIY repair and service to those that tint windows to those that run body shops — have to adjust to not only fewer new vehicles on the road but less individual ownership of vehicles as well. The trends in both technology and behavior make the dramatic change in the aftermarket more certain than in any other segment of the industry.
The biggest changes coming — and in some cases already here — involve DIY auto repair. Currently, many home mechanics bemoan the number of computer sensors involved in something historically simple as changing a spark plug. And that will continue to advance as more complex systems are running the vehicles (see “Electrification” above). The need for aftermarket changes to vehicles will shift from third party shops to the OEMs, who control the software for the car. And like bundles or packs players can buy for their video games on various devices, the updates and customizations will be controlled and offered by OEMs, in conjunction with approved software developers. This means that software will be updated over the air, often at a moment’s notice (see the Elon Musk Twitter exchange above). One role for dealers and third party aftermarket providers might be to helping vehicle owners customize their vehicle software.
It may not be a pleasant reality for many aftermarket providers, but it is one they must recognize all the same: as access begins to creep in on ownership, the aftermarket space will begin to see a market decline five to seven years from now; 15 years from now, it may be unrecognizable. While there will still be enthusiast and vintage vehicles on the road, the increase in mainstream EVs — the full range of electrifcation, not just BEVs — will result in fewer at-home repairs, less vehicle hardware customization, and far fewer repairs at certified garages.
Moving to support fleet and subscription managers is a good start, but most aftermarket providers are going to have to get into the data business — whether buying it from OEMs or flex providers, or generating it themselves — and begin providing content and customization over the air rather than under the hood. Additionally, aftermarket providers and even some dealers could pivot to helping vehicle owners customize their vehicle software.
13 ADOPTING A SENSE OF URGENCY
Regardless of subset, any company in the new automobility industry must recognize that change is coming, and that the industry’s new players will drive it if the traditional players refrain out of inertia or resistance. That’s not to say that dealers will start selling ten cars a month beginning in 2018, or that autonomous vehicles will be the predominant vehicle on the roads by 2025, or that the 2020 SAAR will be 8 million. The changes coming will be steadily gradual, not immediate. But their pace will not alter how disruptive to existing models these changes will be; the smart move is to begin preparing for them now — not with lip service, but with concrete action that positions your organization to thrive both in the current market and the coming one.
The coming changes and the need for new thinking and new approaches call to mind the old fable of the ant and the grasshopper — a contrast between those who chose to prepare and those who chose to soak in whatever success they are having in the current model.
Taking steps now to adjust your business to upcoming environments puts you in the position of successfully navigating and negotiating change, positively associating your brand with customer-centricity, and puts you in greater control of the customer relationships that will be critical to success in the next decade, and beyond.
14 SO WHAT DO YOU DO NEXT?
There is so much change at hand in the mobility industry that it can overwhelm, and as much that can make it seem hard to know where to start. But there are practical steps and a path to your future:
1. Accept that change is real, permanent, and imminent. Do not 5. Audit and inventory the data you already have. No matter dismiss the futurists as impractical or naive, and do not be lulled where you are in the mobility ecosystem, effective use of data into a false sense of security by any current success you’re must by design involve knowing what you already have and experiencing. The timing of the arrival of individual elements of whether it is clean and connected. Do you have multiple the mobility industry may be malleable, but their eventual arrival is databases of customer or driver information that aren’t integrated? not. No business in any aspect of the industry is “safe” or immune How effective are your customer journey analytics if your data to these changes, and the businesses that survive tomorrow will isn’t compilable? be those that begin to plan today. 6. Integrate systems and platforms to build a “true north” of 2. Recognize the coming primacy of voice. Understand that no- data and directional insights. Customers have myriad click interaction through voice assistants like Amazon Echo (there touchpoints with your business – financial services, sales and are already 43 Alexa skills for vehicles), Google Assistant, Siri or service, through phone, email, social networks, mobile devices others will come to dominate customer interaction in every other and desktops, and more. You have to invest in systems and industry. You must not only recognize the importance of voice- platforms that ensure that each of your data systems talk with based solutions for your own business, but be thinking about what each other — sharing information across marketing and sales the ease of that interaction will mean for the expectations your platforms and disparate departments to create a more complete customers will have of you. Also, consider your dependence on map of the customer journey, a “golden customer record” that these third-party voice channels today and the ability to own the contextually informs your every interaction, media buy and peer-to-peer voice relationship tomorrow. approach to those customers.
3. Recognize the importance of customer relationships and 7. Look for where to subtract, not add, to the customer move to own them — and the data that comes with them. This experience and your calls-to-action. The emergence of artificial sounds self-evident; no company believes it doesn’t have a intelligence, mobile technologies, one-click shopping, voice relationship with its customers. But in the mobility industry, interaction and more have created an expectation of on-demand relationship lines will be thoroughly redefined. And don’t forget ease and reduced friction for customers across all industries. Yet that they who own the customer relationship also own the many of industry’s customer-focused efforts emphasize adding to customer data, insights, and everything you need to know about the customer experience — making service waiting areas more how to effectively build and maintain those relationships in a way comfortable, adding features and functions that can confuse the that fits customers’ needs and expectations without being audience, making the interaction with you more frustrating than intrusive. General Data Privacy Regulation (GDPR) alone pleasurable. It might go against conventional wisdom to say so, changes who owns data, and third parties are getting cut out. So but the greatest loyalty-building exercise businesses can invest in begin looking now to understand where you might be is to subtracting from and simplifying the customer experience, disintermediated by challengers across and alongside the entire not adding to it. Look for ways to remove points of friction, remove industry, and begin to make investments that will protect and steps in the process of purchasing goods or services from you, enhance your relationships with customers — and your access to remove layers of complexity or inconvenience from the interaction the data they generate — even after the industry has changed. with you. The winners in the mobility era will be the companies who replicate most effectively the one-click or no-click 4. Invest in data systems and platforms that provide a deeper experiences customers will find elsewhere in their lives. Consider knowledge and understanding of your existing customers your customer’s needs and expectations, not what is most and their vehicles. Because customer relationships will drive convenient for your business, and double down on finding ways to your success in the mobility era, you need to refocus your efforts reduce the friction or inconvenience your customers have when on keeping and delighting the customers you have, far more than dealing with you. you should worry about the acquisition of new ones. 80 percent of next year’s sales will come (directly and indirectly) from your top 8. Look to the future. Do not only consider how your company will 20 percent of best customers. How much do you know about move 10 percent more metal in the next months or year; do not them — not just through your transactional interactions with them, think only of short-term profitability, but of what you’ll need to do but across the rest of their behaviors and preferences? Dealers, five to ten years from now to ensure success. Companies with by nature of the service arrangement, have mountains of data leaders who take the long view now and begin adjusting for it will they may not use effectively (if at all); OEMs have an opportunity be able to thrive in the new world of mobility, while those who to make more efficient use of vehicle data they have access to as think only in terms of the near future or short-term profitability will vehicles become increasingly connected. be left behind.
If your business is ready to begin planning its future in the mobility industry, Brain+Trust Partners specializes in helping companies connect the dots — inside the organization to integrate and draw insights from current customer data, and outside the organization to understand how broader changes will impact your industry and your company. To schedule a complimentary discovery session with Brain+Trust, contact us at [email protected].
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