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How automotive dealers and manufacturers shift from physical to digital
In this episode, our speakers share insights into the shift the automotive dealership and original equipment manufacturers have had to make to engage a new digital native customer.
The COVID-19 pandemic became an opportunity to fast track the digitization of the automotive sector. Manufacturers and dealers have had to shift their way of operating to encompass the new digital native consumer and a “digical” – digital and physical – way by which automotive cars are purchased by consumers.
Key takeaways:
Dealership model changes: a shift to online customer purchase behavior accelerated due to COVID-19; customers can interact and receive an online experience for purchase of both new and used cars.
Collaboration for OEM (original equipment manufacturers) and dealers; a fast evolution of the end-to-end transaction has shifted online, including payments, and deliver.
Future forecasting: what kind of purchase models are consumers likely to encounter in the new digitized dealership world and how will they receive the best service?
For your convenience, full text transcript of this podcast is also available.
Peter Matthews
Hello, everybody. My name’s Peter Matthews, and I lead EY EMEIA Advanced Manufacturing and Mobility Business. And I’m delighted to be joined, today, by John Simlett, who is EY Global Future of Mobility Leader, and David Borland, who is EY UK and Ireland Automotive Leader. And in today’s podcast, we’re going to be looking at dealerships.
For many years, buying a car was fairly straightforward. You perhaps looked at a few magazines, you went down to a series of dealers, you did a few test drives, you haggled with the dealer, and eventually you walked away with a new vehicle. But that’s changing, and the recent pandemic has only accelerated some of the changes that we’ve been seeing in the dealership model. John, you’re someone who’s spent a lifetime working in and around dealers. What do you think have been the most significant changes that we’ve seen in the last few months?
John Simlett
Yes, Peter. Thanks. Great question. I think, really, COVID-19’s affected all parts of the business model for dealers, and it’s really done two things. One is it’s accelerated what we were expecting, potentially even in 2025. And also, it’s increased the availability of some services that were often reserved for more loyal customers.
So, in sales, what we’ve seen is much more of a move to online, really trying to get customers to interact digitally with the dealership and with the salesman, and that customers have been booking appointments so that they can go to dealership in a safe and secure way, to look at vehicles and to test drive them if they want to. But we are seeing much more of this linkage, if you like, between the digital and the physical, kind of a digical experience being given. But that’s not to say that that’s the only part affected.
After-sales has also been affected, so much more digital use of booking, also the whole delivery and pick-up of vehicles, and also the ability for customers to drop off vehicles. For used cars, as well, we’re seeing the rise, and certainly, we can see it in terms of television advertising, etc., of used car platforms, so the ability for customers to buy used cars and sell used cars online.
And that’s radically changing the way that that part of the market’s working. And it’s also enabling some of these more digital players to have different views and use different algorithms around stocking, purchasing and evaluation of vehicles. So, it’s affecting all of those three key areas, as we see.
And I think it’s also fair to say that those changes are now likely to remain, because what we are beginning to understand is that consumer sentiment is changing more quickly. People who weren’t used to buying online are now much more used to buying online, and they are buying products online that they wouldn’t have thought of buying before. So, they feel more secure, they feel more able to make a choice, and therefore we think that the consumer pull toward new digital retail models, whether it be in sales, after-sales or in used cars are there. Peter.
Matthews
Thank you, John. Certainly, from my perspective, I have seen a marked increase in customer sentiment in terms of willingness to do things that they previously would never, in the automotive sector, and now looking very much at adopting the automotive sectors, just how they would do for any other purchase, and that we know from our own studies that this sentiment is increasing rapidly.
And we definitely see dealers reacting, sometimes perhaps a little slower than we might like, but across the board, the dealers are reacting to the fact that we have so many people who the politicians would call digital natives, who are simply used to operating in a particular system. David, can I turn to you and talk a little bit about what this means for the collaboration between the OEMs and dealers? And it’s always been, down the years, a bit of an uneasy relationship, hasn’t it, between the OEMs and the dealers. How do you see that changing in the current climate?
David Borland
Hi, Peter, and hello, everybody. Yes, I’d just like to come back to a point that John made right at the beginning, I think, which is around acceleration. So, this isn’t a revolution that we’re going through. It’s a fast evolution, a very fast evolution.
And what I mean by that is the industry, and the OEMs and the dealers, have been testing and developing new models about how to sell products and cars and services online, for several years. So, this isn’t new to the industry, but it absolutely has been accelerated by COVID-19. And some of the reasons why it’s taken so long to implement, it’s complex. There are many things that need to be considered.
So, if you’re a new consumer, you’re going to either an OEM’s brand website, or straight to a dealer website, or to a third-party website. But if you want to complete an end-to-end transaction, you need to firstly select or configure a particular car or a product. You may want to offer a trade-in, and having evaluations of those trade-ins is a challenge, as well. You need to be able to select finance and lease deals. You need to be able to make an initial payment.
And ultimately, you need to facilitate delivery, as well. So, there are lots of moving pieces there, that need to be considered. And that’s why this is a challenge and why we’re not wholesale, 100% online, and I don’t think we ever will be.
And I think this is where the collaboration is key, because I think there is absolutely always going to be a role for the manufacturers and the retailers. And I think it’s really, really important that they continue to find a way to work in the new and the emerging world. And John also mentioned integration. I think that’s one of the key points here.
So, there are a lot of systems that consumers use, that the OEMs use, and the dealers use. And it’s how are these things connected together to ultimately drive a great customer experience, that will encourage people to buy your products and services? And that really is the front end of this, which would be the digital properties that consumers will visit, but also the back end of this. And one key piece to this is what we call the customer contact strategy.
So, having a clear understanding between the manufacturers and the dealers, who is connecting and contacting a customer at what point in time, and making sure that’s efficient, that’s effective, and there’s not duplication there that’s confusing a customer. So, I think, that collaboration, it has worked for many, many, many years. It will absolutely continue to work, but it just needs to continue to evolve, and evolve at a pace, at the moment. Peter.
Matthews
Yes, I think that’s right, David. And I think that one of the interesting challenges that whole sector is going to face is that the business will move, in time, through being a channel strategy business, where OEMs sell through dealers, to the point where OEMs may sell direct to the consumer, either online, as John has talked about. We’re also seeing, in certain countries, OEMs also setting up their own dealerships, so having a direct relationship with the consumer.
And it will be difficult to navigate, but ultimately, dealers and OEMs want the same things, don’t they? They want to sell more cars. So, let me finish, then, by just asking you to perhaps give one view each on what you think is the most likely thing to happen over, perhaps, the next 12 to 18 months, in terms of the most significant development you would expect to see when it comes to dealerships. John, let’s start with you.
Simlett
Thanks, Peter. Well, I think that there will be a lot of reappraisal going on, so that consequently will lead to potentially the slimming down of the dealership footprint, looking, potentially, at what new retail formats they might bring in. But I also think that some of the savvier dealers, if you like, are moving toward data and understanding how to fit data into the business, and how to use data in a way that’s going to help drive sales and is going to help deliver a new and different customer experience.
And I think that that, we’ll see the first vestiges, if you like, of changes to dealer footprints, etc., but we will also see more moves toward providing a better customer experience driven by data and by understanding.
Matthews
David, how about you?
Borland
Yes, so I think I’ll come back to the point we talked about a moment ago, around collaboration. So, I think, in terms of the brand and the OEM partners, the manufacturer partners that the dealers have. And the reason I say that is we’re clearly in a transition toward sustainability and net zero, and the importance of electrified vehicles is going to become ever more important over the next 12, 24, 36 months.
And I think the importance there, for dealers, it will be around which brands and manufacturers are they partnering with, and what is the future product road map for those particular brands, and does that fit with their own dealer strategy? And as we have more regulation around missions, for example, that we have in Europe, that’s going to accelerate the pace of change in that space, as well, in the next 12 months.
Matthews
Yes. From my viewpoint, I think that what we’re likely to see is even more innovation in this space. I think the whole field of automotive selling is absolutely ripe for innovation. We will likely see newcomers come in and come with some different ideas, whether they be people providing services to the dealers, the OEMs, who perhaps have experience of dealing with customers in different sectors, or whether the OEMs and the dealers themselves come up with wide-ranging, innovative ways of selling cars.
One thing’s for sure, if you’re a consumer looking to buy an automotive in the next 18 months, you will have some very interesting offers to look at. That concludes today’s podcast. We very much hope that you’ve enjoyed it. My thanks to David and John, for joining me.
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