Why OEMs need to Kick Digital Transformation into Gear
With consumers turning their backs on Electric Vehicles (EVs), prompting double digit price cuts, and a raft of new entrants from China poised to shake up the market, the relationship between automotive dealer and OEM is becoming increasingly stressed. Consumers are retaining vehicles for longer than ever, creating an ever-shakier new vehicle sales pipeline. Yet at the same time, while consumers are willing to shell out increasing amounts to keep their older cars on the road, dealers are not always armed with the information required to actively target or support this valuable revenue stream.
At a time when online selling has created a seamless frictionless experience across every walk of life, from ordering food to booking a taxi, even configuring a new car, the aftersales experience remains mired in outdated and frustrating processes. Where is the information to facilitate rapid, profitable aftermarket sales to the independent garage network? Or target a valuable insurance repair business? Where are the apps that inform customers when their tyres might be worn, brake pads due for replacement or provide an MOT reminder? Where is the added value experience, such as an offer on new roof bars or a new tow bar, that could prompt a customer to engage more often with their local dealer?
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James Smith, Head of Client Services, and Chris Hanson, Head of Data at One Nexus explain why it is vital for OEMs to empower their dealer networks with the information to tap into new revenue streams while reinforcing the customer relationships required to retain loyalty in a fast-changing market.
Losing Connection
The introduction of EV was always going to shake up the automotive market but few OEMs or dealerships expected the current set of market dynamics. After the initial excitement, consumers are not queuing up for the latest eco-friendly car technology – quite the opposite. The latest figures reveal dealers slashing up to 25% off EV prices. And that is before the Chinese competition with even lower prices makes any in-roads.
If a dealer does make a new car sale, with consumers turning to the frictionless experiences offered by online car apps, even trade-in and flip revenues are under pressure. Indeed, many of today’s new car purchases are actually forced by insurance companies opting to write-off cars that would previously have been repaired, due to the rising costs of both spare parts and courtesy cars.
Consumers have not just lost faith in EVs, they are losing their connection with the dealer network. They are turning to the independent garage network for repairs and servicing. They are using the ever-increasing number of online and easy-to-use apps for buying and selling vehicles thus, the role of the dealer network in the aftersales space is under threat.
Dealer Relevance
Yet dealers play a key role in the market. For consumers, they remain the public face of the OEM and their performance has a huge influence on brand value. For the aftermarket of independent garages, dealers are – or should be – a key trusted source of genuine parts, parts that ensure the rapid first-time fix that are key to customer satisfaction. So why do OEMs not actively support these dealers to safeguard their revenue, customer relationships and, in effect, their future?
The first step has to be creating a far more compelling aftermarket business model. Independent garages are enjoying the boom in older cars, the additional parts and repairs. They are actively looking for genuine parts that will improve the chances of delivering that vital first-time fix – but if the dealer market cannot respond in a timely or competitive manner, the independent is compelled to use an alternative, despite the associated risks.
With the rise in aftermarket demand set to continue until 2040 at least, there is a massive opportunity for dealers to expand their current aftermarket sales model. With detailed information about parts, delivery and pricing, and the ability to meet the expectations of their customers, dealers can become far more competitive. They can scale up Trade Loyalty Schemes to become the first port of call for any local independent garage. Plus, of course, with complete visibility of a complex mix of parts, they will be able to be far more responsive to the insurance marketplace. With collisions now representing a significant portion of all repair work, this is a key area of opportunity for any OEM dealer, not only to provide genuine replacement parts but to do so in a way that helps to reduce write-offs, boosting sustainability credentials and customer perception along the way.
Frictionless Experience
Better information won’t just support a more competitive and compelling aftermarket experience. Armed with new insight, dealers can be far more proactive about the way they engage with customers, something that will be increasingly key if new EV sales remain depressed. It just isn’t practical in the current market to let a customer drive off the concourse with a new car and disappear: dealers need to take every step to continue the relationship beyond the three-year manufacturer’s warranty.
Fast access to a courtesy car in the event of breakdown or collision under warranty should be a standard component of a high-quality dealer experience, for example, rather than ad hoc goodwill. A seamless end-to-end experience can be delivered by the OEM, combining state of the art technology with call centre expertise to manage the entire process from the initiation of hire by the dealer to qualifying the driver, providing insurance and supplying the vehicle. The process can also handle the inevitable issues with courtesy vehicles, including accidents, parking fines and breakdown – removing any pressure from the dealer while reinforcing the customer’s perception.
Apps can also play a key role in changing the relationship – using insight on typical driving patterns to predict replacement timelines for tyres and brake pads, for example. Customers can be encouraged to use the dealer rather than an independent through offers and promotions. Apps can be used to provide an effortless way to hire a car for the weekend – something increasingly popular with a younger generation less keen on permanent ownership – with the option of an additional discount for family members of existing customers.
Conclusion
OEMs and dealers have transformed the quality of the new car buying experience in the past decade but that is of little value while consumer interest in new cars remains low. Having underinvested in both the aftermarket and used car experience during that time, these businesses have serious ground to make up. Consumers expect far more from their buying journeys in 2024 and beyond. They want integrated, customised experiences at every stage of the car ownership cycle, from repairs to courtesy cars, from a new roof rack to reminders about tyre wear.
OEMs need to empower their dealers to be far more competitive, leveraging timely information to deliver new products and services that truly reflect the needs of the market – both independent garages and consumers. Critically, the approach has to change, with dealers encouraged to embrace an ‘is there anything else?’ culture that is not always in place today to boost both revenue and customer engagement.
In this changing, and challenging, market, every business throughout the car buying and owning ecosystem needs to be far more proactive and engaged to create new revenue streams.
