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Client Advice

"After Four Decades in the Automotive Industry: My Perspective on the Rapid Changes Ahead"

By Hilton Ralph
31-01-2024

Having spent over 40 years in the automotive industry, I have witnessed significant changes. Yet, nothing compares to what lies ahead. I recently read an insightful article A future beyond brick and mortar: Disruption in automotive retail on the future of automotive retail by McKinsey & Company. The article left me excited and apprehensive about the scale of the transformation that is to come.

The article paints a picture of an automotive retail model under severe pressure. Customer preferences are fundamentally shifting, with key pain points persisting throughout the buying journey - especially online. At the same time, ACES (autonomous driving, connectivity, electrification, and shared mobility) trends and increasing digitisation look set to disrupt the status quo even further. COVID-19 has only accelerated these trends. OEMs and dealers are struggling to balance the needs of today's and tomorrow's customers amidst rapidly changing consumer behaviours and technological shifts.

The article indicates OEM strategies diverging significantly from the traditional model going forward. McKinsey has neatly summarised likely future strategies into five retail archetypes. The "OEM building on the dealer as entrepreneur” concept leverages differentiated physical formats like showrooms and service factories to retain dealers' integral role while launching some controlled online direct sales.  This balanced evolution resonated most with me. However, bold moves like an “OEM owning retail” approach intrigues me. If new OEMs are successful with the asset-light model, it could prompt traditional OEMs to reassess their viability.

I believe dealers will remain critical assets for OEMs through their personalised sales abilities and aftersales expertise. However, consumers also want transparent, haggle-free online experiences, so businesses must adapt accordingly. Dealers must cultivate a reputation as both a trusted advisor and a product experience centre to validate their market presence. Failure to do so may result in increased pressure to account for their continued existence.

For OEMs and dealers alike, reactive strategies are no longer an option. Companies that fail to advance their retail strategies risk being overwhelmed by industry changes. OEMs must take a tailored, regional approach across brands - one retail strategy will not fit all markets. To ensure future success, it's important to start transitioning towards advanced analytics capabilities. By taking proactive steps to prepare now, companies will be well-positioned to take advantage of new and exciting opportunities.

As someone immersed in this industry for decades, I was surprised by the scale of the imminent retail transformation outlined in the article. Five ‘no regrets’ moves resonated with me as sensible starting points for OEMs and dealers aspiring to stay ahead: 

  • Clearly define future retail strategies and align organisations accordingly
  • Test direct sales and online models responding to digital trends 
  • Move towards transparent ‘transaction price steering’
  • Implement leaner retail formats and standards to cut costs
  • Customer access to product expertise through specialists in a non-sales environment, developing and growing the role of trusted advisors

 

Companies must implement customised strategies, be proactive now, and not waste time with transition elements like targeted pilots. Automotive retail has constantly evolved but this accelerated pace necessitates getting ahead of the curve now like never before.

I'm excited to buckle up for what will be a fast-paced and thrilling ride, especially for brands that act quickly and intelligently.