Five mega trends are having a profound effect on the development of the automotive industry:
- Electric drives are becoming prevalent, starting from China to most markets and cities and usually based on stricter regulations
- Vehicle connectivity has been prioritised by practically all OEMs as an essential prerequisite for digital services and autonomous driving
- New mobility concepts are being developed based on connectivity and changing consumer practices
- Autonomous driving is becoming gradually more visible, with increasing numbers of Level 3 autonomous vehicles entering series production
- OEMs have recognised that a customer-focussed approach – including the seamless combination of on and offline experiences – is a crucial competitive factor
Based on Capgemini research the vast majority of customers (81 per cent) are willing to spend more money for a superior mobility experience. At the same time, new competitors for automotive manufacturers like car exchange websites, comparison portals and tech giants such as Google, Alibaba, Apple, Tencent, Amazon and Baidu have a number of advantages: business and technology are seamlessly integrated into their business model, they are financially more robust and have a reputation for being more innovative than OEMs. No wonder that VW CEO Herbert Diess has warned the probability of established OEMs winning the race for the mobility of the future is only around 50 percent.
One reason for this scepticism is the long-standing business model of automotive manufacturers: customer contact is partly outsourced to independent trading partners and customer experience has never been in the focus for an industry where the product played always the dominant role. The dealership model incurs costs of 25% for sales and distribution – very high compared to other industries. It also means that some customer data is held by these trading partners, creating a real competitive disadvantage for OEMs in the digital world compared with new market players: while the newcomers gain market share, the old world order squabbles over customer data. OEMs and their partners must rely on each other if they want to obtain a competitive advantage: automotive manufacturers need a physical distribution network to realise the end-to-end experience of their products and services. The core challenge is to give customers the same seamless experience they have become used to in other industries: one where processes are easy to understand, service is first-class and content is relevant for the user.
The transformation into an integrated production and digital company requires the fusion of two elements: unconventional, customer-focussed and highly flexible processes adopted from the digital world, as well as expertise in development and production accumulated over decades by automotive manufacturers. Whoever can succeed in establishing this connection will play a key role in the race for the mobility market.