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Sustainability and the role of Automotive Retailers

18 Mar 2021

The role of automotive retailers within the ever-growing and evolving sustainability agenda

Sustainability and Automotive Dealerships

For the past couple of decades, the pressure placed upon the automotive industry has grown significantly where regulators, investors and societal influences have accelerated the sustainability agenda.

As highlighted in the recent Capgemini Research Institutes report, ‘The Automotive Industry in the Era of Sustainability’, sustainability has become a key strategic focus for Original Equipment Manufacturers (OEMs), with 62% stating they have developed a comprehensive sustainability strategy. The report highlights that some progress has been made across several streams, a number of these include:

  • Continued reductions in CO2 driven by evolving regulatory emission standards
  • A sharper focus on waste reduction and end-of-life disposal
  • Supporting and promoting a circular economy
  • Sustainable Research and Development (R&D) and product development

However, the primary focus of OEMs has been angled towards traditional core competencies of R&D and Manufacturing. In turn this fragmented approach has not fully encompassed all areas of the value chain – including automotive retailers. Yet the need to embed sustainability principles across all aspects of a business will, sooner rather than later, impact retailers across multiple streams, from dealership operations to OEM driven influences, new products and business models characterised through evolving mobility services and consumer demands. In this blog I start to explore the role of automotive retailers across sustainability strategies, with a particular focus on waste elimination, addressing the circular economy and the continued acceleration of electrification.

The Shift to Digital Operations

Whilst sustainable solutions providing societal, economic and consumer benefits have become more apparent, some dealerships have started to adopt sustainable approaches to their operations. Examples include sustainable energy procurement using LED lighting across their showrooms and workshops, water conservation within their car washes and waste elimination, namely around plastics and paper.

Waste elimination has become more prominent across society, and with the increased necessity and access to digitalisation, more retailers are pursuing the adoption of a paperless environment. The growing documentation utilised across the sales and service processes, including invoices, finance agreements, demands and needs, OEM handover packs, brochures, service sheets, jobcards, repair method documentation, warranty documentation and service plan contracts to name just a few, has increased the volume of paper being utilised. Many retailers are therefore striving towards a paperless process, not only driven by environmental benefits but also the associated efficiency gains and increased access and utilisation of data, enabling the ability to move closer to the customer. However, this does not come without its challenges.

Years of sticky plaster solutions, legacy systems, multiple solution providers and, in some instances, out-dated OEM requirements and standards (e.g. warranty documentation archiving and physical customer signatures) heightens the complexity of this pursuit. To reach a paperless (and more efficient and data driven) environment, collaboration and co-operation across the eco-system is required to enable a seamless digitisation of processes. A shift in some Dealer Management System providers’ mindset has aided this approach. As more digital players enter the value chain, they have now become more accustomed to integrating with other solution providers, enabling the real-time data exchange required for an end-to-end digital process. However, retailers will need to invest in their IT infrastructure, new technologies and training, for example moving to cloud-based solutions enabling simplified architecture and open integration points to drive a digitised process, that encompasses OEMs and other solution providers across internal and customer facing operations.

At Capgemini, we have been working with OEMs and retailers globally, building smart digital lightweight tools that drive a paperless service process. Integrating dealer and OEM systems to maximise efficiencies and data sharing capabilities across consumer insights and connected vehicle data, enabling closer collaboration and reduced development times. Whilst this has driven clear benefits, including improving customer and employee experience, dealer operational efficiency, increased data visualisation and new revenue generating activities, it has led to a significant reduction in waste production linked to the traditional long-standing paper-based processes.

The Circular Economy

In many instances, OEM sustainability focus areas will have a direct influence on dealership operations. For example, ‘The Automotive Industry in the Era of Sustainability’ report highlights the most deployed strategic pillar by OEM’s is the ramp up of the circular economy. It demonstrates a sharper focus on ‘re-use’ and ‘recycle’, leading to a potential reduction in waste by 70% through increased resource efficiency. OEM’s initial focus in this area has been placed further up the value chain within R&D and manufacturing; however, retailers have a key role to play. Whether this is in the form of OEMs requiring a higher volume of used parts to be returned, remanufactured and then re-used or, on the other hand, an increased focus on the use and commercialisation of remanufactured parts – as OEMs shift towards a more sustainable aftermarket operation the demand on retailers within this space will grow. Retailers will have to adapt both their internal processes and commercial model to successfully enable this shift in focus.

The Role of Retailers In The Transition Towards Battery Electric Vehicles (BEV) & Alternative Fuel Vehicles (AFV)

Whilst there are several operational points that retailers will face, they also have a key role in society’s shift towards a growing ‘green’ mindset. In 2020, according to the The Society of Motor Manufacturers and Traders (SMMT), 108,205 BEVs were sold in the UK, representing a 185.9% year-on-year rise. With governmental policies accelerating the shift to BEV, and the banning of petrol and diesel car sales by 2030, BEV sales will certainly continue growing. However, retailers will have an impact on this rate of growth, and those who adapt will be able to take advantage of this transition. Whilst online information for consumers around BEV’s has improved in recent years, research has shown the advisory nature of the salesperson still has a role to play in the decision-making process, and even more so in the facilitation of this evolving sales process. The traditional sales focus has moved towards a role of managing the customer experience and new processes – for example guiding consumers through new elements of the journey including government grants, charging infrastructure, battery lease, charge cards and aftermarket capabilities. Retailers’ management of these new experiences and processes will undoubtedly impact the sales and ownership experience for customers, in turn impacting growth in BEV sales, driving positive consumer sentiment and reducing adoption concerns that will enable the acceleration of the associated environmental benefits.

In summary

Retailers’ interaction with sustainable initiatives will only grow over the coming years. Whether these be in-house decisions, OEM led or driven through new entrants in the market, growing societal and regulatory pressures will undoubtedly increase the velocity of change. Retailers will, and in some instances already are, considering their investment options and navigating their way into sustainability led new business models. Digitisation can become a short-term win, however with the growing consumer data held by OEMs and the impact of connected vehicles, a collaborative approach could be key to producing a sustainable solution. Now more than ever, sustainability will need to be a key pillar for automotive retailers, across their short, medium, and long-term strategy.

In my next post I will be exploring the evolving impact of the mobility services sector on the role of automotive retailers.