Revolution in Retail Automotive

Updated: May 27

Like at no other time in recent decades, the retail automotive sector is well into a period of disruptive change. While widely derided as an industry resistant to meaningful change, the Covid-pandemic has only accelerated a number of emerging themes creating an irresistible force.


Quite divergent in origin, these emerging themes form a catalyst that proactive manufacturers, retailers and others may embrace in addressing outmoded distribution models and their historically razor-thin margins.

Climate Change and Alternative Fuels – The impact of transportation-related emissions on climate change is the most potent issue facing the automotive sector. While manufacturers (“OEM”) bring new technologies (“EV”) and infrastructure to market, the UK is among a number of nation’s that have already legislated a time-limit on the internal combustion engine (“ICE”).

eCommerce – Ubiquitous in almost every other retail sector, the specific model of eCommerce that will address retail automotive has arguably not yet been defined. However, the emergence of lease brokers 20 years ago highlighted the on-line imperative of franchised dealers and the more recent introduction of “virtual” dealers like Cazoo, Cinch and Carzam has captured investors imagination.


Used Car Superstores – The historically negative stereotype of the used car buying experience is fast becoming a thing of the past. Following the lead of US-based Carmax, used car superstores focus on an enhanced customer experience in offering large volumes of in-demand make/models in reliably good condition and at attractive prices.

Recognising the importance of used car profits to their bottom line, the larger franchised dealer groups have taken note of superstore success with many acquiring or developing their own similar operations.



Finally, virtual superstores like US-based Carvana and Vroom, Driverama and AutoHero in Europe and Cazoo, Cinch and Carzam here in the UK have only accelerating the trend of enhancing customer experience towards a positive used car buying experience.


Omni-channel Marketing – The traditional wholesale/retail paradigm that underpins new car distribution is already under review. A number of manufacturers are exploring an “agency” concept in which dealers no longer earn gross margin on their own inventory, but rather accrue commission as local reps of sponsoring OEMs.


While no one is yet clear as to how such transition will occur, OEMs aim to weave their newly re-defined agents into an omni-channel relationship direct with end-users creating:

  • Much closer identification between manufacturer and driver/owner,

  • Incremental revenue opportunities,

  • More influence over the vehicle throughout its life cycle and a

  • More cost-effective distribution channel.

Mobility-as-a-Service – Initially attributed to the “millennial” generation’s shifting preference from car ownership to car “usage”, MaaS (or Car-as-a-Service if you like) has given rise to a raft of new vehicle-access models including:

  • Ride hailing,

  • Car sharing and

  • Car subscription.

In truth, this shift has been well-underway since the emergence of contract hire as a dominant trend in new car distribution. However, adoption of MaaS will fundamentally shifts ownership from end-users to service providers

Autonomous and Connected Vehicles – Sometimes derided by cynics as a solution looking for a problem, self-driving cars have certainly captured public imagination. While possibly not an address to private car usage, autonomous vehicles should make a significant impact on the future of public transportation.


Beginning with General Motors’ “On-Star” product, cars are becoming well-connected elements within a 5G revolution. From entertainment to communication to vehicle telemetry, the car is becoming an important connected “node”.


Circular Manufacturing/Markets – A further address of the growing climate crisis, circular manufacturing includes the pre-design of components for efficient re-manufacture. The issue is particularly important for EVs where battery manufacturing, performance preservation and recycling are quite topical issues.

Conclusion

These emerging themes define what is becoming a watershed moment in retail automotive. Established automotive retailers and new start-ups alike require fresh, but rational thinking as to how to enhance the way in which OEMs will build, retailers will market and customers will access mobility assets and services in a changing environment.






IMG_0021.jpeg

Having spent a significant career in the global daily rental and leasing sector, I can't seem to put down these issues in a disrupted retail sector.

Post Archive