Skip to Main Content
Aerial image of two rows of white vehicles lined up in a parking lot

Insight

COVID-19: What’s Next for Automotive?

This article is part of a series on long-term strategies industries and sectors can take in response to COVID-19.

The global automotive sales forecast for 2020 is likely to decline by more than 12 percent from 2019 as the majority of OEMs have stopped production for several weeks and many dealerships have closed their doors in response to the COVID-19 crisis. While some industries have enhanced their e-commerce offerings to make up for the sudden halt in foot traffic, few original equipment manufacturers (OEMs) are ready to sell online. Online sales aren’t limited to offering cars virtually–it should be an end-to-end solution inclusive of the transaction. Although OEMs will face short-term losses, they must not pull back on digital investments and continue to forge ahead with measures that will bolster recovery and resilience in the long-term.

While timing for the return to business as usual remains unknown, the automotive market will pick up—but the overall market and customer purchase behavior will change. Among G7 countries, seven out of 10 consumers say their household income has been or will be affected by COVID-19. As a result, buyers will be more cost conscious and will look for the best deal when purchasing a vehicle, meaning OEMs must foster bonds with their customers to build brand loyalty and convert prospects rather than solely compete on cost. Through the global crisis and beyond, OEMs must continue to interact with their prospects and customers in a personalized manner online, a channel that is now critical.

Once re-opened, dealerships will have old inventory that needs to be moved while factories will struggle getting new inventory to those dealers fast enough after prolonged closures. To jumpstart sales in the short-term, dealers will offer massive discounts, incentives and payment flexibility while making attractive offers to increase lease duration.

In the absence of an e-commerce capability, dealers can make house calls for customers looking to purchase vehicles, offer at-home test driving, provide pick-up and drop-off for servicing, or even perform at-home repairs. Traditional sales techniques and the pre-owned process will shift, opening further opportunities for services and new ownership models.

Customers are seeking flexible solutions to avoid the risks that come with an expensive vehicle purchase. With migration towards cities, changing customer preferences and the impact of the crisis on consumer income – OEMs must rethink their approach to products and services to focus on initiatives that provide customer value. Services like subscription models, third-party integration, digital concierge, car sharing and telematics are not only different in terms of how they’re developed, but also how they go to market. Services require continual updates that are based on data and customer feedback to remain relevant and focused on customer value.

Author

Magda Stefanski

“Customers are looking for flexibility and there are several new players entering the market to meet this need. OEMs have to catch up in the services space in order to maintain market share as well as the connection to the customer.”

Alyssa Altman
Alyssa Altman , senior vice president, transportation and mobility, Americas

While OEMS have made some inroads in the services space, they are still vying for business models that are profitable and scalable in the long term. Audi’s concierge-based car rental service, Silvercar by Audi, is one mobility service that has succeeded in test markets due to reasonable rates, an app-based reservation system and fleet of well-equipped silver Audi A4s and Q5s. Additionally, platform-based companies like Sixt and Fair.com have entered the automotive market along with existing platforms like Zipcar in the U.S., offering user-friendly apps and subscription services for vehicle rentals, car sharing, ride-hailing and leasing. Alyssa Altman, senior vice president, transportation and mobility, Americas, advises that OEMs focus on what customers expect, and then exceed those expectations. She says, “Customers are looking for flexibility and there are several new players entering the market to meet this need. OEMs have to catch up in the services space in order to maintain market share as well as the connection to the customer.”

Once in-person channels are operational, pre-sales, sales, after-sales, used car sales and mobility services across online and offline channels must be integrated to provide a frictionless customer experience. At the same time, OEMs are facing cost-cutting measures internally, increasing the importance of efficiency and better decision making. In order to spur growth with less resources over time, OEMs must lean on data and analytics to inform targeted investments in activities, content and channels across the customer buying journey.

One way to achieve this is through a customer data platform (CDP) to collect, store and unify customer information in order to:

  1. Impart deeper customer insights fast enough to outperform broad-scale marketing
  2. Enable an omnichannel experience while maintaining data privacy
  3. Infuse customer-centricity throughout teams, departments and channels

By combining their customer relationship management (CRM) platforms, data collection systems and analytics tools under one CDP, OEMs will have access to a 360-degree view of their customers where every customer interaction and touchpoint is informed by and generates customer intent. The conventional focus on sales transactions will shift to a focus on experience and ultimately customer lifetime value.

“When OEM headquarters, national sales companies, importers and dealers all work towards the same set of key performance indicators, we’ll start to see better collaboration and greater efficiencies. Functioning as one organization with shared data and goals will improve customer experience and ultimately increase sales and loyalty.”

Matthias von Alten
Matthias von Alten , global head of strategy, transportation and mobility

According to Matthias von Alten, global head of strategy, transportation and mobility, OEMs have to take a dual approach: 1) centralize and analyze data across all touchpoints into one data lake and one tech platform and 2) break down siloes between channels and key players from headquarters down to dealers. “This is not easy, but it is essential. When OEM headquarters, national sales companies, importers and dealers all work towards the same set of key performance indicators, we’ll start to see better collaboration and greater efficiencies. Functioning as one organization with shared data and goals will improve customer experience and ultimately increase sales and loyalty”, von Alten says.

The COVID-19 crisis comes as the automotive market has already set the wheels in motion for business transformation due to legal requirements and increasing standards of customer experience. While people will always have the need for mobility, they will also have higher expectations when it comes to service and will choose the OEM based on the experience and value they provide. While new customer acquisition remains important, customer retention and loyalty will be paramount for OEMs, as loyalty leads to customers re-purchasing from the same brand, and those customers are more likely to recommend the brand to others. By focusing on customer lifetime value, OEMs stand a better chance at recovering swiftly from the crisis, driving future growth and building resilience into their businesses. OEMs shouldn’t wait until the COVID-19 crisis is over, they should start their engines now.

Our Latest on COVID-19 and Automotive

Alyssa Altman
Alyssa Altman
Industry Lead, Transportation and Mobility - North America