From the current level of $18 billion, digital platforms are forecast to influence sales of $70 billion (or about 19 million units in sales volumes) in India by 2020.
12 May 2017 | 2905 Views | By Amit Panday
According to a research report titled ‘Changing Gears 2020: How Digital is Transforming the Face of the Automotive Industry’, compiled by leading management consulting firm Bain & Company and Facebook, almost 70 percent of automotive sales in India will be influenced via several digital platforms by 2020.
The report ...
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According to a research report titled ‘Changing Gears 2020: How Digital is Transforming the Face of the Automotive Industry’, compiled by leading management consulting firm Bain & Company and Facebook, almost 70 percent of automotive sales in India will be influenced via several digital platforms by 2020.
The report claims that US$ 18 billion worth of automotive sales in India is influenced by the digital platforms currently. It forecasts that this number will rise to US$ 70 billion (or about 19 million units in sales volumes) by 2020, thereby highlighting the rapidly growing importance of the internet.
The findings in the report are based on the responses from 1,551 vehicle owners who had purchased their vehicles in the last 12 months. The report also surveyed the factors that influenced their purchase decisions. This was supplemented with a survey of 87 dealers and conversations with top management teams across automakers.
The report also drew insights from Bain’s global automotive consumer survey that included respondents from the US, the UK, Germany, China and India.
Disruptive tech to see evolving business model
The study underlines the growing significance of internet data on mobile phones. It points out that 80 percent of online research is done on mobile phones today and is likely to rise further depending upon the increasing penetration of smartphones and mobile data connections.
Besides automotive sales, the joint study also highlights the consumers’ changing mindsets towards mobility solutions. More than 40 percent of lead consumers are reportedly using app-based taxi services (Uber, Ola etc) for over 3-4 times per week.
Noting the fast changing role of automotive dealerships, the research study communicates that prior to visiting the dealerships almost 81 percent respondents make up their mind on their budgets and price points, 72 percent pre-select the car / manufacturer brand and 49 percent come after deciding the model of their choice. To add to that, nearly 40 percent take the decision on specific vehicle variant (within the model portfolio) prior to visiting the showroom.
This questions the contribution of the sales force at showrooms and dealerships in terms of their influence on buyers’ purchase decisions. It also conveys that among the dealerships surveyed, nearly 85 percent rely on bulk-texting and database calling as their only tool for drawing in customers.
In the report, Bain also estimates that the profits from automotive OEMs’ core activities like vehicle engineering, manufacturing and sales could drop by about 8 percent from 2015 to 2025, even though the industry profits are projected to grow about 35 percent in the same time period.
Moving forward, the report predicts that post-purchase activities are going to be the next digital frontier. “By 2020, over 40 percent of consumers are expected to book services online and about 30 percent will go online to purchase accessories, up from 14 percent and 8 percent respectively, today,” quotes the report. It also outlines that most Indian OEMs are behind the curve in terms of their respective digital investments.
Five imperatives for automakers
The report anticipates five critical imperatives for the automotive OEMs to consider in this new competitive landscape:
Follow the profit: Evolve business models to tap into shifting profit pools. Explore partnerships and targeted investments both forward and backward in the value chain to participate in profitable future businesses, such as connectivity software and mobility platforms.
Follow the customers: Radically change the investment mix to move online with them. Increase the proportion of digital marketing investments with a disproportionate focus on discovery and consideration.
Build the dealership of the future: Differentiate the retail format. Convert dealerships into brand experience centres by developing differentiated retail formats with innovative virtual-physical layouts.
Change the game: Use product digitisation to enable deeper ongoing customer relationships. Move from one-time engagement to ongoing relationships by offering services like pay-per-use insurance and smart maintenance.
Invest in the backbone: Build data and analytics capabilities. Build the capability to integrate data from multiple sources and perform the right analytics.