THE AFTER-SALES BUSINESS IN THE DIGITAL ERA
After-sales business remains one of the main pillars of the value chain in the automotive industry. Although it is an extremely competitive market where, among other factors, the progressive increase in the intervals between maintenance services, as well as the strong presence of independent networks, have presented many challenges, the fact is that this business can represent between 30% and 50% of the profit depending on the manufacturers. Forcing each player to fight hard for every single point of market share.
However, new telematics technology is seen by OEM’s and their dealer networks as a powerful tool that can help them improve the experience of using their cars. Simultaneously, it is a way of regaining the market share they have been losing over time. But to capitalise on this trend they have to develop an infrastructure to connect with consumers, be they individuals or companies.
At the Web Summit this year two presentations stood out in this context and revealed in more depth how this infrastructure is being designed and built. Sabine Scheunert and Dieter May, two senior figures responsible for Daimler’s and BMW’s digital strategies respectively, had coinciding visions. Both emphasise a disruptive approach where the main focus simply shifts from the mechanical performance of the vehicle to a definitive customer-centred emphasis on the digital experience. The concept of an automobile as a living connected object (with which one can even speak), a deeply personalised experience that accompanies the consumer throughout the cycle of contact with the brand. It is quite evident that every manufacturer is creating their own ecosystem and focusing on the excellence of the customer experience, whatever their contact with the brand. And here this interaction is considered so broadly that it can even include the car-sharing of the respective brand. And in reality, this strategy is nothing new and we live it daily, for example in the Apple environment.
“If we cross the potential of connected vehicles with the relative mechanical simplicity brought about by electrification, we can expect that the current after-sales business model will be completely transformed.”
Indeed, the generalisation of telematics gives the manufacturer a new perspective of how their vehicles are behaving on the ground and when they need maintenance or repairs, which can be a mere remote software update or a part that actually needs replacing in a workshop. As the data becomes more relevant and accessible to the manufacturers, they are able to communicate directly with the customers through the cars and advise when and where maintenance or a possible replacement should be done.
On the other hand, it is undeniable that all of this data is owned by the user, but surveys show that users are ready to share this data in exchange for a better user experience. It is true that the consumer may even choose an independent workshop, but the experiments already carried out show that in this case, they are more likely to go to the brand.
The construction and maintenance of this type of ecosystem can, in fact, give a huge competitive advantage to the manufacturers. Although these provide for the coupling of third-party services, let’s see how legislation will accompany the stunning development of the technology, how free competition can be safeguarded by using, for example, open external platforms such as “Carmunication” (also favouring the appearance of new start-up companies working in this area, challenging the market leaders) and how this all remain in-keeping with the unavoidable requirements of data protection.
To sum up, if we cross the potential of connected vehicles with the relative mechanical simplicity brought about by electrification, we can expect that the current after-sales business model will be completely transformed. This is undoubtedly a challenging time, but it is also exciting and promising for those who want to invest grey matter and means to position themselves and take advantage of opportunities. For, despite everything, and as always, there are no winners at the start.
Reference:
Hauser, K. and Wilkinson, A. (2016). Time to tap new after-sales revenue streams — Automotive Manager 2016. Oliver Wyman. [online] Available at: http://www.oliverwyman.com/our-expertise/insights/2016/jul/automotive-manager-2016/services/time-to-tap-new-after-sales-revenue-streams.html [Accessed Dec. 2017].
Breitschwerdt, D., Cornet, A., Kempf, S., Michor, L. and Schmidt, M. (2017). The changing aftermarket game — and how automotive suppliiers can benefit from arising opportunities. McKinsey & Company. [online] Available at: https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/the-changing-aftermarket-game-and-how-automotive-suppliers-can-benefit-from-arising-opportunities [Accessed Dec. 2017].
** Opinion article originally published in Fleet Magazine paper edition /December 2017 **
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All opinions expressed are my own and not to be associated with my employer or any other organization I am associated with.
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