12 February, 2021
2020 was a tough year for the automotive industry. Already mired by years of tech-adoption flux and now down 14.5% overall, businesses throughout its ecosystem were ill prepared for the initial sales drop off and ensuing race to the digital realm. Compounding matters was a vulnerable supply chain that led to manufacturing and sourcing issues during a most critical time; selling cars is tough enough during a global pandemic, but becomes nigh impossible with none on the lot. For the optimists among us, however, it could have been far worse. This end-of-decade crisis could very well be the catalyst required to force progress by giving organizations no choice other than to finally adopt the technological innovations other industries have long turned to their advantage.
With the industry now rebounding due to a combination of aggressive incentives, contactless purchasing options, and EVs within reach of every budget, we’re witnessing the beginnings of a renaissance of sorts. Frost & Sullivan estimates a “brisk 8% year-on-year rise in sales in 2021.” Past blogs have discussed the benefits of digital platforms as well as how dealerships can benefits from a comprehensive digital strategy, but today’s market shift is more than the sum of these parts. Major players are making moves and picking sides on the hunt for market share. Google Cloud recently solidified a deal with Ford, muscling out former partner Microsoft and their rival Azure cloud platform.
Of interest, this deal includes Google license fees for every Ford and Lincoln car sold starting in 2023. Thomas Kurian, CEO of Google Cloud, stated that their partnership with Ford is strategic because “it links all the elements: The experience people have in the cars while they’re driving, the experience they have in the front office, the transformation of manufacturing and supply chain, and the modernization of the IT system.” Ford is similarly optimistic, opining that “we can create these new retail experiences for customers buying a vehicle, when a customer owns a vehicle you get all sorts of opportunity with connected data for the services we can create for them.” It’s clear that within the successful automotive business of tomorrow, the customer experience will transform from a firm handshake to a digital signature.
Across the pond the world’s second largest automaker, Volkswagen AG, is mounting its own challenge to Apple and Amazon by developing its vehicle software in-house. “Volkswagen has bundled its software competence into a newly formed unit Car.Software.Org, which employs about 5,000 and develops the VW.OS operating system.” Apple is also rumored to be eyeing a possible entry into the market, though details remain scarce. Shell, too, has seen the writing on the wall and has cut a deal to acquire ubitricity, the UK’s largest public electric vehicle charging network. From in-vehicle connectivity solutions to full on driverless cars and EV infrastructure, these investments all have one thing in common: they all view enhanced connectivity as the entry point. Indeed, Tesla’s meteoric rise demonstrates that deep technological investment remains the primary driver for success. “Every one of these areas can undergo fundamental changes, and those changes will be decisive in determining which startups will flourish and which collapse in the coming years. Interestingly, the one thing that will likely remain constant is data, cloud, and software…” As information from connected vehicles becomes more accessible, the tools to capitalize on this data will become increasingly valuable. By leveraging connected solutions that communicate directly with vehicles in motion, businesses across the automotive spectrum can finally make use of the data they’ve been so diligently collecting – by marketing to drivers whenever their vehicles malfunction, need repairs or break down.
For an industry where convenience and choice reign supreme, the leap to digital is the logical progression. Recall for instance that during the 1960’s drivers had to trek to dealerships for a lengthy oil change, though beginning in the 70’s were able to swing by a dedicated quick lube location and be out within minutes. The same evolution applies today with regards to vehicle service and purchases, as evidenced by the rise of digital-first dealerships such as Carvana. With vehicles being bought online in record numbers, customers undoubtedly expect the same frictionless experience when it comes to maintaining them. Technology, from AI and chatbots to V2V connectivity are fast becoming the primary drivers for the entire automotive sales cycle and beyond.
The Automotive industry has the raw material necessary to drive radical innovation in our data-driven economy; Internet-enabled cars and a mobile-savvy consumer base provide all the information necessary to capitalize on our “new normal”.
Following the shock of the global pandemic and consumer reluctance for shared mobility services and in-person shopping, digitization has become not only the goal but the means to salvation for businesses struggling to stay afloat in a sea of change. It is these connected digital platforms that can deliver the means to capitalize on changing consumer preferences, optimize the supply chain, and exploit digital channels. Evolve or die – there is simply no other choice.
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