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AUTOMOTIVE

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by EOS Intelligence EOS Intelligence No Comments

Breaking Bad, Building New: Customer Engagement Model for Automakers

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Digital transformation buzz has revolutionized the way companies operate and interact with their customers across virtually all industries. Automotive industry is no exception. Customer expectations today are more demanding than ever, primarily due to the service level benchmarks set up by the likes of Amazon, Uber, and Apple, as well as due to plethora of information customers can get through the internet and social media. The rise of digital channels is fundamentally transforming the entire auto retailing business. In order to stay ahead of the game, automakers will have to break their legacy systems and build new customer-centric marketing models.

The automotive industry has always been characterized by an extremely time consuming as well as complex sales processes that often result in an unpleasant customer experience. The industry notion “People love shopping for cars; they hate buying cars” precisely depicts the challenge auto retailers have to deal with and the need for industry players to rethink their sales and marketing models to enhance the overall customer experience. The Apple and Amazon retail ethos of seamless customer interaction, simple and streamlined sales processes, effortless and speedy customer services has become the benchmark for all retailers. Even in the automotive industry, changing customer preferences, digital transformation, increased connectivity are reshaping the entire retail supply chain, with major impact on the final parts of the chain involving direct customer interaction. The rise of cutting edge technologies, tech and information savvy consumers, and new market entrants are forcing traditional players to rethink and reinvent their entire business models.

The advent of technology has significantly lowered entry barriers for new entrants in the automotive retail segment, who have brought innovative business models and fresh ideas to help customers find, evaluate, and buy new vehicles. With slogans such as “Skip the dealership” and “Find deals. Not dealers!” new players such as Roadster or Rockar are transforming automotive retailing by offering a bargain-free and smooth car buying experience that can allow the customer to purchase a car and have it delivered to their doorstep within few hours. Traditional retailers have started to realize that, equipped with massive information at their fingertips, car buyers today are better informed than ever when it comes to car purchasing. One bad experience and customers will be very reluctant to ever come back to the same retailer. Despite this realization, many companies are still ‘moving metal’ the old-fashioned way using traditional media and other marketing approaches to attract consumers to their stores.

Statistics from many industry studies make it clear that with the mass proliferation of technologies, car buying journey is becoming increasingly digital, with most customers spending a significant part of their buying time online. Studies indicate that more than 65% of the information-gathering and decision-making process is already made prior to visiting a dealership. Therefore, it becomes vital for OEMs and dealers to rethink their entire marketing and customer engagement approach. They need to interact more effectively and engage consumers early and throughout their purchase journey.

OEMs and dealers need to understand that the whole process of buying cars is quite different from the process in some other retail segments. For example, to buy consumer electronics, many consumers visit the store to see/touch/feel the product and then buy it online because of the price benefits and other offers. In case of buying cars, most customers do their research and comparison online. They visit the local dealership to see/touch/feel the car and buy it there to benefit from special discounts and offers. Hence, it is very crucial to have an integrated and seamless transition across various channels in a frictionless manner.

The introduction of new business models (direct-to-customer) and customer experience strategies (highly interactive and pressure-free brand stores) created by the likes of Tesla, or Rockar, have caught the eyes of many traditional players, who have gauged the significance of realigning their marketing and customer engagement strategies as per demands of the rapidly evolving industry. Many OEMs and dealers have started to take a hard look at their entire customer lifecycle processes to assess the current gaps and address them. Companies are reconfiguring their touch points across channels by eliminating redundant processes and services. Recently, automakers such as BMW, Audi, and Mercedes have rolled out brand stores similar to Apple’s, where customers can visualize their cars, configure them to their own specifications, get experts to answer their questions, and even buy cars in a non-pressurized sales environment. Having already seen some positive results, these OEMs are likely to ramp up their efforts to roll out such brand stores on a larger scale across cities, states, as well as countries in the near future. While not all automakers have plans to launch such stores at present, it is expected that it will not be long before OEMs with no such current plans observe and eventually follow the footsteps of OEM players that have already reaped these rewards and showed what advantages such stores can offer.

EOS Perspective

As digital transformation continues to revolutionize the auto retailing landscape, there is no doubt that advancing technologies will make the car buying process increasingly digital for the years to come. We can expect a rapid surge of various online platforms that provide customers with the ability to easily research, evaluate, and buy cars. Operating within such a highly competitive marketplace with changing customer preferences, auto retailers will have to transform their business models to become more customer-centric and deliver on customers’ expectations. They will have to reinvent customer engagement frameworks to create ones that are built around customer needs, and are simple, frictionless, more transparent, quicker, and convenient for today’s savvy car buyers. On the one hand, this will help OEMs and dealers win more business, while on the other hand customers will benefit from an accelerated and hassle-free sales process, resulting in an improved customer experience.

Although transforming current customer engagement model seems inevitable, this will not come easy and will involve massive changes in existing marketing models. At present, majority of industry players lack the resources, infrastructure, and systems required to execute this transformation. In addition, as signification investments will be required, amid current business environment with high cost and competitive pressure, many automakers as well as dealers will still continue to engage in sales the old fashioned way or adopt a ‘wait-and-watch’ stance. At a dealer level, implementation of new customer engagement model will be much slower primarily due to capabilities and resources constraints.

In the end, one thing is obvious – in order to retain today’s customers and to win new ones, OEMs and dealers will have to reinvent their marketing and customer engagement strategies. To achieve this transformation, these players will have to work together to deliver rich brand experience and match the simplified and streamlined buying experiences set by Amazon and others. OEMs and dealers should take John F. Kennedy’s words to heart “Change is the law of life. And those who look only to the past, or the present, are certain to miss the future.”

by EOS Intelligence EOS Intelligence No Comments

India – Prime Target for Smart Mobility

India’s rapidly growing urban population (CAGR 2.35% between 2011 and 2031e), increasing motorization rate (CAGR 12.7% between 2010 and 2025e), critical level of traffic congestion, growing rate of accidents, inadequate mobility monitoring and deteriorating air quality make the country a prime target for smart mobility solutions.

Mobility-as-a-Service (MaaS) could be a game changer for India’s traffic and transportation woes by seamlessly integrating the first and last mile connectivity to supplement the existing fragmented transportation systems. MaaS has the potential to help bridge the current gap between rapid mobility demand and the slow pace of infrastructure development. The rapid consumerization of IT and technology and growing smartphone penetration should help boost the adoption of MaaS, as long as the country’s government stands by its words of making India ‘truly digital’.

We take a closer look at MaaS and the potential impact it might have on India’s transportation and travel – two areas that could be radically altered.

To read further, go to Automotive World’s Q2 2017 Megatrends Magazine.

by EOS Intelligence EOS Intelligence No Comments

As GM Says Goodbye, Volvo Says Namaste India!

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18th May 2017 was a busy week for India’s automotive industry. One would think that it was the financial year end which was causing all the drama, but not really.

It was the week when, to some people’s surprise and other’s ‘that was expected’ reactions, GM India decide to call it quits – no more of the beloved (?) Chevrolet brand on India’s roads anymore. Cars will continue to be produced (or so GM claims, at least for the time being), but only to be exported to other markets in the APAC region.

The fact that GM is withdrawing from India does not come as a surprise – GM’s Chevrolet brand hasn’t performed well in India, in spite of GM introducing new models in recent years. In the segment, in which GM introduced its vehicles (mostly hatchbacks), there had already been an intensive competition from the likes of Maruti and Hyundai, and more recently Nissan. It would have perhaps been better for GM had it introduced models such as Opel or even Cadillac to lure a wider segment of India’s population. One of the reasons OEMs such as Nissan, Honda, or Toyota have done well is that they constantly innovated for the India market, changed designs, and introduced new models and variants that catered to a wide customer base. GM seems to have fared poorly on that front. GM simply failed to sense of the pulse of India’s car buyer who looks for an all-inclusive deal: value-for-money + safety + luxury + service + brand appeal + etc., which clearly was not being provided by the American OEM.

As GM was announcing its exit, Volvo, a Swedish OEM, shared the ambitious goal of doubling its market share in India’s premium segment by 2020. Interestingly though, Volvo’s announcement to start assembling premium cars did not come as a surprise. It already has a good brand name in the CV segment and in the PV segment, the section of India’s customers who would buy a Volvo car already associates it with classy design and exceptional safety. Local assembly would, in fact, be a boost for Volvo if they are able to introduce locally made, India-priced cars as well as use this India production as a hub for South-east Asia exports. Indian car buyers are hungry for more and more international OEMs to enter the market and provide them with world-class products, and cars are no exception. Albeit late to the party, Volvo has the breadth of quality products and service competence to make a strong dent in the premium segment.

So, while 18th May was good for some and bad for quite a few, the dynamics of India’s automotive market continues to keep OEMs on tenterhooks – yes, there is a great opportunity if one gets the formula right, but the pill of failure can be extremely bitter.

Driverless Autonomous Vehicles
by EOS Intelligence EOS Intelligence No Comments

Autonomous Vehicles: Moving Closer to the Driverless Future

An Uber self-driving car was reported getting into an accident in Arizona last month. But as the saying goes “any publicity is good publicity”, this also holds true for autonomous vehicles. The news sparked a discussion and shed some light on potential challenges the technology may face before it becomes available for commercial use. At the same time, it spread awareness about the level of safety testing being done to improve the technology before it is rolled out to the public. We are taking a look at what’s potentially in store for users waiting to see streets flooded with driverless vehicles.

Autonomous self-driving vehicles have been the talk of the industry for some time now, with some of the initial attempts to create a modern autonomous car dating back to 1980s. However, major advancements have only been made during the last decade, coinciding with advancements in the supporting technologies, such as advanced sensors, real-time mapping, and cognitive intelligence, which are perhaps the most crucial to the success of any autonomous vehicle.

Early advancements in the segment were led by technology companies which focused on developing software to automate/assist driving of cars. Some prime examples include nuTonomy, which has recently partnered with Grab (a ride-hailing startup rival to Uber) to test its self-driving cars in Singapore, Cruise Automation (acquired by GM in 2016), and Argo AI, which has recently received a US$1 billion investment from Ford. These companies use primarily regular cars/vans that are retrofitted with sensors, as well as high-definition mapping and software systems.

However, software alone is not capable enough to offer self-driving driving functionalities, therefore, automotive OEMs are taking the front seat when it comes to driving advancements in autonomous vehicles segment. New cars/vans, which are tuned to work seamlessly with this software, are likely to adapt better with the algorithms and meet stringent performance and safety standards required before they can be rolled out commercially. California-based Navigant Research believes that with its investment in Argo AI, Ford has taken a lead among such automotive OEMs in the race to produce an autonomous, self-driving vehicles.

Advanced levels of autonomy still to be achieved

In a nutshell, there are five levels of autonomous cars. Levels 1 through to 3 require human intervention in some form or other. The most basic level comprises only driver assistance systems, such as steering or acceleration control. Most common form of currently prevalent autonomy is Level 2, which involves the driver being disengaged from physically operating the vehicle for some time, using automation such as cruise control and lane-centering. Tesla’s current Autopilot system can be categorized as Level 2.

Level 3 involves the car completely undertaking the safety-critical functions, under certain traffic or environmental conditions, while requiring a driver to intervene if necessary.

Most OEMs developing autonomous cars target launching their vehicles in the next three to five years. Tesla is probably the closest, with its Model 3 car with Autopilot 3 system expected to be unveiled in 2018 (however, this depends on whether the regulations are in place by then). Nissan, Toyota, Google, and Volvo plan to achieve this by 2020, while BMW and Ford have set a deadline for 2021. Most of these companies are working on achieving cars with Level 3 autonomy, with a driver sitting behind the steering wheel to take over from the car’s programming as and when required.

Level 4 and Level 5 vehicles are deemed as fully autonomous which means they do not require a driver and all driving functions are undertaken by the car. The only difference is that while Level 4 vehicles are limited to most common roads and general traffic conditions, Level 5 vehicles are able to offer performance equivalent to a human driving in every scenario – including extreme environments such as off-roads.

Some OEMs, Ford in particular, are against the practice of using a human as a back-up, based on the understanding that a person sitting idle behind the wheel often loses the situational awareness which is required when he needs to take over from the car’s programming. Ford is planning to skip achieving Level 3 autonomy and target development of Level 4 autonomous vehicles instead.

Google is currently the only company focusing on developing a Level 5 autonomous car (or a robot car). The company already showcased a prototype that has no steering wheel or manual controls – a prototype that in true sense can be the first autonomous car. Tesla also plans to work on achieving the highest level of autonomy and plans to fit its cars with all hardware necessary for a fully-autonomous vehicle.

High costs continue to be challenging

While the plans are in place, one massive roadblock that persists in the development of these cars of future are costs. There are multiple sensors used in these cars, including SONAR and LIDAR. The ongoing research has helped to reduce the costs of sensors – Google’s Waymo has managed to reduce the costs of LIDAR sensors by 90%, from about $75,000 (in 2009) to about $7,000 (in 2016) – but they are still very expensive. The fact that a driverless car requires about four of these sensors, makes the cars largely unaffordable for consumers, and that puts off any discussion of feasibility of commercial production at this stage.

EOS Perspective

The first three months of 2017 have been particularly eventful, with several prototypes launched or tested. This activity is expected to increase further as companies try to meet their ambitious plans to roll out self-driving cars by 2020.

Initial adoption is likely to come from companies investing in commercial fleet, particularly those focusing on on-demand taxi or fleet, similar to what Uber or Lyft offer. Series of investments by large bus manufacturing companies, such as Scania, Iveco, and Yutong, also indicate how this technology will be the flavor of the future in public transport.

It is too soon to comment how and when exactly these autonomous vehicles can be expected to impact the way people choose to travel and how they may redefine the societies’ mobility. It is likely to depend on how the regulatory environment evolves to allow driverless cars in active traffic. Current regulatory environment for driverless cars is still at a nascent stage and allows only for testing of these cars in an isolated environment. Some states in the USA, particularly California, Arizona, and Pennsylvania, have opened up to testing of these cars in general public. However, recent accidents and cases of autonomous cars breaking traffic rules have put pressure on authorities to reconsider their stance until the cars become more advanced and tested to handle the nuances of public traffic. We might need to wait another decade or two before driverless cars are a reality in many markets. As things stand, endless efforts continue to go behind the curtain, as companies strive to win the race to develop highly autonomous and safe vehicles.

Indian automotive market
by EOS Intelligence EOS Intelligence No Comments

Tata’s Tamo Breaks with Convention, but the Fight Lies Elsewhere

Will the new Tamo sub-brand be able to change Indian consumers’ perception of Tata Motors?

Tata Motors is out to regain its place in the Indian automotive market, where it continues to suffer from a lack of trust among consumers.

Launched in February, Tata Motors’ future mobility sub-brand, Tamo, is intended to act as an incubation center of innovation’ to push new technologies for developing future mobility solutions…

Read our article published on Automotive World.

by EOS Intelligence EOS Intelligence No Comments

India Union Budget 2017: Implications for the Auto Industry

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Due to various macroeconomic factors, the Indian automotive industry has not achieved its full growth potential during the last 12-18 months.

In addition, the government’s recent demonetization policy has impacted consumer spending and created an unfavorable environment for the auto industry on the whole.

Amid these challenges, key stakeholders within the auto industry were hoping for a favorable budget which could revive consumer demand and catalyze growth in the industry.


What was expected

The auto industry had a fair bit of expectations from the Union Budget 2017 (annual budget of India). Many industry players expected last week’s budget announcement to offer reductions in existing tax structures, various incentives for R&D expenditure and promotion of hybrid and electric vehicles (EVs), and lower interest rates on auto financing. Some of the key items on the industry’s wish list were:

  • In order to support and boost government’s ‘Make in India’ program aimed at encouraging companies to manufacture their products in India, the industry expected some impetus in the form of lower taxation and other financial incentives

  • To increase vehicle sales, the industry expected lower interest rates on auto financing and larger fund allocation for the development of mobility infrastructure

  • EV and hybrid carmakers hoped for various tax exemptions and subsidies under the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India (FAME) scheme

  • OEMs expected the government to continue its 200% weighted deduction on R&D expenses

  • Industry players hoped for further clarifications with regards to incentives, timeline, etc. for vehicle scraping policy

What was received

  • Slashing 5% of corporate tax for enterprises with turnover under ₹500 million (US$7.4 million). This will benefit tier-2 and tier-3 auto components manufacturers and help them in further expanding their business as well as their R&D capabilities

  • The government earmarked ₹1,750 million (~US$25.9 million) in funding for the FAME scheme, which will further enhance the promotion of eco-friendly vehicles in the country


EOS Perspective

Although there were no substantial announcements in the budget that could directly benefit the auto industry, it surely has provided growth opportunities for it. Firstly, the government has increased its fund allocation by 11% to ₹640 billion (US$9.5 billion) for the development of national highways. In addition, 2,000 km of coastal roads are planned to be developed to improve the connectivity of ports and remote villages. These measures are expected to fuel demand for commercial vehicles in the coming years. Secondly, the income tax deduction of 5% for individual tax payers earning under ₹500,000 (US$7,425) is expected to boost personal consumption and spur demand among first-time buyers of passenger cars. Furthermore, the budget focused on boosting rural consumption by allocating more funds through various schemes. It is projected that these schemes will stimulate the demand for farming vehicles as well as two-wheelers in rural India.

For now amid no significant changes, all eyes are on the goods and services tax (GST) implementation expected to take place in July 2017. Industry experts anticipate that the rollout of GST will not only help to standardize various tax aspects, but it will also reduce costs across the industry’s entire supply and value chains. Therefore, a significant share of the impact will be seen only after the implementation of GST. Given the current scenario, we anticipate growth in the industry to rebound largely driven by government’s strong focus on enhancing consumer consumption and infrastructure development.

by EOS Intelligence EOS Intelligence No Comments

The Return of Consumer Credit – What Does It Mean for Algerian Passenger Vehicles Industry?

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(This post, along with recently published article on auto financing in Nigeria, formed a mainstay of a broader coverage article titled ‘Affordable auto financing essential for OEM success in Africa’, contributed by EOS Intelligence to ‘Guide to the automotive world in 2017’, Automotive World’s annual publication covering a gamut of articles by leading global automotive industry analysts and consultants. The report was published in January 2017)

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Banned in 2009 in order to curb the national import bill as well as the level of household debt, consumer credit was reinstated in Algeria in early 2016 to encourage the consumption of national products. In the local automotive industry, Renault Symbol is the only passenger vehicle currently available on auto financing, since Renault is the only locally assembled vehicle in Algeria. Can the return of consumer credit along with other policies provide the much needed boost to the nation’s passenger vehicle industry?

With a total population of approximately 40 million, Algeria is the second largest automotive market on the African continent. For the past several years, the country’s automotive industry has relied heavily on imports from Europe and Asia, importing nearly two million cars between 2012 and 2015. Today, the industry continues to be heavily dominated by imported vehicles, which account for approximately 85-90% of the total market. Passenger car manufacturing is limited, with Renault Algerie being the only domestic manufacturer (the Renault Algerie production plant is an assembly unit that builds the Symbol model from completely knocked down production for the Algerian market).

In 2009, all consumer loans were abolished by the government in an effort to reduce import bills as well as the level of household debt. However, in 2016, under the Executive Decree No. 15-114 of May 2015, consumer loans were made available on selected goods manufactured nationally. Under the scheme, car loans are available only on Renault Symbol, since it is the only locally-assembled vehicle.

Unlike in Nigeria and in several other African countries, where accessibility and affordability of car finance remain an immense challenge, in Algeria, a considerable part of the population can qualify for loans based on their monthly income level. As a result, major Algerian banks have seen a rapid surge of car loan applications. Although access to consumer finance has boosted car loan applications over the second half of 2016, this is not likely to significantly impact the industry growth, since consumers have no choice in selecting either brand or model. In addition, Renault’s current production volumes are very limited (25,000 vehicles per annum) and cannot meet the total local demand. However, due to the recently introduced reforms, the industry dynamics can be expected to change in the next few years.

EOS Perspective

The current economic environment, along with the implementation of licensing system and import quotas are likely to have a negative impact on the passenger vehicles industry in the short term. New vehicle sales can be expected to witness a decline to some extent in 2017. But the recent developments are also likely to push automakers to invest in setting up local production facilities. The arrival of major OEMs and their production projects is expected to serve as a growth catalyst for the local automotive industry over medium to long term. Once these projects become operational, local production volumes might increase significantly, which will provide consumers with more buying options. In addition, the ease of consumer lending could accelerate household spending, leading to increased bank lending in the automotive industry. As competition between banks intensifies, more innovative and affordable car financing solutions are likely to be available to consumers in Algeria, which can in turn attract many consumers across segments to buy new cars. The rising and young middle-class Algerians are likely to consider shifting from entry-level segment to the luxury segment, as they can spread their payments over a longer period of time (e.g. up to 60 months).

All of these efforts combined together – the recent industry reforms, auto manufacturing projects in the pipeline, and auto lending – can be expected to fuel growth in Algeria’s passenger vehicle industry.

by EOS Intelligence EOS Intelligence No Comments

Affordable Auto Financing – The Key to New Passenger Vehicle Sales in Nigeria

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Since the announcement of the National Automotive Industry Plan in 2013, the Nigerian automotive industry has witnessed an increased interest from several global automakers. As a result of the Plan as well as recent reforms made by the Nigerian government, PwC predicts Nigeria has a chance of becoming Africa’s auto manufacturing hub by 2050. However, the passenger vehicles market in Nigeria remains heavily dominated by imported second-hand cars, mainly due to the various industry challenges, including lack of access to auto financing. Could affordable auto financing schemes drive growth in Nigeria’s new passenger vehicles market?

This post formed a mainstay of a broader coverage article titled
‘Affordable auto financing essential for OEM success in Africa’, contributed by EOS Intelligence to ‘Guide to the automotive world in 2017’, Automotive World’s annual publication covering a gamut of articles by leading global automotive industry analysts and consultants. The report was published in January 2015.

Nigeria’s new passenger vehicle sales are far behind sales in countries such as Egypt, Algeria, and Morocco, despite the fact that Nigeria is the most populous country in Africa. With a giant share of nearly 80%, Tokunbo vehicles (local name for imported used vehicles) heavily dominate the Nigerian passenger vehicles market.

Although there is a plethora of industry challenges that range from lack of cohesive government policies to poor infrastructure, one of the major growth constraints at present is the lack of affordable auto financing. Due to the limited accessibility and expensive financing options, new vehicles remain out of the reach for most Nigerians.

Nigeria Affordable Auto Financing

Nigeria Affordable Auto Financing

Currently, the cost of auto financing in Nigeria is exorbitant. Amid current economic environment and credit criteria, only a small segment of the population can obtain auto loans. Therefore, most Nigerians either buy used cars or save money over period of time to buy new vehicle for cash, stalling the new vehicle sales – retail customers accounted for less than one-third of all new cars sold in 2015.

This shows how lack of financing options is holding growth in a market segment with the highest growth potential. According to Lagos Business School’s research, an affordable vehicle finance scheme could boost Nigeria’s annual new vehicles sales to one million from 56,000 units at present.

Nigeria Affordable Auto Financing

Nigeria Affordable Auto Financing

EOS Perspective

Although the National Automotive Industry Plan and recent government reforms managed to attract some FDI in recent years, the Nigerian passenger vehicles industry still remains heavily reliant on imported used cars. As the government plans to curb the country’s auto imports, as a first step, the industry stakeholders should plan policies that can make new vehicle ownership more attractive to mass consumers.

The current credit facilities offered by banks are unattractive to many consumers due to cost and credit terms. In order to fuel growth in local vehicle manufacturing and new vehicle sales, the industry, along with the help of CBN, should develop more affordable vehicle credit purchase schemes targeted at the mass middle class population.

Further, as majority of consumers simply have little or no credit history, the current lending models are not going take the industry growth any further. By leveraging on alternative credit data such as payment data from utility and telecom companies, lenders should look beyond credit scores to segment a new customer base of creditworthy consumers.

For vehicle manufacturers and dealers, there is a tremendous opportunity to move up the value chain by setting up in-house financing with the help of the right partners. By offering innovative auto finance solutions, they can push the demand for new vehicles, especially among millennial and emerging middle class first-time buyers.

Whether Nigeria is capable of becoming the next auto manufacturing hub for Africa, only time will tell, but with better financing options, it can surely boost new car sales and help the local automotive industry to progress.

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