Rising expectations around sustainability, new definitions of luxury and digitally-enhanced vehicles are set to change the way people think about cars forever. Now is the time for the automotive industry to reimagine products, services and experiences that deliver against customers’ new values, wants and needs.
Connectivity, autonomous vehicles, electric and shared driving are four megatrends that have been disrupting the automotive industry—causing unprecedented technology and business model transformation.1These innovations have forced organizations to rethink many aspects of how they do business.
On top of this, lockdowns and social distancing measures, caused by the pandemic, sped up critical shifts in consumer behavior. Consumer focus has moved from convenience and simplicity to prioritizing sustainability and redefining notions of “ownership.” This shift has created a significant impact on original equipment manufacturers' (OEMs) futures.
The global passenger car market—valued at $1,321.74 billion in 2020—was being tipped to increase at a compound annual growth rate (CAGR) of 9.3% this year and at a CAGR of 8% to $1,988.72 billion by 2025, according to one survey of the global passenger car market published in February 2021.
People will expect more of their cars in the future—more safety, more experience, more flexibility and more integration into their daily lives beyond simply being a mode of transportation.
OEMs have an opportunity right now to reimagine the role of cars in people’s daily lives—reestablishing their value and rebuilding the emotional infrastructure and relationships humans have with them.
Moving forward, OEMs need to organize the whole business around the delivery of exceptional experiences, which is what we call the Business of Experience. This means rewiring the customer-facing functions of the organization: marketing, commerce, sales and service. The Business of Experience is an approach that allows organizations to become customer-obsessed and reignite their growth.
Here, we identify four opportunity areas. Each is significant and important in its own right. Combined, they represent a reimagination of the whole automotive domain. This is the time for OEMs to take innovation seriously and holistically reimagine the automotive experience in line with technological progress and human change.
When buying a car, customers want a digital-first experience that combines the flexibility of virtual product interaction with the convenience of buying online and the personal consultancy of a dealer. With the use of e-commerce and expectations of brand experiences driven to new heights by the pandemic, now is the time to reimagine the car sales experience.
When it comes to sustainability, the automotive industry doesn’t have a great track record. But at a time when consumers don’t just want change—they are demanding it—organizations have a powerful opportunity to take the lead in driving the sustainability agenda forward through the products, services and experiences they create.
3. FROM LOST TIME TO PRIME TIME: CARS AS EXPERIENCE PLATFORMS
Cars no longer just get us from point A to B. Now, they act as a charger, workspace, entertainment venue and stage for a growing part of daily life. With cars now valued for convenience, as well as being perceived as safer than public modes of mobility, the time is right to upscale ambitions for what the future in-car experience can and should be.
4. PREDICTIVE PERSONALIZATION TO INDIVIDUALIZED INTERACTION
As OEMs shift their business models—from product-focused to software services—business is no longer “as usual.” Software-defined vehicles require not only new production approaches and ways of working, but also a paradigm shift in how drivers and passengers experience vehicles and what they can do above and beyond transportation.
Car buyers want a digital-first experience combining virtual interaction, the convenience of buying online and the personal consultancy of a dealer.
RADICAL CHANGE DRIVEN BY REALISM
Consumer trends in the automotive industry have long been powered—and characterized—by change. From shared mobility to carpooling and communal mobility, there has been a massive shift in how people move from point A to B. Now, the industry stands on the brink of a radical change in attitudes toward car ownership.
Yet to date, many services have struggled to deliver against what change demands, creating a perception that singular and one-sided solutions are not up to the job because personal mobility is too complex, too contextual and too diverse.
Meanwhile, consumers’ expectations continue to rise—especially around sustainability. People want more from their cars, and they want the companies behind them to deliver more, too.
OEMs need broad-based openness and courage to veer from the beaten track and embrace the era of technology in order to reinvent the automotive industry from the core. They need to integrate personal, shared and public transportation infrastructure into a seamless experience that adapts to the different needs of consumers. And they must address a set of underlying, accelerating trends that fall into two broad categories.
People are reluctant to accept compromises around mobility—a necessary part of modern life and society—and they are often blind to the contradictions that exist. For instance, on one hand they strive for the luxury and flexibility of owning a car, on the other hand they’re increasingly demanding more sustainable mobility solutions.
As a result, people feel torn between wanting to embrace greener lifestyles and not wanting to forgo the daily convenience of private mobility. They want everything at the same time and they expect OEMs to expand their offerings accordingly.
Meanwhile, cars are taking on new roles in people’s daily lives. Increasingly, they’re being reconsidered in terms of both functionality and usage. And as cars become more connected, flexible and adaptive, they’re offering many of the features of a home away from home.
OEMs need to rethink their entire business around people’s new demands and respond to the value created by digital experiences.
To do this, they need to scale flexible digital capabilities across both their main business and the entire value chain—from new points of sale and payment models to logistics, production and product innovation.
Challenged by new entrants, new digital disruptors and new partnerships, incumbents also need to embrace agile software delivery, fast iteration cycles and constant expansion of digital services as areas of growth.
STRIVING FOR A HOLISTIC VIEW
What’s needed now is to reimagine the automotive industry’s foundational building blocks—explore completely new areas of value and expand the range of experiences in the daily lives of their customers.
It’s too easy to focus on incremental areas of improvement. Instead, what’s needed is an understanding of mobility as an integrative layer of working, living, social experiences and health. This understanding will offer progressive OEMs the opportunity to redefine their value propositions, set new industry standards and reimagine the future of mobility.
New digital sales experiences will make choosing and buying cars as smooth as the drive itself by offering radical transparency and letting people experience the vehicle in a virtual setting. Reimagined physical touchpoints will evolve from singular options to interconnected points that support and elevate the digital experience in the offline world.
As we move into new frontiers of sustainability, the road to zero emissions will be paved with electric options, circular production and new models of shared mobility, going from one-time purchases to total cost of ownership. Meanwhile, expanding the car into a more versatile tech device will turn it into a true companion.
The decoupling of software and hardware can help us wrap consumers in a software bubble that moves with them from vehicle to vehicle has the potential to create a whole new paradigm.
OEMs that have high ambitions for human experience and embrace this kind of meaningful innovation will grow and sustain their mission while leading a positive shift in the automotive domain. They’ll need to be ambitious because radical expectations demand radical ideas.
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