RESEARCH REPORT

In brief

In brief

  • Most established OEMs stick to the traditional sales approach, leaving many customers dissatisfied with the way that cars are currently being sold.
  • New competitors are challenging the traditional sales model by directly assessing customers’ needs and providing them with convenient experiences.
  • With the introduction of these newcomers, established OEMs are racing to design new and innovative sales models that meet evolving customer demands.


The automotive industry is at a tipping point

The days in which established OEMs have independently set the tone in the automotive industry are over. Four megatrends are revolutionizing the business: electrification, autonomous driving, connectivity and the sharing economy. Every single one of these trends is powerful, but their combination is profoundly disruptive.

The game is changing. Inspired by their experiences in other industries and the rise of new technologies, customers are seeking a new, modernized automotive sales journey. Especially young customers are increasingly dissatisfied with the way cars are currently being sold.

New disruptors such as Byton, NIO, and Carwow have responded to the changing market environment, offering futuristic vehicle designs at affordable prices. Most importantly, however, their transformation of the customer’s journey of buying a car into a simple and convenient experience is posing a tremendous challenge to OEMs.

This is forcing legacy OEMs to reimagine their sales strategy and retail network to meet future customer demands and maintain their competitive advantage.

Traditional automotive sales models are at risk

The traditional automotive sales model relies on independent dealers which occupy a central role in pricing, marketing and sales. By purchasing vehicles from the OEM and reselling them to the end customers, they generate the bulk of OEMs’ new car sales revenues.

For OEMs, the traditional sales model has three identifiable weaknesses:

Unsatisfying customer journey

Despite an inconvenient purchasing experience, marked with inconsistencies and breaks between channels, alternative online options are very limited.

Inconsistent prices and intra-brand competition

Inconsistent pricing creates intra-brand competition and reduces dealers’ profit margin by 1-3 percent.

No direct access to customers

OEMs have limited or no direct engagement with the customer. This limits their ability to aggregate customer information, even though data-driven business models are essential for future success.

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Online and direct sales as the future?

To provide an improved online experience for their customers, several OEMs have started to experiment with online sales and launched their own online stores. However, adoption of these online stories is slow and the customer experience they offer is inadequate.

OEMs have little experience in online sales and are reluctant to push online solutions due to concerns of cannibalizing dealer’s sales.

For this reason, some OEMs have started to copy the direct sales model of new disruptors. This means that OEMs orchestrate all distribution channels and sell directly to the customer, whereas dealers transform into agents who receive a premium-based compensation.

While this seems simple, it represents the largest transition alongside the introduction of electric and autonomous vehicles. To get it right, OEMs need to strive for excellence in three areas:

Achieving customer centricity

OEMs need to put the customer at the heart of their operations. They must invest in the right organizational set-up and IT infrastructure.

Securing dealer involvement

Traditional OEMs’ existing dealer networks are assets, and especially valuable to newcomers. But getting dealers on board is challenging.

Transforming the core

OEMs need to be ready to rethink their business structure. Transforming the company’s organization and technology is a bold but necessary step.

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Time to move

Given the tremendous disruption ahead, transforming the sales model is only the first step of the journey towards a completely new era for the automotive industry.

Advancements in electrification and autonomous technologies require enormous investments. Given that 30 percent of the local list price are currently consumed by costs of retail, optimizing the sales model can stem some of these investments.

With ridesharing and other shared mobility concepts booming due to decreasing costs, car ownership is becoming less and less important. Here, direct customer access is important for OEMs to master their transformation from retailer to mobility provider.

If OEMs do not act fast, they risk losing 30 percent of revenue to new competitors by 2035. Pivoting to a new, innovative sales model can shield OEMs from impending digital disruptions and prepare them for the challenges of the future.

Overall, OEMs are in a good starting position. But it’s time to move now. Are you ready?

Axel Schmidt​

Senior Managing Director and Global Automotive Lead – Accenture


Johannes Trenka

Managing Director – Accenture

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