What will it take to be a future leader?

My blog is again a little late this week, but it has given me the opportunity to pick up some inspiration from the Automotive Dealer Days, organised each year by our friends and partners at Quintegia in the beautiful city of Verona.  With an attendance of over 5,000 people this year, it is the largest dealer event in Europe, and next year they hope to expand and increase the international coverage.  May 14-16, 2024 – get the dates in your diary now!

In an international roundtable, we were asked to consider what image would be most appropriate to represent a mobility leader in five years’ time, and one of the images was similar to the one above – a juggling unicyclist.  It’s the one that got my vote although other images and comments were more focused on electrification, digitalisation and subscription schemes.  Those are all good candidates in terms of areas where we may see significant business change, but that is exactly the problem – they are all good and valid, but we have little idea as to where the balance will lie in any of these areas, or in other equally valid strategic paths such as the use of agency and changes in customer buying behaviour.  The connection to the juggling unicyclist for me is that if you’re in the hot seat, you need to be highly reactive and keep many balls in the air at once, whilst sitting on a less than stable foundation.

There are actually few options that I would rule out.  Personally I remain highly sceptical about the prospects for fully autonomous cars in anything other than a fully controlled environment.  (Sorry Moia!)  I do not see that manufacturers will be able to replace profit on the metal with profit from digital services, adding $1.5 trillion in revenue through on-demand mobility services and data-driven services.  (Sorry McKinsey!)  However, that leaves many options open, each offering a wide range of solutions that anyone involved in automotive distribution – manufacturers, retailers, repairers and technology/service providers need to be prepared for.

Taking mobility in the widely-recognised sense first, ICDP consumer research shows that the vast majority of car buyers will still want exclusive use to a car in 10 years’ time.  Sharing a car is fine at certain stages in your life, and for certain situations, but there’s no substitute for being able to leave your stuff in the car and the keys in your pocket.  Adjacent to car-by-the-hour mobility schemes, sits subscription, and whilst this continues to attract some attention, most consumers today actually choose options that have longer terms and less flexibility, but at a lower cost.  The boundaries between this type of subscription and a bundled lease with added flexibility are small, and we do believe that the shift from ownership towards some form of leasing or subscription will continue.  But where along that continuum the demand will focus is uncertain.

The drive towards electrification will continue as I stated in a previous blog, but the ICE parc will remain for many years, potentially prolonged by availability of e-fuels if costs reduce over time, and hydrogen will have a place, either in ICE engines or to power fuel cells.  Having identified the options, the fact that you need to be prepared to sell and support vehicles utilising a range of power trains is clear, but this has quite different implications for the skill sets needed and the frequency with which the vehicle will require attention.

Digitalisation affects every aspect of our life, and one certainty is that car buying journeys and aftersales support will become increasingly digitalised.  Whilst this presents opportunities for more personalisation, the real opportunity is in how we use that data to improve decision making and take waste out of the system.  This requires skills that few businesses have today, and will become increasingly scarce as all industries seek to apply data science.  Going beyond that, artificial intelligence will mechanise a growing number of tasks, and given the speed of development, it is probably genuinely beyond our imaginations to understand what progress will be made in the next 5-10 years.

Linked to digitalisation – but not in my view, replaced by it – is the role and format of physical retail.  Substantial restructuring and reformatting of networks is long overdue, with the challenge that the longer the delay in biting the bullet, the more painful the change will be, particularly for those who own the property and the staff who are employed there.  Too much change over a concentrated period will be truly disruptive at a human and financial level, but the change has been deferred so many times, that it is again difficult to call the point where it becomes inevitable, and indeed it is dependent on the other areas of potential change.

Perhaps finally, automotive distribution is built on relationships – with customers, but also between trading partners.  Manufacturers and dealers, parts wholesalers and repairers, technology providers and users.  We can see a certain direction of travel at the moment with the introduction of agency and consolidation of dealers, parts distributors, repairers and technology providers.  Will OEMs embrace agency and make it work?  Will we end up in the coming years with a few retailers controlling the whole car market in the same way as grocery retail as one correspondent suggested to me this week?  Personally I doubt the latter, but we can never say never.

The Greek philosopher Heraclitus is credited with the saying that “the only constant in life is change”, and I certainly believe that applies to how our industry – enabling mobility for the masses – will develop.  On that basis, better to improve our juggling and unicycling skills, than take a bet on a single outcome.