Where are the twists and turns ahead?

The last few days have been busy for ICDP as we prepare for our spring members meeting in Berlin this week.  At this point in the year we are wrapping up a number of research streams before launching out with the new programme activity starting in April.  The spring meeting is therefore a ‘best of the best’ recap and an opportunity to look back at what has emerged over the last 12 months, some of which we anticipated, some of which is new or at least of a different magnitude.  We describe ICDP as being similar to the navigator in a WRC rally car.  We're not driving the car but we are trying to support the driver with warnings of the worst hazards ahead and where there are opportunities to make faster progress.

For manufacturers, supply chain issues which have constrained production have continued throughout the year, boosting profits for them and for most dealers.  The wave of new BEV product launches was anticipated but consumer demand is still far from solid particularly from retail customers who are the main target for used cars.  This has caused some forced registrations and disruption of residual values.  With continuing uncertainty around energy prices and taxation treatment, this is a hazard which is likely to continue for some time.  We did not anticipate a year ago the number of manufacturers who would choose to announce over the following months a transition to agency in at least some of the markets previewed.  The list of manufacturers who are declaring that they will not move to agency is not very much smaller than those who have done so or plan to.  However there have also been a number of challenges associated with that transition and whilst recent delays due to issues to be resolved is clearly the right response, a few are pressing on, potentially creating issues for the manufacturers themselves but also dealers and customers.

Dealers have generally been accepting of the changes, seemingly accepting being forced down a route with which they have strong reservations and in some cases legal concerns.  That perhaps reflects an unequal power balance in the industry, but it is also a lost opportunity where there has not been genuine engagement between manufacturers and dealers to understand how this fundamental change to the retail model can be implemented with reduced disruption and risk.  Dealers have focused much more attention on improving their used car business, aftersales reach and their digital capabilities.  These will all insulate them to some extent from disruption in the new car business, but in the end everyone in the industry depends on new car sales to feed downstream activities and profits.

The independent sector comprising the parts suppliers, distributors and repairers have again demonstrated their ability to adapt to changing technology, whether that is from electrification or more complexity in the car itself from ADAS and other features.  Scale is becoming more important and is being achieved through acquisitions and through growing membership of franchise systems which provide virtual scale to smaller players.  As manufacturers and dealers try to retain a higher proportion of the park within their world further into the life of the car, independent players seek to form relationships with large fleet operators and insurers to push back, often competing as much on service as on price.  We still see opportunities for co-opetition i.e. a blend of competition and cooperation between the franchised and independent repairer worlds and there were a few examples in the course of the last year.

Finally for the many businesses who act as intermediaries, outsourcers and technology providers to the rest of the industry, they have also adapted in the course of the last year to the various pressures that have emerged.  They will need to remain agile to avoid being locked into legacy solutions that have a limited future, and reinvent themselves around the new opportunities and needs.  In some cases we see this happening through mergers and acquisitions between existing players which extend product and or geographical reach and in others through product partnerships where the partners collectively can address the needs of a whole eco-system.

Regardless of your position within the industry, the need to understand where the twists and turns and hazards will be is more critical than ever.  Avoiding those will be the ticket to survival but understanding where the opportunities are to put the power down will be the source of differentiation.

For anyone based in the UK, we do have an open meeting covering these topics from our research which anyone in the industry is welcome to attend on April 20th at Brooklands Motor Museum on the west side of London.  If you're interested in attending details are here and you can book by emailing the Project Office projectoffice@icdp.net