Forces of Change on the Path to Car PurchaseBy Mr. Hui Liang, President NETSOL Technologies, China on 13-07-2021
Vehicles have certainly gotten more complex over the years. Customers want to have better insights into product complexity and features and a comprehensive understanding of the technicalities.
As the pandemic unfolded globally, things went from bad to worse for the global auto industry. Almost all key economies experienced a slowing downward trend and were impacted by a hard hit. Worldwide car sales fell to just under 64 million automobiles in 2020 (Statista).
COVID19 disrupted the supply chain for electronics makers, which are the brains of modern cars which furthermore, left automakers scrambling to secure the required components. The broadest shutdown of vehicle plants and closed showrooms due to lockdowns sent sales down the drain. The auto industry expected a ray of hope in the following year, which came sooner than later. But the rise of 2021 brought the great fall of the semiconductors. Realization hit late to auto parts suppliers running short on dozens of microprocessors needed for each car as chipmakers were slammed making semiconductors for gadget makers.
After the restrictions were eased and factories reopened, demand bounced back faster than expected. The Corona-stricken auto industry had a devastating growth and required immediate attention to reimagine the auto industry's future to accommodate the high demand. Car sales gained momentum in the first half of 2021 to approximately 70 million (Statista). According to the S&P rating, it is forecasted that by the end of 2021, global auto sales will expand to 83 million-85 million. Every region had an uneven recovery pace, with China in the pole position, North America being second and Europe catching up on the third.
The Need to Facelift Sale-Purchase
As the recovery phase rolls out, the auto industry is in a dire need to fill in all the loopholes and define new standards to survive and thrive. To achieve that, a concern of utmost importance arises, and that is the consumer's car-buying journey. The process of acquiring cars can be tedious. This factor contributes and is changing opinions about the need to own a car and the vexation many buyers have when shopping for a car. Buyers are comparatively less willing to go through the rigmarole. Car dealerships are now considered a waste of time. Buying cars can often be considered an anxiety-inducing ordeal that can last hours. A survey suggested that one in three Americans would rather sit in the middle of an airplane seat than go through the process of buying a car (Edmonds).
Vehicles have certainly gotten more complex over the years. Customers want to have better insights into product complexity and features and a comprehensive understanding of the technicalities. The most frequently sighted pain points tend to be when customers are sitting in the finance and insurance office, often up to an hour or more filling out all the paperwork and negotiating terms of the deal. Many customers feel that they are unprepared for this long, complex discussion with sales representatives. High-pressure sales tactics can turn away customers. According to a survey, 30% of the customers sighted that a dealership did not have a required model in stock. In many cases, cars are out of stock and the customer is asked to revisit or visit another branch for a car inspection. This has made the process of car sale-purchase tremendously inconvenient for its customers. Moving forward such measures should be taken which will ease out this hectic journey.
Digital is the Answer
Technology has changed consumer buying patterns and has aided companies to innovate and accelerate. 95% of the information is gathered over the internet about the purchase the customer wills to make. Digitalization is a great innovation that allows brands to bypass geographic restrictions and provide a better experience for their customers and prospective buyers. Virtual car showrooms are emerging as a powerful trend. They give a complete picture of the potential car purchase to see if a particular model is a good fit for the customer. The automotive industry is undergoing many technological advancements which have provided the buyer comfort, ease, and satisfaction. Potential buyers not only see the car but can fully customize it according to their desire. Using various virtual reality car applications, customers can see, hear, experiment with, and even drive their favorite model without having to leave their homes.
Customers can now almost complete the entire paperwork process peacefully online, which they do seemingly prefer, compared to doing it at the dealership, making the entire process hassle-free as they can get as much information about the transaction's financing side as possible. They can think it through, process it, and then make a decision. Consumers have generated more interested in paying monthly or annual fees for access to a periodically updated product or replaced.
With everything put together, the formula equates to the customer-centric approach of car selling rather than product-centric, making it easy and suitable for the customer. Now, pizzas and cars are just a click away.
The Upcoming Buying Audience of Cars
They are known as generation Z. Gen Z are very comfortable doing their research and making a decision based on what they have discovered because they have grown up on the internet. They are relatively well educated on the auto market and want to research and compare vehicles on fast and intuitive websites. They are way more practical than Millennials. The next generation of car shoppers are very considerate about their financial situations and demand more approachable solutions. They are hesitant to buy new vehicles and take on more debt while ride-hailing and other transport mediums solve the commute problem. A current trend suggests that this pragmatic demographic is more inclined towards used cars, and leasing is also becoming quite popular amongst them.
Dealers need to incorporate digital retailing, integrated inventory management, and Omni-channel communications to match their pace. The touch-feel concept is less of a concern for them; instead, brand coverage, social media presence, and other digital platforms make an extensive impact on their car purchasing journey. They are more attracted by multi-channel retailing, where they are provided with multiple touchpoints to get what they want and when they want it.
The role of Ride-Hailing and M-a-a-S in Car-buying Decision Making
The disruptive dimensions of mobility have crucially challenged the automotive market, and henceforth, gained momentum. Some shifts are taking place in the automotive market and are a considerable challenge for dealers and carmakers. Ride-hailing companies are becoming more powerful day by day. It means something when three of the top five ride-hailing companies make it to the Disruptor-50 list - Uber, Didi Chuxing, and Lyft. Didi Chuxing claims it has more than 30 million rides a day in almost 400 cities within China, almost twice as many as Uber, Lyft, and all other car-hailing apps combined. These Ride-Hailing companies have a significant impact on traffic externalities; too many cars on the roads are causing congestion leading to pollution and crashes. Most importantly, It has improved mobility for the car-free household. Global ridesharing users as a whole, the ridesharing market is growing at a steady rate. Its projected that by 2021 nearly 540 million people worldwide will use ridesharing apps.
Mobility-as-a-Service has also provided ease of access and cost-effectiveness, which has led to a shift from ownership to user ship of mobility. Arevo, an Australian company, has integrated trains, trams, bus systems, bike and car-sharing, and Uber and off-street parking, which has created value for money and time. MaaS is a user-centric approach that will eradicate undesirable scenarios with autonomous vehicles like congestion, parking, maintenance, fuel, and insurance. It also has excellent potential for economic prosperity. All of these factors are impacting the decisions making of the consumer regarding car purchases.
Electrified Mobility, a New Era
Electric vehicles will be a game-changer for the transportation industry and will be the most significant shakeup in over a century. Electric vehicles provide accessibility and ease to consumers by providing less air pollution, lower maintenance costs, and cheaper fuel. EV's are smartly designed to avoid collisions. Networked cars would communicate with each other and will move around seamlessly. However, the most significant barrier to achieving full vehicle autonomy is visual perception. Our brain uses almost 100 billion neurons to flawlessly recognize and interpret our surroundings while utilizing a minimal amount of power. An EV would need 75TERA operations per second of computing for every watt of power consumption, an efficacy requirement yet to be met by the industry.
EV's are an intelligent transition for the prospective buyers. The buying of EVs is on high demand and auto makers are going to great lengths to provide a smooth Car purchasing process for this technology driven cars.
Nonetheless, companies are researching to develop self-driving cars and are putting effort into staying ahead. Carmakers have rolled out their attempts to lure customers with online marketplaces, digital showrooms, subscription services, offering contactless test drives, and much more. General Motors set up Shop, Click and Drive, which allows customers to configure vehicles online, get estimates for their purchases, sort out their financing options, and either have their delivery at home or a showroom. Over the last few years, many companies are selling cars online. One such company is Vroom, which allows you to buy and sell online; one of Vroom's stand-out features is seven days' returns, which is highly unusual for car sales.
A smooth and fast online car buying process with a quick response time to engage with the customer as soon as they reach out will help solve the problem. Dealers need to put up the desired informative content on their websites. Up and ready convenient leasing plans should be developed and readily available with the facility of customization. The targeted audience needs to be thoroughly analyzed and should be provided with a tailored buying experience. Potential consumers are likely to value information about your company and the impact a company has on society. Funnel AI reviews three years of data to determine that auto dealers miss roughly 78% of social conversations about their business. Their goal should be to participate in these genuine conversations and provide accurate information to satisfy their customers. Also, they need to develop and focus on social media strategies more than sponsored ads and posts as the new customer base is keenly looking for information, recommendations, and conversations at these social media handles.
At NETSOL Technologies, we offer digital solutions for OEMs, dealers and customers at various touchpoints. To find out more, click here.
Mr. Hui Liang, President NETSOL Technologies, China
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