The automotive industry is investing more in digital transformation and electric vehicles
According to recent research from Salesforce, the automotive industry is in the midst of a historic digital transformation. For the Trends in Automotive report, Salesforce Industries Insights surveyed 500 employees of original equipment manufacturers (OEMs), captive finance companies, and retailers worldwide to learn more about digital imperatives that are transforming the customer experience.
The research highlighted three key trends:
- Automotive customers ride a bumpy road: Customers are eager for streamlined digital buying experiences, but companies are struggling to deliver.
Less than one in five OEMs and retailers believe their digital storefronts are engaging and mobile-friendly and with the same number reporting inventory accuracy problems online. - Companies believe customer data builds a better customer experience: Companies are prioritizing collecting customer data but are having trouble putting it to good use. 93% of companies agreed that first-party data would substantially improve the customer experience.
- With profits under pressure, companies pursue new revenue opportunities: Companies are investing large sums in electric vehicle research and development and offsetting tighter margins with new revenue from subscriptions and partnerships. 85% of companies agreed that the research and development cost of transitioning to EVs will be a substantial risk to the industry's profits for the next five years.
Automotive customers ride a bumpy road
The automotive shopping experience is more digital today than ever before. OEMs, captive finance companies, and retailers are building on the digital experiences offered in other industries, such as retail. The research also highlights the post-purchase experience to be more digital and virtual, from managing their loans to purchasing additional miles on their leases to downloading service updates.
Research indicates that companies aren't as far along on their digital journeys as they might believe. Salesforce research found that 73% of companies believe they are overperforming when it comes to digital transformation; recent research from McKinsey shows physical touchpoints (and unsatisfying interactions) still dominate the buying experience.
Digital Maturity: The percentage of companies that ranked themselves as somewhat or far above average when it comes to providing digitized and personalized services in the following domains.
Customers want price transparency and streamlined lending, but companies are not delivering. Only 27% of captive finance companies rated their online automobile financing tools as far above average. Even worse, only 24% of those surveyed report that the prices on their website consistently match what customers actually pay. That's a problem, given that 74% of consumers say communicating honestly and transparently is more important now than before the pandemic.
A complex path-to-purchase is challenging e-commerce capabilities. Less than one in five OEMs and retailers believe their digital storefronts are engaging and mobile-friendly. The same number also reports inventory accuracy problems online.
Also: I loved driving the Hyundai Ioniq 5 and Kia EV6. There's only one reason I can't buy one
According to retailers, customers who want to use online channels to customize the options on a brand new vehicle also face challenges. For example, 79% say that customizing trim and color options online isn't easy. The amount of time it takes to complete a transaction also leaves much to be desired, with only 21% of OEMs and retailers believing they offer a fast buying experience.
The post-purchase experience needs to improve. Caring for customers after the sale should be simpler, but right now, digital post-purchase experiences are challenging companies: 79% of OEMs and retailers report customers having trouble accessing their personal accounts or service case through digital channels.
Companies believe customer data builds a better customer experience
95% of automotive companies buy customer data from third-party sources to support marketing initiatives, but changing internet privacy regulations mean companies must gather information directly from customers themselves. In the future, customers must explicitly agree to share first-party data like an email address and mobile phone number, along with zero-party data like product preferences and purchase intentions. 93% of companies agreed that first-party data will substantially improve the customer experience. Only 46% of companies report having comprehensive data.
The communication needs to be more timely and relevant - personalization is key. Only 26% of captive finance companies and 22% of OEMs and retailers can personalize communications across channels like email and text -- something that 73% of customers already expect. This kind of messaging drives incremental sales and margin, according to 87% of executives surveyed. Yet, according to our research, 78% of OEMs and retailers report they cannot customize communications based on specific accounts or even customer complaints.
Connected vehicles that link to devices or services over the internet are an important new source of first-party data. The report found that 50% of companies surveyed reported they are currently investing heavily in activating first-party data from connected vehicles to improve the customer experience.
Investments in the connected car experience improvements and technologies
With profits under pressure, companies pursue new revenue opportunities
The automotive industry is investing more in electric vehicles. Today, entry-priced electric vehicles (EVs) are often loss leaders for OEMs, with models priced for profit out of reach for many consumers. At the same time, environmental regulations are leading OEMs to invest heavily in EVs. As North American and European companies push consumers toward environmentally sustainable transportation, their bottom lines could pay the price: 85% agreed that the research and development cost of transitioning to EVs will be a substantial risk to the industry's profits for the next five years.
Subscriptions and partnerships offer new revenue opportunities for OEMs. As companies race to develop reliable, safe, and affordable EVs, they are turning to subscriptions and partnerships as revenue generators: 68% of OEMs and 62% of retailers are already investing in Internet of Things (IoT) applications such as Apple CarPlay and smart home devices. Captive finance companies are also exploring new ideas, like giving customers the chance to buy use-based insurance products, allowing them to streamline the purchase of extra lease miles online, and bundling financing and maintenance into a single payment for commercial purchasers.
The Automotive Industry report concludes by emphasizing the EV revenue opportunity. "As EV adoption grows globally, the pressure is on companies to solve concerns related to vehicle affordability, charging station availability and compatibility, and the harmful environmental impact caused by mining battery minerals. As companies in the industry adapt to new incentives promised by the Inflation Reduction Act, some out-of-sector businesses are already jumping on a new growth opportunity."
I am a member of the Experience Per Mile 'EPM' advisory council. The EPM Advisory Council was formed to encourage collaboration among an exclusive group of automotive executives, analysts and industry insiders regarding the changing value chains in automotive being driven by the connected movement. The purpose of the Advisory Council is to uncover best practices and foster cross-industry innovation to define and improve the in-vehicle experience for consumers. The council published the 2022 EPM Index, a rating system that differentiates across trip types and various vehicle models. The first-ever EPM Index Report for the automotive industry can be found here. The key findings of the EPM Index further validate the research from Salesforce. Consumers who use more technology features tend to have higher EPM scores.