Entitled The Digital Auto Consumer, the Sophus3 Forum 2017 in London explored the various upcoming trends in the automotive industry, and the threats and challenges that the industry is predicted to encounter over the next year. Saad Ahmed reports back on the main talking points
“The car market won’t be as healthy as it was last year, [and] it’s not going to get better anytime soon,” Paul Rutishauser, editor of Automotive Market Intelligence warned attendees at the Sophus3 Forum 2017 in February.
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The Digital Auto Consumer was the theme of the day, as the conference explored how automotive companies could expect to meet challenges from more technology-focused and non-traditional rivals such as Uber, and cope with the increasing demand from consumers to be ‘always on’.
The forum began with an introduction by Scott Gairns, managing director of Sophus3, who inaugurated the proceedings. Rutishauser was the first to present, and addressed the attendees with a look back at the automotive industry’s performance in 2016 – and delivered stark warnings for the road ahead in 2017.
Rutishauser said the combination of Brexit, the fall in the value of sterling, and rising challenges from companies such as Uber would offer an unprecedented challenge to the UK automotive sector. “[The] disruption is of an existential nature; it’s a game changer,” he said.
Rutishauser added: “Inevitably, in the second and third quarters of this year we are going to see price increases on consumer goods and cars, and that’s bound to have an impact. That’s bad news for everybody, because the UK is [Europe’s] second-largest car market.”
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By GlobalDataRutishauser warned that if companies such as Uber pushed into the autonomous space, OEMs would be reduced to manufacturers of mobility pods, with their market share eroded and their brands and identity effectively rendered useless as expectations of transport evolved.
“The nightmare is what would happen if Uber, with a huge fleet of autonomous vehicles, became the way that people solved their mobility needs? Automotive manufacturers would be effectively locked out,” he said.
“The other worry for manufacturers, for which brand and product are so important, is potentially those vehicles becoming reduced to nothing more than anonymous pods.”
Rutishauser ended by warning attendees that in the move towards offering mobility services, automotive companies must “protect” certain areas.
“[They] need to reinvent themselves as digital companies,” he told the attendees. “The first step in that is click-to-buy.”
Luca Andreose, client services director at Sophus3, spoke about the Digital Cases for Interaction Optimisation, informing attendees how certain online features could boost lead generation and business for automotive companies.
According to Andreose, the presence of a live chat on a car brand’s website increased page views by 96%, and boosted visitors’ willingness to complete a form by 120%.
Franz Wimmer, general manager of modern retailing at BMW Group UK, said the automotive industry was facing “iconic change”, and that the time for a real push for online car sales had arrived.
He presented three ways in which automotive companies were competing with rivals, listing car connectivity, the sharing economy, and the retail sector.
Claiming that 40% of consumers would purchase their next car online, Wimmer declared: “The market is ready. We have to be both online and offline.”
Wimmer presented BMW’s online used car offering, and said that finance could be offered in 90 seconds, if the buyer was creditworthy.
He also touched on another problem in the industry, claiming that some women feel uncomfortable about going to dealerships alone. This prompted a question from the crowd during the Q&A session asking how this could be addressed. Wimmer replied that BMW was conducting “big discussions” at board level “about how we treat female customers. The consciousness is there, we need to work on it.”
Returning to the theme of the digital future, Wimmer continued: “You don’t want to start this new era alone. We need our retail partners to embrace technology, to embrace digital, serve the digital needs of the customer, and provide with us, as an OEM, the best service the customer deserves.”
In his speech titled The Digital Relationship in the Brave New World, Fabio Borney, Europe, the Middle East and Africa digital marketing and CRM program manager at Fiat Chrysler Automobiles, stated that in order for automotive companies to truly embrace digitalisation, they first needed to understand the underlying business model.
Give finance love
Rémi Rivière, a consultant working with RCI Bank, put the brakes on the digital drive, and proposed that the automotive industry needs to go back to the basics and “give finance love”.
He stated: “I’ve been working over 10 years on the OEM side, and all these websites have one common point: It’s all about product.”
He added that despite finance contributing to profit, it had not been traditionally well advertised. “Finance brings a lot of money, [and] it’s less sensitive to market volatility,” Rivière said, and encouraged automotive businesses to present finance simply.
A major recommendation made by Rivière was to display the price of a car in terms of monthly instalments more prominently on home and landing pages, and not simply on the finance page.
“The price is not the price; the monthly instalment is the price,” he said, before going on to encourage upselling of services such as warranty and insurance packages.
He pointed out that motor finance could contribute a substantial percentage of an OEM’s profits, and pointed to Renault-Nissan’s 2016 results as an example. “Renault posted a record profit of €3.2bn,” Rivière noted. “Out of those [profits], finance contributed €896m, which is roughly 27%.”
Rivière explained that finance employees only counted for 2.5% of the workforce, yet delivered 27% of the profits in 2016. He claimed that finance was responsible for 95.7% of the Renault Group’s profits in 2012. “Even in those tough times, finance still had a positive impact of €500m,” he explained.
On presenting finance, Rivière told attendees to “keep it simple”. He said that, on average, customers spend 11 hours researching a car, and that customers would be tired of the process. Rivière indicated that simplicity was needed for this reason. “That’s the point where the bounce rate increases,” he warned.
Using the example of a chocolate eclair priced at around £2, Rivière explained how finance could be better expressed in layman’s terms: “My promise is that for the daily cost of two eclairs, you can drive a brand new SUV,” he said. “Is it simple? Is it attractive? And you know what? It’s true.”
He then displayed the payment terms for a Dacia model, and after this compared the finance pages for two different leading car brands and compared their simplicity, pointing out some of the smallest details.
“When you’re selling a £40,000 car, and the customer deposit is £7,800 and 30 pence, give away the 30 pence,” he said.
He encouraged attendees to sell finance-related services such as warranty extensions on OEM websites: “We have money customers that are willing to buy a warranty extension. Why don’t we sell it online?”
Rivière also pointed to further upselling techniques, such as suggesting a car with higher specifications and monthly cost on the website as part of the process. “There’s a lot of homework to be done there!” he said.
Hugh Fletcher, digital business consultant at Salmon, and formerly digital marketing at Audi UK, brought the topic back to digital retail. He asked why the automotive industry seemed to resist change, and said: “The franchised dealer model is strangling progress.”
Melanie Shufflebotham, cofounder and director of Next Green Car and ZapMap, a website showing the location of electric car charge points, spoke about the rising interest in alternatively fuelled vehicles.
“Having worked [in this industry] for the last seven years, it’s been a very exciting time,” she said. “We’re just about to see the real take-off of this market.”
Shufflebotham told the automotive industry that interest in electric cars had grown consistently, stating that there were only around 1,500 electric cars in the UK in 2011, a figure that has since grown to over 90,000 electric cars and plug-in hybrids.
“That is projected to be around 600,000 by 2020, and over 2m by 2025,” she said, adding that charging infrastructure was also expanding, forecasting a rise to 90,000 UK charging connectors by 2025 – a significant rise from over 12,000 currently, and 2011’s figure of 752.
She concluded by urging OEMs to make information more available on digital channels, and said that, ultimately, drivers of electric vehicles (EVs) would themselves be the greatest brand ambassadors.
“All the new EV drivers out there become amazingly important advocates for your brands,” Shufflebotham said. “They’re the ones who are going to help push [EVs] to mass market adoption.”
The Sophus3 Forum showed an industry unsure about how to respond to oncoming change.
Digitalisation, it was hoped, would help keep OEMs afloat. However, with the encroaching tide of Uber and other non-traditional competitors lashing at their market share, the automotive industry may need a bigger boat.<
Q&A WITH BMW GROUP UK’s FRANZ WIMMER
When did BMW start selling online?
It began as an initiative based on the idea of changing everything with the BMW i brand. As part of the initiative, we changed the material of the car, the drive, almost everything.
We started in New Zealand with Mini in 2008, as we did not have the i at this time. The pilot was a success, we learned a lot about it, and then launched it in the Nordics in 2009 and 2010. Then we brought it to the BMW brands in the UK, the fourth-biggest market for us, in May 2015.
What is the main finance deal you offer?
The majority is PCP. For customers, it is more digestible for them to have a monthly payment, rather than paying a big sum upfront. With PCP they are paying for the usage of the car. In our experience, if customers sign up for a two-to-three-year contract they mostly terminate earlier. It’s easy for them to change and switch to the next car.
What are the advantages of online motor finance?
Customers get an answer in 90 seconds. The great thing about having these digital offers is that we see more people apply. So those who just got it ticked off may have been too afraid to go to a dealer, as there was a risk. If they get rejected, we can tailor a new offer for them. We can still bring them into BMW.
How do you convince someone to buy a car they have never tested?
Not one of our customers is like the other. A lot of customers are repeat buyers; they know the car, so they might just take the next one without having to drive it.
We also have customers who like to test drive each and every model before they buy it. Each customer looks for their own way of getting the information and making up their mind for the purchasing decision.
What is your returns policy?
If you buy online it is two weeks. Finance is regulated, so for finance contracts you need to sign the contract on the premise of the retailer. There is no way to have it all online, but you can make the down payment.
We are using electronic ways of signing contracts, but on the premises of the retailer. These can then be sent out digitally, and they are encrypted.
Do you use chatbots?
BMW Genius Chat is personal, and so quite expensive. While we always look for efficiency, we would not replace a person with emerging technology.
However, we have already embarked on this journey on the BMW UK website. The search box has machine-learning behind it, which hopefully will give better results. If this continues to advance, it might in future merge and replace the Genius, but this is a long journey still.
Which countries are covered by your BMW online sales?
We are just in the UK at the moment, but we are looking at several markets. At the moment, the most likely is China.
