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Writing this after a four day holiday weekend in the UK, when I have had the opportunity to more or less put work aside and do other things it would be easy to start thinking about the choice of each day being a holiday and retirement or at least slowing down on the work front.
This was also brought home to me last week as I prepared some thoughts for a lecture I have been invited to give at the Fellowship of the Motor Industry meeting in the UK tomorrow.
I’ve been told that most of my audience would have retired from the industry a few years ago and the purpose of the lecture should be to let them know how much things have changed and will continue to change in the years to come.
As one thing I will share with audiences besides a passion for the industry is gray hair, my intention is to explain why I give lectures instead of sitting in audiences, why do I still work instead of playing with classic cars?
The answer is simple enough, that I feel there is still work to be done to secure the fundamental changes that are still needed in the distribution model, and hope that I can play a role in making that happen.
ICDP was founded in the early 90’s with its roots in the International Motor Vehicle Program run by MIT in the US, but focuses primarily on engineering and manufacturing. Several individuals involved felt that distribution was not getting the attention it deserved and therefore founded ICDP with the ambition to facilitate the same transformations downstream that we have seen upstream.
I spoke to a dealer friend before and we agreed that in the 40 or so years we’ve both been in the industry, there has never been a time like the present in terms of the myriad challenges everyone involved faces. If you like challenges over avoiding them, then this is definitely a reason to want to get involved and be part of the change process.
Electrification is the solution that has been dictated to the industry by regulators rather than the one that has been chosen as the optimal way to deliver real environmental benefits, but is now inevitably the top choice in Europe – because too much has been done in moving from ICE to BEV.
It is a technology that Chinese industry has chosen with government backing to leapfrog its long-standing rivals, but which may be challenged and less dominant in other parts of the world.
Digitization is changing customer relationships but not in the way some would suggest towards online sales becoming dominant.
Even as online customer research has intensified, they are visiting dealers more frequently and this has been a trend over the past decade. But more online research activity means more data and it enables data-driven decisions, not intuition or history.
We have moved from an analog network to a digitally enabled network and we are now at the transition point to a digitally driven network.
Aftersales suffered a structural decline due to more reliable cars and longer service intervals.
Electrification has accelerated that trend and digitization brings the potential for some maintenance operations to be handled over the air.
ADAS has a similar volume effect in the accident repair sector with fewer crashes, fewer mid-grade damages, and more write-offs due to technology costs. The days of service department funding dealers are gone, the independents are more professional, so the fight for the smaller cake will intensify.
Given all of the above, it would be easy to assume the dealer is dead, but this is not the case. The dealer’s role in the network will change.
I believe that an agency, properly run, will be a good thing for the industry, but there are many signs that the execution will not live up to these standards.
But regardless of the contractual relationship, dealer groups will become more dominant, become larger and increasingly international. They will continue to invest heavily in digital but they are facing a property time bomb with underutilized physical assets. The people who work in dealerships will change because different skills are required to be successful.
The last point I will cover in my lecture is the rise of Chinese manufacturers. My experience working with them is that they see a dominant global position as inevitable and when you look at other sectors of manufactured goods, and their advances in the automotive space, it’s hard to argue with that.
Tariffs and protectionism are not the answer – they will only delay judgment day. Existing players need to be more competitive and fight Chinese newcomers on product and dexterity, not trying to hide behind artificial barriers.
With everything that’s going on it’s clear there’s never a dull day for anyone involved in the auto industry. Today, more than ever, there is an opportunity for breakthrough, but it comes against a backdrop where the cost of failure may be greater than in the past. Come on, and count me out!
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