Coronavirus and the Markets: Automotive
There is the chance for a return to business as usual in the near future, with the smart interaction
With March’s steep drop (85%) in new car registrations, the automotive industry has been one of those hardest-hit during the lockdown. That said, one recent success story points to digitalization as the path forward.
Visiting the dealership, taking a test drive, picking up your new car. Buying a car is one of those sales transactions that – before the lockdown, at least – was very much tied to an in-person visit to the dealership or showroom, with physical contact between buyer and seller.
From a purchase decision-making point of view, moreover, buying a car does not require the long-range financial-planning or the red tape intrinsic to purchasing a home. Therefore, it is an easier purchase to postpone, especially given the available alternatives, like long-term leases, ride-sharing, and other transportation options.
The automotive industry is, and will continue to be, one of those hardest-hit by the Covid-19 crisis. This is first and foremost because it was one of the first to suffer the ill-effects of the crisis, when the initial restrictions in China sent a ripple effect through the global supply chain and caused an industry-wide slowdown. To this day, the supply chain has lagged behind in response to the uptick in demand. Secondly, the virus has hit each of the world’s continents in waves. Given the interdependence among supplies, and the international network of key players, it is likely the industry to suffer the longest-lasting impact.
For things to return completely to normal, Covid-19 must be vanquished on an international scale.
The Numbers: the Crash-Test Effect
These are dizzying statistics. Frost & Sullivan, a research and analysis firm, estimates that the best-case scenario for 2020 is a 14.2% drop in global production for vehicles. A return to 2019 levels is forecasted no sooner than 2022. The worst-case scenario for that return: 2024.*
More specifically for the Italian market (one of the countries hardest-hit by the virus) new car registrations plummeted by 85% in a single month (March). This nosedive leading automobile manufactures to seek incentives to re-ignite demand.**
A silver lining within this freefall can be found in a study of purchasing behavior: according to a survey conducted by Autoscout24, a research firm, 97% of those intending to buy a used car before the lockdown confirm that although they have put off buying a car, they still intend to do so at the earliest opportunity.***
Cars are, moreover, the top choice for everyday travel during “Phase 2”. This is in part to avoid public transportation (which is still operating on a limited schedule), as well as ride-sharing options, where the cars are not necessarily disinfected after each ride.
The tendency to use private vehicles for transportation appears to be gaining traction during “Phase 3”, when buying a car may well become a priority for any number of consumers. Cars will likely be the top choice for vacation-transportation because they will be deemed lower risk compared to trains and planes.
Add to this the many promotions currently being offered by car manufacturers (with the intention of moving inventory), the “getting back to normal” phase may end up being the best time to buy a car. A light at the end of the tunnel in terms of a return to business as usual in the short term.
Opportunities: a recent success story
The only car manufacturer to come out ahead during the crisis is Tesla, whose Model 3 was the best-selling car in the UK for the month of April. This was no accident. From its founding, Elon Musk’s company has focused on digital retailing and connectivity. Everything needed to buy one of their cars, including the paperwork, can be handled virtually through the customer’s online account. During the lockdown, the company took things a step further with a contactless car-delivery system. The car is left in a secure location, and then accessed using a smartphone app.****
Connectivity and digital retailing appear to be the buzzwords for mitigating the effects of a crisis of this magnitude. The focus is on digitalizing most of the customer journey (using virtual meeting rooms, online vehicle configuration, chat-bot customer support, remote customer-identification, and electronic contract signing), and on personalizing the purchase experience through at-home test drives and personal appointments at the dealerships.
Digital Onboarding and DTM takes the lead
These are the first two tools from which to launch the digitalization of both back-office and front-office processes. Using the Tesla model, having a Digital Platform in which purchase-phases are tracked and automated allows for a great number of interactions to be transferred online.
A Digital Onboarding procedure, for example, allows for customers to be identified remotely, to have their identity verified, and to check that all submitted documents are authentic and valid. A Digital Transaction Management option can be added to the mix. Here, users can generate, sign, manage, and file documents and contracts in a secure and legally compliant way.
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* Source: Frost and Sullivan, Covid-19 growth impact assessment for the automotive industry, 2020
** Source: Sole 24 Ore, Auto, Covid-19 triggers an 85.4% freefall in the Italian market
*** Source: Ansa, Coronavirus, Phase 2: Car sales to restart, with diesel in the lead
**** Source: Formulapassion.it, Tesla is the only one smiling