Almost, USD 40 billion of automobile sales will be digitally influenced by 2020, according to a Bain & Company and Facebook report ‘Changing Gears 2020: How Digital is Transforming the Face of the Automotive Industry.’ This value accounts for 70 per cent of Indian automobile sales.
At present, the digital medium is estimated to influence USD 18 billion of auto sales. Social media will influence about 40 percent of sales valued at USD 23 billion by 2020, up from 20 per cent of sales at present.
Almost 72 per cent of customers select a vehicle brand and 49 per cent choose the vehicle model before stepping into a dealership. As a result, the dealer contribution is often limited to influencing the variant of the vehicle purchased. Though dealers have started to shift towards better digital engagement with their customers, more than 85 percent of the dealers surveyed say they still use bulk SMS and database calling as their customer-targeting process.
The report looked at responses from 1,551 Indian customers who had purchased a vehicle in the last 12 months and surveyed their purchase influencers. This was supplemented with a survey of 87 dealers and conversations with top management teams across automakers. The report also drew insights from Bain’s Global Automotive Consumer Survey that included respondents from the US, the UK, Germany, China and India.
The report, which looks at the impact of digital technologies on the automotive industry, finds that digital engineering, 3D printing, smart sensors and the Internet of Things (IoT), are poised to disrupt auto R&D, manufacturing, sales, marketing and after-sales services.
“India is likely to witness a digital leapfrogging given consumers’ openness to new technologies. At this time, more than ever, it is important for companies to adopt a digital mindset. To remain relevant companies will need to keep up with the changing customer behaviour, differentiate the retail format into brand experience centres, use product digitisation to create deeper ongoing relationships and invest in a strong analytics backbone,” said Yaquta Mandviwala, partner, Bain & Company and co-author of the report.
The report said that 80 percent of online research is on mobile phones today and this is expected to rise further with the increasing penetration of smartphones and mobile data connections.
More than 40 percent of lead consumers report using app-based taxi services like Ola and Uber more than three or four times per week and further headroom for growth exists.
Umang Bedi, managing director, Facebook India added, “Digital has struck the automotive world with lightning speed and this transition to digital is only going to accelerate, today’s ideas go from drawing board to production in months rather than decades. All this advancement and focus on digital will deepen relationships between customers and auto manufacturers.”
Most Indian automobile OEMs are behind the curve in digital investments, spending 10 to 11 per cent of their total marketing expenditure on digital mediums in 2016.
Digital disruptions across the value chain are likely to cause a drop in profits from the core activities of car makers like vehicle engineering, manufacturing and sales by about 8 percent in the decade to 2025, even though industry profits are projected to grow about 35 percent in the same period, the report said.
Post-purchase activities are expected to be the next digital frontier. By 2020, up to 40 per cent of consumers are expected to book repair and maintenance services online and about 30 per cent will go online to purchase vehicle accessories, up from 14 percent and 8 percent respectively at present. Bain’s Global Automotive Survey, says that Indian and Chinese consumers have depicted a greater willingness to shift multiple parts of their purchases online, compared with their peers in the US, the UK and Germany.