BearingPoint: OEMs need to move with the times to survive

10 September 2020 Consultancy.eu

As they get further detached from the end customer, automotive original equipment manufacturers (OEMs) and after-sales operators need to adapt to the mobility landscape of the future in order to survive.

According to a new BearingPoint study, the after-sales market currently generates cushy margins of 20%, which exceeds margins from vehicle sales. OEMs and after-sales operators are sitting pretty, although evolutions in the mobility landscape are fast putting their margins under threat.

Digitalisation has gripped the automotive sector, which means everything from the purchase of a vehicle to its repair and servicing can be done online. That is for those who still own a personal vehicle. BearingPoint highlights how owning a personal vehicle – once a symbol of status and wealth – has for a many now fallen out of vogue.

An increasingly environmentally conscious and practical consumer base prefers to either own an electric vehicle or use shared mobility platforms. Triggering major cities in Europe are already tweaking their infrastructure to facilitate modern forms of mobility.

OEMs are losing their customer touch points

The direct fallout from this scenario is that OEMs and after-sales service providers are losing their interaction with customers. According to BearingPoint, these trends could be potentially devastating.

“Although today’s digital era brings changes and disruptions to many industries, the following adage is still true: those who own the customer touchpoints own the customer. Automotive OEMs will need to react quickly to avoid becoming pure hardware providers as customer touchpoints continue to shift away from the traditional automotive value chains,” explained Stefan Penthin, Global Leader at BearingPoint’s Automotive division.

Staying relevant will be hard work for OEMs. That being said, BearingPoint highlights the opportunity they have to immerse themselves in the future of mobility. In its report, the firm put forward five recommendations for the after-sales automotive community, as they look to navigate disruption.

Five strategies

Priority one is to counter the evaporating customer contact points. Here, the authors suggest that OEMs actually use digital tools to establish more touchpoints with customers, offering an ever-evolving suite of products and services with seamless customer experience.

Customer intimacy is key

To help offer a personalised and smooth customer experience, OEMs could leverage vast pools of after-sales data gathered over years of service. This is BearingPoint’s second suggestion – the use of multiple sources of data to hone in on customer needs and adjust service offerings accordingly.

Tesla is put forth as an example here. Tesla customers can access roadside assistance using an app, which automatically transmits the location and the issue with the car. The new features not only revealed the potential of data in customer service, but also revealed that customers actually prefer human contact in some cases. As a result, data served to reveal unknown nuances in customer demands.

The third suggestion from BearingPoint is to build an ecosystem within the automotive sector. OEMs can collaborate with everyone, from urban planners to telecom companies and even household appliance manufacturers. Perhaps the most bold example of this potential is a link up between OEMs and smart homes.

 “Cooperation with smart home services could be another opportunity. Data captured from IoT sensors can make it possible for a refrigerator to notify a driver about what and where to buy food for the evening meal.  The vehicle sensors can also be leveraged to recognize a driver's preference for what he or she plans to do when they arrive home. This could result in preparing the lighting, temperature, and music for the evening,” explained the report.

Staying connected with customers can add value

Following naturally from this is the fourth recommendation – using software as a means to product differentiation. Brand value, colour, engine power and looks are all priorities of the past. What consumers want now is functionality, where software can be of great help. Software Over the Air (SOTA) is one example here, which allows manufacturers to remotely configure the engine and specifications based on customer needs. Once again, Tesla leads the way in this field. 

The last suggestion from BearingPoint is to invest in new business models. An example is the collaborative arrangement between BMW and Daimler reached last year, which saw both players invest more than $1 billion in a new combined mobility service that facilitates car sharing, ride-hailing, parking, electric car charging and multi-modal transport.

OEMs can’t beat the wave of new mobility and digitalisation, so they might as well join in. According to the report, the sector should take inspiration from tech giants in the way they manage customer expectations.

“OEMs must realise that today’s differentiators are rapidly becoming business as usual. Customers are becoming more demanding for new features and functions. While software updates are considered essential leveraging SOTA, OEMs should realize that these updates create new experiences for the customers. One is example is how the iPhone feels ‘like new’ whenever a new iOS is installed. The same concept can be leveraged by automotive OEMs,” said Manuel Schuler, co-author of the report.