19 May, 2017
Almost 70% of automobile sales in India or $40 billion will be digitally influenced by 2020, says a research report released by Bain & Company and Facebook on "How digital is transforming the face of Indian automotive industry".
The report was created based on responses of 1551 Indian customers who had purchased a vehicle in the last 12 months and surveyed their purchase influencers. The findings were further 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.
Also Read: Driving Digital: How Auto Industry Is Adapting for Connected World
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.
Social media will influence about 40% of sales valued at $23 billion by 2020, up from 20% of sales today.
Karan Singh, Managing Director at Bain & Company India says as digital technologies cause disruption across the value chain from manufacturing to after sales service, rules of the game are changing and new opportunities and threats are emerging for automakers.
"Players from outside the traditional auto industry are witnessing rapid growth world over. It is important to evolve the business model to tap into shifting profit pools," added Singh.
Highlighting the importance of mobile in the overall device mix, the report said that 80% of online research is on mobile phones today and this is expected to rise further with the increasing penetration of smart phones and mobile data connections.
Not surprisingly, those 35-years-old and younger will lead the digital charge: 49% of consumers younger than 35 years report digital influence on purchases today compared with 40% of those older than age 35. As this cohort ages and a new younger cohort enters the market, digital influence is set to increase.
According to Bain and Co.'s partner Yaquta Mandviwala who co-authored the report India is likely to witness digital leap frogging given consumers’ openness to new technologies.
Social media will influence about 40% of automobile sales valued at $23 billion by 2020, up from 20% of sales today.
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 in to brand experience centres, use product digitization to create deeper ongoing relationships and invest in a strong analytics backbone,” she added.
The study also explores auto customers’ changing mindsets and attitudes towards shared mobility. More than 40% of lead consumers report using app-based taxi services like Ola and Uber more than three or four times per weekend further head room for growth exists.
“Technology is transforming the automobile industry in un-imaginable ways and this report discusses quite a few insights,” said Umang Bedi, Managing Director, Facebook India.
Umang further added, “Digital has struck the automotive world with lightning speed and this transition to digital is only going to accelerate, today’ side as 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.”
Bain and Facebook’s findings highlighted the changing role of the automotive dealer with almost 72% of customers selecting a vehicle brand and 49% choosing the vehicle model before stepping into a dealership, thereby limiting the dealers influence on buying decision.
Though dealers have started to shift towards better digital engagement with their customers, more than 85% of the dealers surveyed say they still use bulk SMS and database calling as their customer-targeting process.
The report claims that most Indian automobile OEMs are behind the curve in digital investments, spending 10 to 11% of their total marketing expenditure on digital mediums in 2016 and they need to redefine their marketing and customer engagement efforts.
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% in the decade to 2025,even though industry profits are projected to grow about 35% in the same period, the report said.
The sector will witness the emergence of new players, such as software and mobility platform providers, with non-traditional sources of competitive advantage who will gain an increasing share of sector profits.
The report enlists five critical imperatives for auto OEMs to consider in this new competitive landscape. It called for evolving business models to taping to shifting profit pools, radically changing the investment mix to follow the customer online, differentiating there tail format, using product digitisation to created deeper on going customer relationships and building the data and analytics backbone to enable meaningful use of digital.
Looking ahead, post-purchase activities are expected to be the next digital frontier. By 2020, up to 40% of consumers are expected to book repair and maintenance services online and about 30% will go online to purchase vehicle accessories, up from 14% and 8% respectively today.
As per Bain’s Global Automotive Survey, 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.
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