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Hyperconnected Cars: Changing The Auto Industry
Published on 03/17/2016 | Market Sizing
Technology is transforming products and services across many industries, but it’s also changing the sales process. The auto industry is a good example. Connected cars benefit car buyers while increasing challenges to manufacturers and retailers – though of course, challenges can bring opportunities.
Hyperconnectivity is the order of the day
According to the Economist Intelligence Unit (EIU), in a report produced in association with SAP, cars are the perfect example of hyperconnectivity. Vehicles themselves have become digital products. Cars are now firmly part of the Internet of Things (IoT), with auto technology such as electrical diagnostics, in-car navigation, entertainment features, and other Internet-connected elements.
Technology: A key selling point
The additional in-car technology makes the manufacturing process much more complicated, with more scope for error, but digital features are now becoming a key decision point for buyers. A recent Accenture study found that 66% of respondents say in-car technology is a more important influence on their car-buying decision than the performance of the vehicle on the road.
Digital: Changing the sales process
Digital technology is also changing the way people buy cars. Historically, a typical customer would visit a car dealership five or more times during the purchase process. With the growth of Internet access, mobile devices, online forums, and dedicated apps, it’s easier than ever to compare, select, customize, and even purchase a vehicle online. The Accenture survey found that 37% of people who own a car say they’ll likely buy their next vehicle without visiting a dealership.
Tesla is changing the game
Tesla is known for its all-electric and hybrid vehicles that challenge the auto industry’s reliance on gasoline. However, its biggest disruption may be to the variety of state laws that govern auto sales in the United States. In many states, automobile manufacturers are banned from selling directly to customers, leaving the field clear for auto dealers and franchisees. Tesla is challenging this traditional setup across state and federal courts and legislatures, and any victories could change the way other manufacturers operate.
Key steps to success in the digital economy
The auto industry is already well on its way to digital transformation, but car manufacturers can still take some of the following key steps to thrive in the new digital economy:
• Improve your online presence to give would-be buyers persuasive but accurate and clear details about different models.
• Describe your range’s high-tech features in a way that stresses the practical benefits for the less tech-savvy user, while still including specific details for those with a keen interest in auto technology.
• Rethink your supply chains and manufacturing processes to allow for the added complexity of embedding technology in vehicles, perhaps even using the Internet to source new suppliers.
• Draw up contingency plans for potential changes to the dealership and franchisee model of selling to customers.
• The impact of e-commerce on the auto industry is just the tip of the iceberg. Learn more about the Hyperconnected Car in the Economist Intelligence Unit report.
For an in-depth look at how digital technology is changing business, download the SAP eBook, The Digital Economy: Reinventing the Business World.
Discover the many factors driving digital disruption in the SAP eBook, Digital Disruption: How Digital Technology is Transforming Our World.