1994 – 2014 - 2034
A Long Term Perspective on Car Distribution: 20 years back, 20 years forward
By Eric Le Gendre, incoming Chairman, ICDP
I am very happy and proud to take on the position as chair of the International Car Distribution Programme (ICDP), as I have known, supported and enjoyed the programme since its very beginnings, some 20 years ago. Looking backwards a lot has changed over all those years: consumer pressure, economic downturns, newcomers, and last but not least, all the new technologies, the internet and digital wave. Looking forward, I guess the pace will be wider and the speed of changes will accelerate in the coming years. Let’s try to summarise some major trends in the Automotive Business:
An extended digitalisation of the economies, transforming the retail model as well as the consumer journey
Just as EasyJet hurt BA and Ryanair pressed Aer Lingus, I guess this huge digitalisation and commodities wave will drastically change our retail models, probably by fragmenting the facilities. But what about classical dealerships in remote suburbs? And what’s the future of huge expensive “terminals”? A new threat for the current genuine spare part business model might also emerge soon when 3D-printing will allow customers to produce their own spare parts from a cheap downloaded pattern.
Consumer appetite and requests for changes will grow
24/7 operations, integrated mobility, car-pooling, car-sharing, class-actions, claim campaigns and their huge reimbursement policie, pay per use - those strange attitudes will be commonplace for our kids even though today they are only just emerging. The impacts on the economics or the automotive distribution chain are huge, and expensive. Despite their poor current financial situation, car dealers will have to implement these changes, and struggle like the remaining white tigers in the Indian jungles. And let’s not forget: the jungle might shrink - most of our planet’s citizens live in cities, where the number of circulating cars might reduce. It’s clear to me that building customer relationships which offer value to the customer, without driving high costs into dealers, will be a must.
Newcomers will play the game
It took 20 years for the Korean car manufacturers to invade the West. Now, in some markets, they beat the Japanese. I fear the Chinese, not all of them but probably half a dozen of them, will set up their factories in Eastern Europe and North Africa and sell credible cars in Liverpool, Strasbourg and Milano. However other newcomers will also emerge: I would advise us all to track early ideas by Google Labs for example, who, in the automotive sector, dared to think about Elon Musk in the early 2000’s? No one.
Deflation and the low cost trend will expand
I’m not a fan of deflation but I guess the low cost trend will expand in the coming years both in car manufacturing and car retailing. Who could have guessed that such well established sectors as banking, the travel and hospitality industries would have to face the challenges that have so desperately hurt them in recent years? I’ve already heard of a low cost hospital in the US. When will the Dacia model become the norm and create a radically different business model and consumer environment? And will it come from a classical operator, or from an Asian or Brazilian manufacturer, or from a genius tycoon?
These four trends are “commercial” ones. I do not venture into the technical trends of EV’s, lightweight cars, and so on.
At the very end, I’m certain there will be still car dealers all around the world in 2034. But I’m also certain they will look completely differently to those of today, which are not so different from those that I knew in the mid 90’s. And they will have moved from multi-Chanel to omni-Chanel, mobilised and digitalised operations. But behind that, the biggest challenge is to change our minds and attitudes: from car salesmen and women to automotive “CXO’s” the capability to detect, feel and understand the right trends, to move forward in those directions, and to make it happen to delight the consumers will make the difference. We work on this at ICDP, and I’m very proud to lead a team that can help all of you.