The automotive industry must embrace digital transformation being driven by tech-savvy generation of younger drivers.
It’s said that change is the only constant in life and in many ways the same is true of the UK’s automotive industry.
Ever since motorcars rolled onto British roads during the early 1890s, our vehicles and wider transport networks have been in a continual state of evolution and would be unrecognisable to those early, Victorian pioneers.
From Frederick Bremer’s first four-wheeled petrol-powered car to the impressive all-electric and ultra-sophisticated models being brought to market by the Volkswagen Group brands, change has remained constant.
So why have I started this month’s column with a history lesson?
Well, I feel it’s helpful context as our industry embraces an era of digital transformation and wrestles with certain trends and topics that may have felt quite alien just a few years ago.
Convenience is king
Consumers are increasingly looking to search, buy, rent and sell cars online because of the convenience this offers.
In fact, a survey of in-market car buyers by What Car? earlier this year found that the most popular reason customers gave as to the perceived benefit of buying online was the fact it ‘saves time’.
And to further illustrate this point, the data insights team at Volkswagen Financial Services UK recently revealed that 59% of Gen Z and Millennials found the concept of ordering a new car from their smartphone to their front door appealing.
Similarly, another study we commissioned not so long ago found that six-in-10 people aged 18 to 34 are interested in accessing a car via subscription, similar to services such as Netflix, where you can cancel anytime.
To this end, car subscription models for the Group brands will be developed based on individual customer needs, brand identity and the respective product range, and by 2030, around 20% of revenue could come from subscriptions and other mobility offerings.
Whilst I’m convinced physical retailers will continue to play a key role in the buying process – as part of a hybrid approach alongside digital channels – no-one in the industry would disagree that smartphone technology has been a real game-changer.
This is why it’s so important that the industry continues its digitalisation journey. Businesses must work hard to make sure they are where their customers are: online.
However, this digital transformation offers plenty of questions. What is the role of artificial intelligence? How can big data transform business? What do the new digital business models look like? How can data generate profit?
One of my key objectives as a CEO is to identify key opportunities to grow and develop the essential capabilities and architecture that will help shape our future digital success.
Building this infrastructure is essential, and we continue to invest significantly in building the right platforms and technology that will shape our future business model and allow us to diversify into different market segments. Integration with the infrastructure of our retailer partners is also a key focus.
For example, at Volkswagen Financial Services UK, we’re committed to delivering a complete end-to-end digital journey for customers and by 2025 we aim to have secured 25% of our sales through digital channels.
As a forward-thinking car finance provider, developing our eCommerce eco-system is a top priority for us, which is why we’re redoubling efforts to support in-life needs through our Customer Portal, allowing customers to self-serve, as well as provide tools and information that allow people to research their next vehicle at their fingertips.
Staying loyal to 'tradition'
Needless to say, lockdown has given many people time to rethink their lifestyle choices, including how we finance our cars, and there has undoubtedly been a deliberate shift towards digital technology over the past two years.
Even before we entered lockdown, consumers were becoming more used to interacting with brands on their laptops and devices, but the pandemic has accelerated digital activity – and younger people are certainly driving this shift in behaviour.
We know that people aged 18 to 34 are four times as likely (77%) as people over the age of 55 (18%) to use a smartphone to research their next car.
This is where the market is heading but also, in the here and now, digitalisation is clearly already a massive topic.
Modern vehicles benefit from the luxury of software updates to unlock new features for drivers and more than half of people surveyed (53%) in a recent survey of ours said it’s important that their smartphone can connect to their car.
As consumer behaviour continues evolving, the automotive industry needs to remain flexible and agile to be able to accommodate customers’ needs.
For us, that requires offering a broad range of products across digital channels, whilst staying loyal to more traditional ways of working.
In essence, going digital means implementing seamless customer experience at the click of a button or swipe of a screen as new generations of tech-savvy drivers demand that change remains constant.
Author: Volkswagen Financial Services UK chief executive, Mike Todd