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Future of automobile industry post the pandemic

  • 18-03-20
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The automobile industry includes two-wheeler, four-wheeler, passenger vehicle and commercial vehicles. In 2018-19, 4.06 million cars were manufactured and at present around 32 million cars run on Indian streets. The two-wheeler segment dominates the industry with a share of 80 per cent.

The Indian automotive sector was already struggling before the Covid-19 crisis. It saw an overall downturn of nearly 18 per cent. The situation was worsened by the emergence of the Covid-19 pandemic and the ongoing lockdowns across India and the rest of the world. These are the challenging times for the Indian automotive sector on account of slow economic growth, negative consumer sentiment, liquidity crunch, low capacity utilisation and potential bankruptcies.

Taking a lead from the Chinese automobile industry, there will be significant changes in buying approach after the lockdown. Consumer preference will be more towards hygiene and cleanliness during travel. Post the pandemic, consumers can switch more towards personal mobility. Shared mobility will take a backseat. There is expected to be increased demand for used vehicles in the next 3 – 6 months. Service based models such as pay-as-you-go, and lease rentals may also see uptake from Indian consumers. Already the used car market has seen a growth of over 40-lakh units in last year, which is almost 40 percent higher than the new car sales. But the rush for used cars is expected to swell in the coming months as customers looking for personalised mobility in a safer environment would propel demand.

As the traditional automotive sales model relies on independent dealers it results in unsatisfying customer journey and no direct communication with the end customers. Hence the future solution of this problem is direct sales.

Given the tremendous disruption ahead, transforming the sales model is only the first step of the journey towards a completely new era for the automotive industry.

Advancements in electrification and autonomous technologies require enormous investments. Optimizing the sales model can unleash immense financial potential by reducing cost of retail by up to 4% and creating annual savings of more than $1 billion for an exemplary mid-sized sales region. This can help OEMs stem some of the investments that are necessary to keep pace with the disruptive technological changes. With lucrative new value pools opening up in shared mobility and platform economies, direct customer access is important for OEMs to master their transformation from retailer to mobility provider.

Hence there is a huge ongoing shift in brand positioning, strategy, sales tactics and consumer behavior in the automobile industry. Deploying strategies identified in the various stages above along with building differentiated capabilities for the data driven, agile and future ready organisation will help create long term value for the Indian automotive players.

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