Dealership sales strategy General

Raido Toonekurg: Three factors accelerating the digitization of the automotive industry

December 11, 2021
Raido Toonekurg - Modera's CEO
Raido Toonekurg. Photo by Liis Treimann

The car industry is currently experiencing some unprecedented turbulence. For a while, bigger changes were happening on the manufacturing side, with strict new CO2 emissions regulations put in place and the developing costs of electric vehicles claiming their share of attention. Now, new winds seem to have reached the retailers’ front as well. So what are the three biggest cost items the car industry is currently facing?

1. Manufacturers’ developing costs for new technology

The stringent regulations set by governments regarding CO2 emissions levels for all new vehicles have skyrocketed the predicted development costs for the next 10-15 years for car manufacturers. 

Volkswagen Group is planning to put 73 billion euros within the next five years towards electrification, hybrid powertrains and further digital technologies; 

Toyota is planning to invest $13 billion in the development of EV batteries;

Stellantis (car manufacturer created by the Fiat Chrysler-Groupe PSA merger) is set on investing $33 billion during the next four years in order to increase their portfolio of software-based products. 

There’s no denying we’re talking about colossal investments, but the fact is, that these investments need to pay off in the long run. That’s exactly why manufacturers seem to have a number of significant changes up their sleeves just waiting to be implemented. 

2. The increase in labor costs for car dealers has been soaring

As for most sectors, during recent years, there has been an outrageous increase of wage costs in the car sales and service sector. On top of that, finding a qualified workforce has proven to be a challenge. Inevitably, these trends will force companies to start thinking about introducing robotics into the car service as well as digitizing not only the service portion but also sales sooner rather than later. 

It is imperative to start working more efficiently and find ways to decrease costs, whilst also automating different processes. We’ve reached a point where all other options have been exhausted and these changes are needed, regardless of whether we’re dealing with an Average Joe right off the street or a big ride sharing company. There’s a limit to every cost and by simply raising salaries and not finding more effective ways to work or automate, keeping up with the competition will prove to be too big of a task. 

3. The maintenance costs for showrooms are increasing while incoming traffic is decreasing

The digi-based consumer of today is used to being able to manage most aspects of their life via a smart device or the computer. They’ll have the desired products and services delivered to their doorstep via an app and in case one provider is unable to fulfil those requests, there’s always another one waiting. This means less and less people visit the actual physical showrooms, as all the necessary information is ready and available on the website. Customers can book a test drive online and a great salesman will even give them a solid overview of the car via video chat.

As most of us know, showrooms are basically just big spaces created to give the customer that WOW-effect. These spaces need to be heated during the winter and cooled down during the summer. Within the last months however, what used to be an electricity bill of 5000 euros per month has now become that of 12 000 euros and let’s not even get started on the heating costs. 

What now?

With the pandemic doing its part, customers are now more than ready to start consuming digitally. That means the car sector has no other option but to grab the digital bull by the horns and jump on the bandwagon. Otherwise they’ll be left biting the dust of competitors or closing their doors completely.  

One thing’s for sure – the car industry has a lot of changes coming up and the two key words here are *electrification* and *digitization*. If you still want to be successful in 3, 5 and ten years, now’s the time to act!

Raido Toonekurg
Modera AS