Auto dealers are coming together to walk online trail to stay in the game

Topics Coronavirus | Car makers | Lockdown

Big brands such as Mercedes, Hyundai among others are reaching out to customers directly via digital sales platforms, thereby eliminating the role of physical showrooms
Over the past two months, Covid-19 has nearly flattened the vast network of auto dealerships in the country that was already struggling under the weight of a long-drawn slowdown. To find their way back into reckoning, the dealers are coming together to walk the online trail with auto makers, and use their last-mile access to customers, to be a part of the ongoing overhaul. 

Ashish Harsharaj Kale, president of the Federation of Automotive Dealer Association (FADA) says that the current situation has changed the mindset of customers and manufacturers towards digital and as a consequence, he adds, “The infrastructure footprint of the dealer and his cost will go down.” The auto industry is headed into a business transformation that will lead to more online sales and companies have said they have their sights set on a hybrid model, which will see nearly 90-100 per cent of online sales in major cities and metros. For the 15,500-strong network of dealers this could spell extinction. 

To stay relevant, FADA is working with auto companies and ancillary manufacturers to build a model whereby the customer ownership continues to be with the dealership. “The dealer is the local representative of the brand, he/she handholds the customer through the purchase including registration of the vehicle and finally, takes care of the service. The online model (of auto sales) will be a collaborative effort,” Kale said.

The dealers are betting on their large cache of data with respect to buyers, brands and the purchase process to be a part of the emerging channels of brand-customer engagement. Vinay Raghunath, partner and leader, Automotive Sector, EY India said, “We do believe that a “hybridisation of dealerships with greater Phygital play” will become more common.

According to industry experts, of the 5,000-odd dealerships that have opened so far since the lockdown restrictions were slowly eased, barely a handful are retail showrooms. It is largely the service centres that have kicked back into action. And even among the few that have opened their retail doors, footfalls have been negligible. Meanwhile most of the big auto brands have advertised their return to business by touting the efficiency and convenience of their own digital platforms, thereby cutting off the ties that bind the brand to local dealerships. 

 

Leading car brands including Mercedes Benz, Honda Cars, Volkswagen, and BMW have dedicated online portals. Korean auto major Hyundai recently launched its online automobile sales platform called ‘Click to Buy’ and Mercedes-Benz too has its #MercFromHome, a digital sales initiative.

A completely contactless, digital sales channel would be an option for the automobile industry, especially the passenger car and two-wheeler industry in the country, post Covid-19, noted an EY opinion paper (The invisible car salesman). “As far as the passenger car segment is concerned, ‘The invisible salesman’ can become a market reality in India, if all players in the ecosystem come together to redefine the automotive retail journey. It will have a myriad of benefits for them in terms of better customer reach, better data insights and improved efficiency in operations,” said the consulting firm.

Already, in metros and big towns, nearly 60 per cent of the buyers choose digital, this number will increase to nearly 90-100 per cent, while in tier-II and III towns the trend of walking into dealership would continue for some more years, said Kale. The customer finalises the deal with the brand, but the relationship is established with the dealership and it is this relationship that FADA wants to leverage. According to several members of the association, auto makers cannot do business without dealer partners even in developed countries since relationship and trust are key. 

Many companies have already tied up with dealers and others in the ecosystem to facilitate online purchases. For instance MG Motors has partnered with online portal Myles for making Hector available on subscription. It has also tied up with CarDekho for a buyback program, wherein customers are promised 60 per cent ex-showroom price after three years.  Raghunath believes that this could be a turning point for dealers and brands. 

“The current disruption could became a catalyst for digital solutions aimed at both revenue and cost value levers. New non-traditional showroom formats and direct to consumer platforms will become a crucial part of delivering a true omni-channel experience to the consumer,” he said.


Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel