In a quickly changing landscape, established automotive companies are looking at how they can leap, like Tesla and Rivian, to innovate their product lines and sell directly to customers online. In combination with increasingly automated, autonomous, and computerized car systems, the amount of data being created offers a challenge and opportunity for automotive manufacturers. Businesses are jumping on the opportunity to control margins, directly own customers and customer data, and optimize the automotive buying experience.
Data Storage and Management
As cars get more sophisticated and integrated with internal and external systems, the volume of data greatly increases.
For BMW, this means the next generation of cars will create and process about 3x the volume of vehicle data compared to current models. In BMW’s “Neue Klasse” models, “driver-assist features, like adaptive cruise control, parking assist, and partially automated highway driving, create tons of data from engineering teams to process and analyze for future updates and improvements.” - The Verge
Data and Supply Chain Traceability and Compliance
Additionally, automotive businesses are looking to collect and surface data that provide material traceability of parts throughout the supply chain. This is no small endeavor - requiring labeling tens of thousands of parts per vehicle, provided by a global network of suppliers, and integrating it with digital data capture. But that parts and components-specific data tracing allows for supplier traceability - which becomes important in the event of product recalls, parts/component upgrading, and supply chain visibility. As global legislation and funding rules around Environmentally and Socially Responsible (ESG) businesses gain more traction, capturing, managing, and surfacing this data becomes more critical to ensure that manufacturers are showing data-validated compliance with several global regulations and recommendations, including non-coercive labor standards, Greenhouse Gas (GHG) emission standards, diversity in hiring and contracting policies.
Building Direct-to-Consumer Channels in Automotive
As manufacturers look to meet customer demands for improved researching and purchasing experiences, the model moves away from dealerships to a hybrid or digital-first buying experience. Many companies are using their Electric Vehicle (EV) lines to make this transition. Volvo, for example, launched their EV XC40 in India this way - owning the entire car stock, selling via franchise partners, and invoicing and processing orders to customers directly.
Amit Kaushik, India Country Head at Volvo says, “With D2C, automakers get rid of the high inventory rates, which in some cases, contribute to about 10-15% of overall expenses…. The expenses go down, efficiencies improve, delivery timeline is managed and one price strategy is maintained across the country.” - India Times
This opens up supply chain and business challenges - where manufacturers previously sold to wholesalers, who would then take on the operations headaches of shifting reseller relationships and managing the last mile of the supply chain: ownership, title, taxation, management, and selling. A Boston Consulting Group article lists three key areas for manufacturers to consider:
- Strategic planning around product categories, sales channels, a competitive marketplace, and internal resources and capabilities
- Learn the business: understand the costs, expectations, and best practices for interacting with end customers. According to BCG, “Often simple things, such as estimating the operating costs of a demo car, turn out to be more complicated (and the costs higher) than initially thought.”
- Define a pricing strategy that aligns with the brand, and find alternatives to price adjustments and highly visible discounting (leveraging marketing, sales demos, and discounting where less visible)
Additionally, moving to direct-to-consumer creates new data challenges: requiring that manufacturers collect, integrate, utilize, and analyze user data, product data, and customer data in order to create customized, efficient digital experiences that allow car buyers to find the products they are looking for quickly and easily. A 2020 Harris Poll found that consumers prefer online (to in-person) for the following car-buying steps:
- Search for a car (80%)
- Determine the final price (78%)
- Schedule an appointment to receive/take possession of the car (76%)
- Conducting credit checks and financing (74%)
To do that well, manufacturers need to organize and integrate their product data to allow for product discoverability - with SEO content, robust onsite search, and accurate and fast filtering. For purchasing: pricing, inventory data, and integration with third-party financing tools need to be implemented into backend systems as well as a seamless part of the front-end experience.
By owning the direct-to-consumer channel, manufacturers open up new areas for growth, including:
- Aftermarket parts and replacements
- Alternate selling models, including leasing and car subscriptions - essentially short-term leases, like Care by Volvo)
- Additional product offerings (upsells, warranties, post-purchase upgrades, services, and products)
In-Vehicle Subscriptions and Data Management
Subscription-based in-vehicle services provide new opportunities for auto manufacturers, both capturing new revenue streams and data. While these subscriptions are tied to the vehicle, they are paid by the driver - so when a car is resold, for example, the new owner is responsible for the ongoing cost of these subscription services.
In-vehicle subscription services include media services (like Sirius XM), autonomous driving access (Ford’s Blue Cruise, and Tesla’s full self-driving package), as well as a few trialed and abandoned plays, like heated car seat subscriptions and remote start subscriptions. GM is promising 50 new subscription services by 2026. Manufacturers are well positioned: as McKinsey reports, “55 percent of respondents indicate that established OEMs are their most trusted providers for vehicle subscriptions.”
Big Data and Privacy in the Automotive Industry
This new world of automotive innovation both creates and demands a huge amount of data. For your D2C business, you’ll need to consolidate customer data from multiple sources (billing, customer service, marketing, and any other collected demographic, buying, or researching data) to drive your sales and marketing functions.
Additionally, product research and purchasing information can inform product roadmaps, pricing, and trends, giving manufacturers for the first time first-party insights into the makes, models, colors, accessories, and features that convert (and don’t).
The amount of data that can be collected from the cars themselves and driver services (anything from insurance dongles, media services, location data, and digital interactive screens), means that vehicles are a huge opportunity for big data collection and a risk for privacy.
A 2023 CBS report found that many manufacturers are sharing, and not protecting, data collected: “Most major manufacturers admit they may be selling your personal information, a new study finds, with half also saying they'd share it with the government or law enforcement without a court order. The proliferation of sensors in automobiles - from telematics to fully digitized control consoles - has made them prodigious data-collection hubs.”
Car manufacturers can refine and define their privacy, security, and data protection measures to satisfy consumer preferences and reduce the risk of cyber attacks.
Optimizing Data Solutions for Innovation in Automotive
With the clear move towards alternative energy models, selling models, and increased digitization, automotive manufacturers are gearing for a major shift in their relationship to data.
“Data integration is the single most important success factor for effective e-commerce, with seamless hand-off points along the customer journey.” - S&P Global Mobility
Currently, dealerships are the focus of a huge amount of customer and product data, and systems. However, a manufacturer-owned channel requires that offline and online customer and product data is collected, integrated, and governed in a seamless customer experience.
As the automotive industry radically changes, the volume and depth of data allows manufacturers to be uniquely positioned to make data-driven strategic decisions. From zero-waste manufacturing to mapping charging networks, businesses now can collect and utilize first-party data to uncover their competitive niche and market opportunities.
Data Analytics Consulting in the Automotive Landscape
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