During the epidemic, the automotive industry will face a big test

Translated from - semiwiki

Recently, Automotive News publisher Jason Stein interviewed Scott Corwin, managing partner at Deloitte Consulting and leader of its Future of Mobility practice. Corwin’s credentials lie more in his insights than actual data and knowledge about what might happen in the future.

Deloitte’s scenarios — described as “a short storm,” “good company,” “sunrise in the east” and “lone wolf” — are based on considering the potential depth and severity of the pandemic and the resulting government responses. But what they lack is a reflection and quantification of events unfolding in real time and their impact on consumer behavior and economic outcomes.

In trying to grasp the "big picture," Deloitte has ignored the harsh reality that consumers and business owners have faced every day over the past three months. To survive and compete today, we must rely on our own wisdom and resources. We cannot count on governments, we cannot rely on traditional customer behavior.

We all have to deal with four tricky variables: the pandemic, transportation demand, and the priorities of automakers, governments, and regulators. The worst-case scenario is that COVID-19 will be with us indefinitely. So it’s best to proceed based on that assumption and take all appropriate measures.

For mobile operators, consumer decisions are unpredictable, so it is best to prepare for the worst and hope for the best. Service providers and employers should seek minimum acceptable standards and look forward to returning to normal new business.

For automakers, this means real-time, daily testing of factory workers to enable reliable and scalable vehicle production. For dealers, this means accelerating online car sales with touchless dealer deliveries. It will take time to increase testing, and it will take time to ramp up contactless car sales and deliveries, but this is becoming the new normal.

As for government assistance, the best hope is financial aid. At least in the United States, the government will not step in to lead testing and tracing activities or provide specific guidelines for worker protection.

Strategy Analytics surveyed consumers in the U.S. and the U.K. in May, asking them about their plans for car ownership, transportation use and ride-hailing after the pandemic.

The survey revealed some key changes in their transportation preferences that have both long- and short-term implications, some of which may be obvious:

During the COVID-19 recovery period, use of all mobility services is likely to decline.

Car use may remain the same or increase.

Air/surface cleanliness and plastic partitions are not important to most passengers when it comes to the ride-hailing user experience.

Self-driving technology doesn’t add much value to the ride-hailing user experience, even during a pandemic.

When it comes to car shopping, most, but not all, remote activities and features are fun.

While browsing inventory and completing sales remotely has broad appeal, some of the advanced tech-driven drills aren't very interesting.

Smart or clean surfaces are more valuable than removable or customizable cabin barriers.

The most important conclusion from the study is the importance of quarantine zones in taxi and ride-hailing environments. While only half of respondents expressed interest in quarantine zones, this should make COVID-19 compensation measures a must-have. Dealers should also note that the survey showed that remote service is a customer priority.

As we grapple with the impact COVID-19 is having on our lives and livelihoods, we must be as open and honest as possible. Experts have made it clear that COVID-19 is a mutating coronavirus that affects different people and communities in different ways, even before it mutates. Researchers are working to understand exactly what COVID-19 is and how it affects the human organism. They are doing that research knowing that COVID-19 itself is evolving—as is our response to it.

Therefore, mobility service providers, automakers, and new car dealers would be wise to make a few assumptions:

A) COVID-19 will never go away; B) Every customer has deep concerns about COVID-19; C) The government is incapable of resolving this crisis.

Extended reading: The epidemic brought "lethality" and also pressed the "conversion button"

　　Wang Xia, Chairman of the Automotive Industry Committee of the China Council for the Promotion of International Trade and Chairman of the Automotive Industry Chamber of the China Chamber of International Commerce, said that the "destructive power" brought by the epidemic was astonishing. From January to May this year, China's automobile production and sales were 7.787 million and 7.957 million, down 24.1% and 22.6% year-on-year. Passenger car sales fell by nearly 30%, and new energy vehicle sales fell by 38.7% year-on-year. In China, more than 1,000 dealers applied for deregistration or bankruptcy. All automobile companies in the world have experienced a life-and-death test.

　　"However, the Chinese auto market is still recovering," said Wang Xia. On the basis of stopping the decline in April, sales in May increased by 5.9% month-on-month and 14.5% year-on-year. Sales and production are gradually converging, indicating that the cumulative effect of auto purchase demand is being steadily released. In the global auto market, among the four major auto production and sales countries of China, the United States, Germany and Japan, only China has successfully achieved a reversal from negative to positive.

　　Wang Xia said that it is worth noting that in May, luxury car sales increased by more than 20% year-on-year, while demand for models below 80,000 yuan was sluggish. In other words, the epidemic has pressed the "switch button" for consumption upgrades, opening up new space for product quality and brand upgrades. In Wang Xia's view, in the post-epidemic era, the entire industry will face more uncertainties and more new issues, such as the repair and even reconstruction of the supply chain, the closure and transfer of industrial bases, and the reshaping of consumer confidence. The new normal in the auto market that is about to emerge will be very different from the original normal.

　　Brand improvement, new four modernizations to enhance competitiveness

　　The continued downturn in the market and the impact of the COVID-19 epidemic have caused the automotive industry to face unprecedented challenges. How can automakers turn "danger" into "opportunity" and face the challenges head-on? Brand improvement has become the consensus of the guests present.

　　Zhu Huarong, President and Party Secretary of Changan Automobile, innovatively proposed the concept of "new 4+2". That is, the comprehensive integration of electrification, intelligence, networking, and health, the continuous optimization of new retail and sharing models, and the accelerated upgrading of automobiles from "hard to soft", so as to improve the utilization efficiency of social stock resources. For Changan Automobile, first of all, it is determined to transform from a traditional automobile manufacturer to an intelligent travel technology company, and build efficiency as its core competitiveness; secondly, it insists on the development direction of new energy and looks for new market space and cooperation opportunities in the industry; thirdly, it intensifies the adjustment of product structure to achieve a comprehensive renewal of products, audiences, and brands; finally, it strengthens customer management and builds a user ecosystem.

　　Xu Heyi, chairman and party secretary of BAIC Group, said that although the market has bid farewell to the "golden age" of rapid growth, the ceiling of total automobile consumption is far from coming. At the industrial level, domestic brands have the comprehensive strength to "wrestle" with foreign brands in terms of technology application, product quality, system capabilities, etc. The deconstruction and reconstruction of the global automobile industry has been significantly accelerated, more resources will be transferred to China, and the industrial center will further tilt towards China, adding weight to the fight for Chinese automobile brands to break through.

　　You Zheng, member of the Standing Committee of the Party Committee and deputy general manager of Dongfeng Group Co., Ltd., believes that with the support of new technologies such as 5G, AI, the Internet, and cloud computing, cars will no longer be a traditional means of transportation, but a mobile terminal running on the highway. Therefore, in addition to continuing to tackle key technologies and ensure the safety and controllability of the automotive industry, we must also deepen the transformation of automotive products to products + services, focus on customer dynamics and needs, accelerate the upgrade of traditional cars to new ecological cars, and promote the development of brands towards high-end.

　　Chen Demei, vice president of SAIC Motor (600104), predicted that automakers should actively adapt to changes in consumption and upgrading trends, launch healthy automotive products and services, and seek growth in the existing market.

　　Revitalize consumption and use data to reach customer needs

　　How to revive automobile consumption? Yang Guanghua, deputy general manager of Changan Oushang Automobile, general manager of the sales company and company spokesperson, believes that in the era of stock competition, it is necessary to achieve differentiation in product marketing. In his opinion, only by empowering marketing with data can marketing actions be faster, data can serve sales, and customers can lead marketing, so as to accurately grasp customer needs. Let data empower communication and create scenario-based live broadcasts for new retail. Changan Oushang conducts online live broadcasts with content production + traffic empowerment + traffic closed loop as the core.

　　Xu Yang, managing director and global partner of Boston Consulting Group, summarized the countermeasures in five words: connection, empowerment, intelligence, exhibition, and finance. "Connection" means that OEMs can directly connect with customers. Use digital means to achieve direct connection with customers, and guide product development in a timely manner through customer feedback, including after-sales service and the use of the ecological chain. "Empowerment" refers to empowering channels. "Exhibition" is the concept of smart showrooms. Technologies such as intelligent voice invitations and face recognition are emerging in an endless stream, but only when these technologies can be truly used and integrated together can marketing efficiency be brought into play. "Intelligence" refers to the use of data. "Finance" refers to finance. Finding differentiated selling points in the field of auto finance and better meeting the needs of young users can establish a leading opportunity in the fierce market.