By Ryan Briley
J.D. Power’s Automotive Forum is an annual event that brings together leaders from service providers, dealers, OEMs (Original Equipment Manufacturers), government, and the media to discuss how current market conditions are affecting the industry today and how they will define the future. The 2016 Forum featured keynote sessions from luxury and mainstream brand OEMs (BMW, Jaguar, and Ford), an industry pioneer in autonomous driving (Google), an automotive economist (IHS), the largest US dealer association (NADA), as well as the world’s largest re-marketing company (Cox Automotive). Themes from this year’s forum included:
1. Mobility Services
Mobility services are predicted to have both huge near-and-long-term opportunities. Traditional auto manufacturers are aggressively entering this market to provide services that enable vehicle access vs ownership. This trend is driven by the economics of the cost per mile going down and the value shifting to experience enabler (i.e. selling capabilities vs products). Ford in particular is working to become a mobility services company and some of their latest offerings include: Ford Pass, Go Drive, Go Park, and Smart Mobility. The traditional ownership model is not expected to go away, but the average number of cars owned per household is expected to drop, which could have a significant impact on dealers. NADA believes that impact will not be felt for a long time due to an anticipated slow adoption rate. The rise in the use of fleet vehicles (which reach their end-of-life much quicker) would be a positive impact to dealers as well.
2. Autonomous Vehicle Advancement
Many OEMs are focusing their autonomous driving efforts on putting out incremental driver assist capabilities. Google, however, has taken a firm position that full autonomy is the right solution. They believe that adding any driver assist capabilities becomes a safety risk by allowing the driver to pay less attention. Similarly, Google doesn’t value vehicle-to-vehicle or vehicle-to-infrastructure approaches as they create added dependencies and failure points. The technology giant also shared that, after more than seven years of testing, they are beginning to see a shift in public opinion. For example, the most common question they receive now is no longer “if” autonomous driving will happen but “when”. Google acknowledged that they’ve made amazing progress with their technology, but significant testing is still needed for vehicles to perform in inclement weather and varied terrain scenarios. Despite the need for more testing, their biggest hurdle is regulation. Numerous laws that are in place to limit operator error (i.e. requirement of a turn signal lever) prohibit Google from expanding their testing and deployment.
3. New Sources of Value
With Mobility Services companies coming online regularly and autonomous vehicles becoming a reality, dealerships as we know them today, are positioned for change. The physical dealership isn’t expected to vanish, but it will need to modify and create new offerings to stay relative and competitive. Today’s service departments are mostly paper driven and offer very little technology to enhance the consumer experience, but in time, they will likely become an increased source of value for dealerships. A recent Cox Automotive survey shows that 85 percent of consumers say service influences their next purchase, yet little effort is placed on upgrading the capability. For example, less than 10 percent of a dealer’s website is typically focused on service. Value, trust, and convenience are what consumers find most important when it comes to service. To enable that, dealers should look to invest in tools like proactive service notification, auto appointment scheduling, pick-up/drop-off service, online progress tracking, online payment, and digital repair history. Service departments need to adopt “Amazon-like” thinking to better understand consumer preferences in order to tailor their new experiences accordingly.
4. Innovation vs. Regulation
Innovation is happening quickly within the automotive industry. Startup announcements, as well as joint ventures between OEMs and tech companies, appear regularly in the news. The pace of that innovation is causing a variety effects, but one of the most profound is the effect on regulatory entities. Advancements in technology, like autonomous driving, are showing a growing need to redefine the fundamentals of automotive regulation that have been in place for almost a century. The NHTSA acknowledges that changes in regulation are often slow but they are prepared to “fast path” items where it makes sense to support innovation that improves safety.
An overall takeaway from the 2016 Forum was that transformation is coming to an industry that has been largely unchanged for decades. While fully self-driving cars and more advanced car sharing solutions will take time to completely replace today’s fleet of consumer automobiles, all of the various form factors will at some point co-exist. This is creating an environment that is ripe for new entrants and is forcing traditional manufacturers to create a much broader product mix to remain competitive. Dealers and regulatory bodies are putting many resources into figuring out how to best serve the industry of the future.
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