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Industry insight: Motorists score as OEMs look to evolve their business models

Pure electric Volvo C40 and XC40 Recharge at a charging station

Pure electric Volvo C40 and XC40 Recharge at a charging station

Published Jul 19, 2021


JOHANNESBURG - Without significant transformation, original equipment manufacturers (OEMs) will struggle to remain profitable in 2035. This is one of the key findings of a Deloitte study titled: “Future of automotive sales and aftersales: Impact of current industry trends on OEM revenues and profits until 2035”.

According to Dr Thomas Schiller, managing partner clients and industries at Deloitte, this struggle is due to the fact that the global automotive industry “is on the cusp of a monumental transformation”.

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“Besides technological trends in the area of connected cars, e-mobility and autonomous driving, we can observe significantly changing customer preferences in terms of mobility usage and buying preferences,” he reveals.

The e-mobility trend is especially significant; the report explains that the move to electrification will negatively impact the OEMs’ highly profitable aftersales business. “As a result, the total business will likely decline by 10 percent despite the car parc growing by more than 50 percent,” it warns.

Volvo Cars brings infotainment system with Google built in to more models

Couple this potentially perilous future with sluggish local new car sales impacted no doubt by price increases (in South Africa, new and used vehicle prices contributed 11.2 and 10.5 percent respectively to inflation in the past year) – and it sounds like a doom and gloom scenario is looming for the OEMs, doesn’t it? Not necessarily. Deloitte says car companies can prosper – but the transformation of current products and processes is imperative.

While 2035 may well be 14 years away, forward-thinking OEMs are already doing this and they are looking for competitive ways to close deals. And, while these offers are undoubtedly driven by their desire to bolster turnover and profitability, there is a rather appealing consequence for motorists: they’re accessing rather good deals.

Volvo XC60

Just one example is a current campaign at Volvo Car South Africa, whereby the company is currently offering 0% balloon, 0% deposit, and a lending offer of prime -2. Practically, this means that an XC40 works out to R10 300pm and an XC60 costs R13 100pm. These are all extremely safe and luxurious cars that – before the introduction of these offers – were genuinely priced out of the shopping range of many South Africans. Shop around and you’ll see that other leading OEMs are offering similar structured deals based on mobility needs rather than the need to own a vehicle outright.

This strategy is in line with the recommendations contained in the Deloitte study. “OEMs have to significantly transform their current sales and after-sales network regardless of the future-state scenario,” it reports.

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Practically, Deloitte says that this will need to involve introducing new digital experiences, developing a truly seamless digital customer experience and also optimising the total cost of ownership (TCO) for vehicle owners. So, a distinctly digital and decidedly appealing financial future is just around the corner for motorists if you prefer to pay for use rather than pay for ownership.