Automotive manufacturers no longer simply manufacture vehicles. As mobility trends and technologies advance—think of connected cars, autonomous driving and car sharing—automotive manufacturers are rethinking their business models to deliver greater customer value. At the core of this change is transforming from offering only products to providing services—known as servification.
In this blog, I share some of the drivers of servification in the automotive industry and how data and digitalization will underpin this transformation and, ultimately, success.
#1 - Changing consumer expectations and buying behavior
The way customers think about and use cars is changing. They are moving away from traditional ownership models to using cars "as a service." Faced with rising prices and looking to make more sustainable choices, consumers today increasingly opt to rent cars for specific purposes (for instance, using a smaller car for city driving and a larger car for a road trip) rather than buying one. Car-sharing is also gaining momentum, and for many who choose to buy a new car, subscription-based models have a strong appeal.
#2 – Maximizing services-led revenues
Traditionally, automotive manufacturers' growth strategies have centered around selling higher volumes. With changing consumer behavior, this is no longer their only goal. In the short term, most automotive manufacturers (on both sides of the Atlantic) are looking to evolve their business models where a significant part of revenue and profits come from the services offered in and around the car. This shift is mirrored in the 2023 Voice of Our Clients findings, which reveal that innovating service and product offerings are high on the agenda for automotive manufacturers.
#3 - Evolving customer relationships
Servification is completely altering how automakers interact with their customers and how the market operates. Manufacturers now sell directly to consumers rather than through dealers. In fact, we see e-commerce and direct sales platforms as the future of automotive retail, as they offer a more efficient, convenient and personalized shopping experience while giving automakers greater control over their sales and marketing data. However, this doesn't signal the end of brick-and-mortar showrooms. Many customers will still want to "touch and feel" the vehicle they are buying or confirm features.
In light of changing business models, data has an increasingly vital role to play.
Data to enhance the customer experience
Successful car-sharing platforms and subscription models require digital platforms catering to the "digital customer." This means having the ability to track location and usage and understand demand and preferences. The "connected car of the future" is like a smartphone on wheels, fully connected to multiple data sources, including sensors, cameras, GPS and communication systems. This data forms the lifeblood of these smart vehicles, fueling real-time monitoring, predictive maintenance and improved safety features. For instance, collecting and analyzing data on driving patterns, traffic conditions, weather and road infrastructure can help optimize routes, enhance fuel efficiency and reduce carbon footprints.
Moreover, manufacturers require data to optimize their complex production and supply chains to respond to the pressures of razor-thin margins. They must introduce, categorize, manage and deliver new products and publish catalogs quickly through multiple channels and hierarchies. The process of returns, rebates and sales incentives is complex. Moreover, showcasing inventory through ecommerce platforms requires adding additional product attributes and images. Regulation and compliance also need to be considered.
Servification will require automotive manufacturers to gather the data, make sense of it and offer "value-added" services that support the customer and help manufacturers secure vital revenue streams. It also urges manufacturers to think "outside the box" and develop partnerships with new (and unlikely) partners, vendors and service providers to offer innovative services to customers. Michelin's Better Driving Community is an ideal example. Moreover, the data from connected cars will pave the way for the development of autonomous vehicles by feeding the artificial intelligence (AI) algorithms that support self-driving capabilities. In the high-end automotive segment, manufacturers can use data to offer one-of-a-kind experiences like viewing and tracking the car's production in real-time.
Data to drive excellence on the shop floor
On the shop floor, automotive manufacturers recognize the need to weave data into every fabric of their operations to meet these new market realities. Leading manufacturers are redesigning their plants to be data-driven factories, with many already seeing benefits.
Data-driven manufacturing helps to improve shop floor processes by using enabling technologies, such as AI and digital twins. While AI automates repetitive tasks, freeing up employees for high-value work, digital twin technology helps to design new simulations, processes and training, providing a better overview and transparency of the supply chain and improving the customer experience.
For instance, I recently visited an automotive manufacturer and saw how radically digitalization has changed jobs on the shop floor. A critical step at the end of the car production line is a final inspection of the tires. Instead of an employee doing this manually, the manufacturer uses AI and digital sensor technology (via cameras) to perform the inspection. The operator only intervenes when there is a discrepancy. Not only does automating this process increase the speed, efficiency and accuracy of tire checks, but it also ensures the operator is engaged in a more rewarding, engaging and high-value task.
Operators on another manufacturer's shop floor are trained to paint cars using virtual reality. Using a virtual headset and simulation of a real working environment, the employee learns the correct painting process with zero product wastage. The other upside is that employees gain confidence before beginning the work.
Driving forward innovation and customer service with data
Today's automotive customers expect a seamless omnichannel experience supported by a fully integrated delivery pipeline. Comprehensive and accurate data gives automotive sellers valuable insights into customer preferences, market trends and pricing dynamics, so they can redesign their offerings, build lasting customer relationships and make better-informed decisions to maximize sales and profitability.
CGI offers manufacturers a comprehensive suite of data-driven solutions that empower them to harness the full potential of their data and drive transformative outcomes. To understand more about our approach to becoming data-driven, please get in touch with me.