I recently interviewed Gary Johnson, a delivery director at Perficient who has worked with various automotive brands. In our conversation, Gary shared how the automotive industry is faring during the pandemic. He gives a big nod to electric vehicles (EVs).
Eugene Sefanov: First and foremost, I would be remiss not to ask how the automotive industry is doing during COVID-19.
Gary Johnson: The industry as a whole isn’t doing as well as it would in a typical year. There’s no question about it. That said, we are in a better spot today than when the pandemic started. When the virus began to spread, everyone was terrified. People were afraid to go into stores. They were afraid to touch anything. I remember seeing shoppers wearing gloves and masks as they entered establishments. No one knew what to make of it.
At the same time, dealers were closing their doors temporarily to help reduce the spread. They had to change the way they operate with new social distancing guidelines. Virtual and by-appointment-only showings, at-home deliveries, virtual chats, texting, and lots of interaction by phone was what they shifted to immediately. Factories also paused manufacturing, which contributed to the industry’s overall supply chain distribution. Fast forward to today, we are in a better spot. The supply chain is steady. Sales are up from what they were initially, but they still tend to dip as infections spike.
What kind of long-term implications could COVID-19 have on the industry?
Well, the supply chain can undoubtedly be affected again. But, we’ve learned how to deal with related issues a little better. I think the more significant impact COVID-19 could have in the long run revolves around consumer behavior. It’s a little too early to know for sure, but there are some early signs of what could come.
People are more comfortable than ever transacting digitally. From retail to consumer goods, online and mobile sales are up significantly. Consumers were essentially forced to realize they don’t need to go into a store to buy something or get the in-person service they relied on for so long. They also found that the customer experience is often just as good, if not better. This shift has caused customers’ expectations to increase, and companies to adjust to what many believe will be the new norm.
One area of the automotive industry that could benefit from COVID-19’s impact is electric vehicles (EVs). Think about this for a second. Many people don’t want to go to the gas station to fill up because they’re afraid of the virus. Every time they need to touch that pump handle (most types of handles, really), the virus comes to mind. So, what’s that alternative to pumping gas? Electric vehicles. While not everyone can, it’s safer and more convenient to plug into your garage’s outlet.
What’s also really interesting is the typical EV buyer. It’s frequently someone who is an early adopter of technology and likes everything at their fingertips, including a big screen in the car that helps seal the deal for many. As more people get exposed to and entrenched in digital and have positive, personalized experiences outside the auto industry, the chance of considering an EV is only going to increase.
The fact that EV buyers are typically digitally savvy, not to mention the behavioral changes that are happening right now due to COVID-19, could also mean that buyers might be more inclined to purchase a car via a website or an app. Automotive customers should consider stepping up their digital and ecommerce game. Shopping carts, chatbots, live chat, text, and email. Personalized communications. Video. Mobile apps. The entire car-buying journey can be digital and contactless. Don’t get me wrong, there’s still a place for dealerships and in-person browsing and shopping. But, pre-COVID 19, we were already headed in a direction that focuses on the digital consumer. The virus just catalyzed the trend. There’s no question about it.
I hear that EV vehicles make consumers anxious? What’s that about, and how do you combat it?
You’re right. There is a fear among consumers when it comes to EVs. A common reason people avoid EVs is that they believe the battery will run out of juice while driving. It’s a fair point, but I think there is crucial information that they are missing, which can help alleviate their concerns. For example, most batteries can run for 300-400 miles, a far cry from the 100 miles just a few years ago. Before the pandemic, the average person commuted 35-40 miles every day. It’s much less during the pandemic.
Now, if they travel more, they’ll have to plan accordingly, just like they would if they were driving a traditional car. It’s certainly more challenging to plan because it’s harder to find a charging station. It’s an industry challenge, but it is getting better. The industry is building out the infrastructure to support widespread EV usage.
We actually helped a major automotive company build its EV nationwide charging network. These were neat projects that focused on its website, mobile app, and charging station interfaces. It’s exciting to see the positive impact we’re having on the industry and environment.
While charging stations are popping up and research and development continues, we still have a few years to go before “range anxiety” isn’t an issue. For now, companies can limit this fear with education.
You mention education. What are some ways automotive companies can better educate consumers?
The omnichannel (online-offline) approach is essential, but digital has the opportunity to make the most significant impact. Auto manufacturers need to address the pain points head-on. They need to let consumers know what they can expect when it comes to batteries, driving ranges, charging, and warranties. That reminds me. People think you need to replace EV batteries after a short period of time, which isn’t true. They are made to last for many years and at least 100,000 miles.
OEMs should explain why EVs cost more (initially). Do consumers know that batteries are a significant portion of an EV’s sales price (up to 40% in some cases), and the more charge a battery can hold, the more expensive it is? What about the cost-savings that come with EVs, like not having to fill up or get oil changes? What about the tax incentives and credits? Studies show that when you stack up the best-selling EVs against the best selling ICE vehicles, EVs have a lower total cost of ownership.
There are also some other things that should be communicated to consumers. The government has regulations for greenhouse gas emissions, and companies have carbon-neutral goals. For example, some states, such as California and Massachusetts, plan to ban the sale of new gas-powered cars by the year 2035. These are serious motivators for companies to ramp up their production of EVs. At the same time, buyers of EVs are equally environmentally conscious. It’s imperative to showcase the environmental benefits of EVs to consumers.
While EV margins aren’t as high as traditional cars, we know companies are trying to close the gap. What are some of the monetization opportunities companies pursuing?
Cars are built with incredible technology that offers manufacturers a lot of customer intelligence data. They can leverage that data to up-sell, cross-sell, and share that data with external parties. User-based insurance is one way to monetize a car’s data. The car can let the insurance companies know how much, how fast, when, and where you drive. With this information, insurance companies can build personalized policies. And, don’t forget about advertising. This type of data is an advertiser’s dream.
We’re also going to see an increase in subscription, rental, and pay-per-use programs—from cars to battery chargers and charging stations to intelligent mobility services—in the next few years because everyone sees the promise of reoccurring revenue and profitability that comes with it.
Partnerships and collaborations with all types of companies, including software, retail, and other companies in the automotive sector, will also help manufacturers remain profitable as the demand for EVs increase.
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