Automotive

For Heritage OEMs and EV-Only, Challenges and Opportunities Abound

The automotive industry is acutely focused on electrification and defining new standards for emissions. Until recently, electric vehicles were costly to develop and buy, leaving OEMs and customers uncertain of their future potential. Many new technology startups have disrupted the automotive industry by innovating new technologies, reducing battery prices, and creating the potential of commercializing electric vehicles for the masses.

The rise of electric vehicles has created two distinct types of original equipment manufacturers (OEMs) in the industry. The first is heritage companies that manufacture both internal combustion engine (ICE) vehicles and electric vehicles (EV) (today, EV represents about 5% of the automotive market in terms of consumer sales). And the other only manufacturers EV. These are technology companies that are disrupting the entire industry. The macro-economic issues of high fuel prices, the war in Ukraine, and the shift to a more environmental focus have helped fuel this growth in EV as well.

Many of the heritage OEMs are separating their businesses into two parts: one for ICE and one for EV. I had seen these industry dynamics before in the late nineties, except it was between digital and print in the publishing industry. Currently, ICE represents 95% of the automotive sales, and it is difficult to have the EV part of the business innovate and do the things they need to do if they are all under the same roof. The same held true for media companies. When I was at Washington Post Newsweek Interactive, we were separated from print. This strategy worked well because it allowed both parts of the business to run their business units as they needed and not be constrained by the legacy part of the business. Once the newer business gets to a certain scale, then you can combine both businesses together again.

The EV-only companies have in many ways been the largest single disrupter to the automotive industry. They are technology companies and not based in automotive manufacturing. And they are changing the way things have always been done. They do not have dealer networks and prefer to sell directly to the consumer. They also don’t have model years in terms of vehicles, which is very different than a heritage OEM. In some ways, EV-only companies follow a much simpler methodology of going to market. They operate like technology devices that create updates that are downloaded at various times throughout the year. They do, however, have the challenge of educating consumers about electrification, the technology, and creating confidence in the charging infrastructure. For most consumers in the United States, this is a very different way of conducting business in terms of the automotive industry.

These disruptions have also necessitated changes in the consumer experience. Heritage OEMs have an extensive dealership model, and EV-only companies have rejected that current model largely because of two factors. The first is the belief that the consumer needs increased education with the new technology being offered. The second is that EV-only startups cannot produce enough vehicles to make sense for distribution in a dealer network. The EV-only companies see a dealer network as moving metal, and that is a very different mindset in the technology companies.

The one thing everyone agrees with is the idea that dealerships will need to evolve, and it is already happening. Dealerships today are embracing mobility in service and retail by coming to the consumers rather than having consumers come into dealerships. Today in many dealerships, this is at least an option for consumers. And it has been embraced by consumers for its ease and convenience. Some EV-only companies are creating service and experience centers for consumers. I think you will see dealerships also embrace this positioning and an increased focus on these elements.

At Perficient, we are a different kind of consulting company. We are technology-based and consumer-driven with vast experience with both Heritage OEMs and EV-only companies. We not only understand but live the necessity of the transformation needed that will involve charging infrastructure, consumer education, and a different experience.

Consumers will need clear and transparent pricing so that they can focus on understanding and becoming comfortable with the technology. This will generate a more consumer-friendly way to purchase the vehicle. And it will also involve a relationship to manage that product beyond the original sale in a way that consumers really haven’t experienced or needed before. Again, these new vehicles are not cars but rather technology devices that will have regular updates and downloads, much more like the current phones and tablets.

The key to success in the automotive industry today is understanding consumer expectations and the technology necessary to create, facilitate and augment this exciting transformation.

So, whether you are at a heritage OEM and transforming your company with the new technologies for your consumer needs or you are at an EV technology company that is manufacturing vehicles and embracing electrification and changing the nature of the automotive industry, we can help. We would love the opportunity to partner with you in both extending and creating world-class organizations.

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Keith Tomatore

A long-time senior executive in the auto industry who has held the position of SVP, Retail Marketing at Global Team Blue (GTB, a WPP Company) on the Ford Retail Business. In this role, Keith worked with the Ford Dealer Associations across the country to help them with their Precision Marketing and digital efforts. Also, he served as CEO of iFrog Marketing Solutions, which focused on Automotive advertising solutions for Tier 2 and Tier 3.

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