Automotive

Understanding the Importance Of Heritage OEMs and Their Dealer Networks

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Sitting here on a Saturday afternoon with my father-in-law, who is visiting Michigan for the weekend. My father-in-law, Jim O’Connor, is retired today. He was an executive at Ford Motor Company for a great many years who oversaw sales and marketing operations and was specifically influential in the dealer network.

I love our time together mostly because I learn so much. We spent some time reminiscing about relationships from years gone by and dealer friends that we share. We have even visited a couple of dealers here in Port Huron just for fun. Jim shared that during his time at Ford Motor Company he saw the dealer infrastructure as a key competitive advantage. Understanding what the people close to the customer are saying is critically important to any business. As the conversation progressed, I asked my father-in-law what he thought the relationship between Ford and the dealership infrastructure would be like in the future and if he thought he would ever see a day where everything was direct to consumer.

First off, he emphasized that Ford, like all heritage OEMs, are at their core manufacturing companies. He said that Ford could build 90 F150’s in an hour, and while he respects that EVs look at themselves as technology companies, he wonders if they can build vehicles at scale. Tesla, being the EV leader, has just surpassed the million-vehicle mark worldwide this past year. He also thinks that Direct to Consumer is a lot to unpack and is more of a journey starting with greater personalization around consumer wants, needs, and experiences. Yes, it certainly means that the focus needs to shift from the salesperson at the dealership to the consumer as a starting point.

There are a lot of questions that need to be resolved for the consumer, and it will require both the OEM and Dealer working together. In this new world of supply chain issues, there are less vehicles on the lots, and consumers have shifted toward ecommerce and special ordering. This requires a much deeper connection between brand and retail marketing and advertising. It also requires improved order processing and factory-to-dealer communication. With the rapid rise in EV production and consumer demand, there needs to be a lot of dealer and consumer education. Education is not only around vehicle features but also about charging infrastructure and components. This education is critical as we get to greater EV adoption in the industry.

The automotive and mobility industry also wrestle with EV vehicles being more akin to devices. There is talk about OEMs wanting to establish a fixed price that would not change in the dealership. This brings up an interesting inflection point as OEMs feel that they set the price, and much like when a consumer purchases a computer or phone, the price in the store is not negotiated as a fixed price. Dealers are the ultimate capitalists, and they feel that supply and demand should be reflected in the prices as they are fluid. And the precedent has always been that the prices of automotive vehicles have always had a negotiated price. When EV-only manufacturers set the price of their vehicles and sell direct to consumer, it impacts the heritage OEMs who are selling EVs and making them a huge part of their lineup. As of this writing, the heritage OEMs also want fixed prices for EV vehicles.

Another layer of EVs is subscription services. EV-only companies view their vehicles as devices, and a large part of how they make annuity money is through offering subscription services through applications. The consumer is charged an extra monthly fee for music, podcasts, maps, and other things. All system service fixes would be handled as software upgrades in the same manner that smartphones are upgraded today from the factory. The question around who gets that revenue, and is there a revenue share, is something that will need to be addressed for heritage OEMs. Even though it may seem like things are relatively easier for EV-only manufacturers, the vast dealer network for heritage OEMs makes selling vehicles across the country much easier and at a faster scale. Ultimately, regardless of how companies view themselves, whether technology, automotive, and/or mobility companies, manufacturing is an underlying necessary component. Whether you are calling your products vehicles or devices, everything must be manufactured to reach scale and then brought to market expediently to be sold.

One of the great things about Jim, who was at Ford Motor Company for 42 years, is his ability to understand both parties and find solutions that are best for Ford, their dealers, and the Ford customer. He would not pursue solutions that did not check all the boxes. He realized compromises had to be made, but he led that charge and listened and understood all the positions. What he made clear was that what was best for the Ford customer was not negotiable, and he was an honest broker who brought all sides to the table.

My father-in-law retired at the close of 2004, and he still stays close to both Ford and their dealer body. He often attends dealer events and still bleeds Ford blue and embraces the concept of being a brand ambassador for both Ford and their dealer body. He is still whispering in a lot of ears, talking about the industry he loves, and watching the company he helped build enter this new world of EV and mobility. I like the thought of modifying an approach to solve changing customer expectations and needs. So often, folks think about tossing things aside as a first step and, in my opinion, should be the last step. There is no question in my mind that there needs to be tremendous change in the automotive and mobility space, and it is largely being driven by customer needs and the changing direction of electrification.

I think Jim would also share in the opinion that this new world of electrification provides a lot of opportunity for both EV only and Heritage OEMs to grow and evolve in different ways. Perhaps the two very different companies and approaches can learn best practices from one another?

At Perficient, we are working within the automotive and mobility industry. Our solutions are about succeeding in this business today. They reflect not only the latest in technology solutions but also understanding data not only from a gathering of many types of data and reporting but predictive as well. We introduced the first-ever Journey Science practice, where we connect the complex customer journey with understanding the lifetime value of customers for clients.

So, what did I learn this weekend? I got a ton of perspective on the complex but ultimately exceedingly successful OEM and Dealer relationship. I also gained a solid understanding of how both the factory and the dealer network could evolve to better serve the customer. It’s really a sustainable competitive advantage when we position the customer as our north star. And lucky for me that my wife’s errands gave me enough time with my father-in-law to spark a greater excitement for this industry and the opportunities to come.

 

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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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