India’s automobile industry gears up for digitisation after coronavirus roadblock
The coronavirus pandemic and the subsequent lockdown put the brakes on the growth of the Indian automobile industry.
India’s automobile industry, the fourth largest in the world by volume, seems headed for another year of significant declines. Sales of passenger vehicles have been particularly hard hit, and recorded zero growth in April this year while a month earlier in March it was down 52 percent.
The news doesn’t get any better as India enters Unlock 1.0 and attempts to kick-start its economy.
Counterpoint Research expects the nation’s auto industry to decline by at least 25 percent in all categories in 2020. A report by Fitch Solutions states that vehicle production in India is likely to contract by 8.3 percent in 2020, following an estimated 13.2 per cent decline in 2019.
But, there’s a silver lining behind the COVID-19 cloud.
The pandemic has brought to the forefront an opportunity for rapid adoption of digitisation in the passenger vehicle segment, putting the focus on a contactless environment.
Frost & Sullivan, in a recent note titled Changing Retail Strategy & Consumer Connect - Auto Industry Road Map, said, “With COVID-19 triggering an 80-100 percent drop in physical visits to showrooms and contactless transactions expected by customers, digitisation has emerged as key to survival. It is empowering automotive retail and after-sales, and enabling more meaningful customer engagement.”
The Indian automobile industry has been struggling for some time now, as passenger vehicle sales fell below three million in 2019 from the earlier level of over 3.3 million in 2018.
The industry, which moves in sync with the country’s economy, has been fraught by idle capacity, low demand, and high cost of production.
And, the coronavirus pandemic has pushed it further.
Brokerage house Axis Securities, in a recent note, said vehicle sales in May plunged 70-90 percent, excluding the tractor segment, for all original equipment manufacturers (OEMs) even as there was a gradual opening of plants and dealerships.
Passenger vehicles market leader Maruti Suzuki reported an 86 percent tumble in total sales in May.
On a digital road
However, this does not imply a doomsday scenario for the automobile industry. Indians are still interested in owning a car, but the manner in which they will go about purchasing may be different.
The fact that automobile companies have readying themselves for digitisation over the last couple of years will help ease this transition.
Steffen Knapp, Director, Volkswagen Passenger Cars India, says, “At Volkswagen, digitalisation has been the core principle of our strategies. We are pushing the boundaries of end-to-end retail sales and strengthening our commitment to customers with the launch of our simple, secure, and user-friendly online retail platform. We aim to provide our customers flexibility in choosing their preferred Volkswagen product through a safe and contactless channel.”
Manohar Bhat, Vice President and Head - Marketing & Sales, Kia Motors India, echoes these thoughts.
“Since inception, Kia Motors India has always been innovative and futuristic. Technology-led digital transformation has been a key pillar of our approach. We pioneered this process with seamless, end-to-end digitalisation of our sales process aligned with dealer partners. Even before the launch of Seltos, we had collaborated with banking and finance partners to provide online financing options.”
The change in process
Digitalisation of the retail channel is emerging as a key channel; this is how vehicles will sold or bought in the near future. This envisions a scenario where the buyer of a car could go through a process with minimal human interaction and maximum digital tasks.
Coronavirus is expected to create a physical contactless environment with an increased thrust on online assessment and buying of vehicles. This is a huge shift as the purchase of vehicle is a strong-involvement, high-investment decision with deep-rooted human behaviour regarding touch and feel.
The Frost & Sullivan note states that online retailing will emerge as a critical channel, not only in terms of sales but also for vehicle servicing.
Spinny, a Gurugram-headquartered startup with an online-to-offline retail platform for buying and selling used cars, has already implemented a contactless delivery system with sale of over 600 cars. The initiatives adopted by this startup include virtual tour, contactless home test drive, car and employee hygiene, and also a customer safety kit.
Niraj Singh, CEO and Co-Founder of Spinny, says, “In a world where lockdowns and social distancing norms are becoming commonplace, our initiative #WithExtraCare is focused on setting industry standards in safe and contactless transactions, thereby witnessing a sharp increase in inquiries of home test drives.”
Home test drives is a concept where the vehicle comes to the consumer location rather than the individual going to the dealer’s place.
Volkswagen launched the Digital Workplace initiative across its dealerships in India around two years ago. Under this, 121 of its dealership centres were given tablets with a pre-installed Digital Workplace application.
The German carmaker has also extended its digital capability to the used car segment where a prospective customer can buy or sell a pre-owned vehicle on the Das Welt Auto website. It also offers an application for self-evaluation of a vehicle.
An omnichannel approach
The increased thrust towards digitisation does not mean that the entire realm of buying and selling cars will go digital. The shift will be towards a phygital world where online and offline co-exist.
The Frost & Sullivan note said, “Our analysis reveals an increasingly clear trend of physical stores and online retail channels merging to create an omnichannel bricks-and-clicks retail environment. This, we believe, is as much a response to the exigencies of COVID-19 as it is to the fact that, currently, less than 50 percent of car dealers globally can fulfil a complete customer journey, from purchase to delivery, online.”
Manohar agrees that the post-COVID-19 world will witness the evolution of online sales coupled with visit to showrooms.
“Customers may use our end-to-end digital buying process and physical visits to show rooms may reduce, but the future of car buying will be a close conjunction between online for ease and a dealership visit for touch and feel – a phygital approach to ensure a mix of both digital and physical,” he says.
Revving up for the future?
The automobile industry’s strong shift towards digital is likely to lead to a rapid rise in sales.
Frost & Sullivan projects that online retail will account for about one million vehicles sold in 2020, increasing rapidly to over six million by 2025. Similarly, revenues generated by online vehicle retail, after-sales, and services are likely to grow almost five times, from about $120 billion in 2018 to about $605 billion by 2025.
The global automobile industry is witnessing definite changes.
The emergence of ride-hailing apps, a rising preference for not owning cars but getting them on an on-demand basis, advances in autonomous vehicles, and the advent of a contactless environment is likely to give a further fillip to adoption of a digital platform.
“One of our observations has been that OEMs in India are increasingly turning to digital showrooms due to multiple benefits. These include lower operational costs and the ability to use a range of technologies like AR/VR, AI-powered systems, and voice recognition to provide customers with an interactive 360-degree experience,” Frost & Sullivan said.
However, the sobering reality remains that the Indian economy is not really in good shape and coronavirus has only increased the stress. There is no doubt that the automobile industry will face a severe impact for quite some time.
But, analysts and carmakers remain hopeful.
Speaking on market leader Maruti Suzuki, Axis Securities said, “A gradual recovery is expected in June as 80-90 percent dealerships become operational. Retail and service enquiries have seen an uptick for the company.”
Will the next few months see the Indian auto industry get back on the road? We’ll have to wait and watch.
Edited by Teja Lele