Post-Covid-19, how OEMs and dealers are changing their retail models

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Automakers make cars; dealers buy them from car manufacturers and then resell them to end customers. This has been the practice for as long as anyone can remember. It also makes sense; a buyer, for example, cannot approach the gates of the Maruti Suzuki factory in Manesar to buy a car! But the pandemic has changed that.

By mid-2020, after the first lockdown, most automakers had started selling cars online by setting up an end-to-end online car buying platform. For the buyer, the steps include:—Set the budget;

—Select a make/model;—Visit the car manufacturer‘s website;

—Test drive (most dealerships send the vehicle to your home/office);

—Trading and finance (online and by phone);

—Delivery pick-up (most car manufacturers promise delivery of the car to your home/office). “Although online car sales took off during the lockdown, these processes were also in place before Covid-19,” Brajesh Chhibber, partner, McKinsey & Co, told FE.

“The lockdown has helped accelerate digital adoption, including online sales, and OEMs have started to focus much more on improving the customer experience, including reaching out to them even before they knocking on the doors of the dealerships.” During the lockdown, Hyundai India, for example, launched the online automotive retail platform called “Click to Buy”.

Maruti Suzuki has digitized 24 of the 26 car buying stages it says exist (excluding the two stages of “test drive” and “car pick up”). Kia India launched “VR Showroom”. Honda launched ‘Honda from Home’, Tata Motors launched ‘Click to Drive’, Mahindra launched ‘Own-Online’, etc. consolidation, lean retail formats, direct access to customers and alternative sales models, added Chhibber.

“It continues, and omnichannel sales will be the new normal.” Dealerships now go where the customers are, not the other way around. “In addition to digital, this includes lighter and more flexible retail models, such as experience stores, pop-up stores, etc.,” Chhibber said.

“Essentially, they go where the footsteps are.” Three examples of a totally transformed retail experience are Mercedes-Benz India, Citroen India and Volvo Car India. a format under which Mercedes-Benz India owns cars, sells them through franchise partners (existing dealerships), invoices new cars directly to customers, processes and fulfills the order.

Martin Schwenk, MD and CEO of Mercedes-Benz India, told FE that with ROTF, dealers don’t have to invest in building inventory. “Instead, they will use their money in new ventures for the advancement of the dealer network,” he said. Aircross SUV, and delivering directly to customers from its manufacturing plant in Tiruvallur, near Chennai. This initiative covers purchase, online trade-in, financing, insurance, maintenance packages, warranty extension and registration before home delivery.

Last week, Volvo launched the XC40 Recharge, which will be sold online only (not through dealerships). But most automakers FE spoke to said online isn’t a separate sales channel and dealerships will exist. “Online or offline, a car should be sold through dealerships. Dealerships are not intermediaries, they are our partners,” said an executive from a major automaker.

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