Reports and Management Briefings
ICDP’s Reports and Management Briefings provide fuller details of individual research topics. They are available for ICDP programme members to download - please insert your username and password when prompted. This page lists our most recent outputs; all earlier ones are available on request - please refer to our Publications Catalogue for a full guide.
Please note that usernames and passwords from the old ICDP web site are no longer operational - please contact the Project Office to obtain your new details.
Launching into the European market with a ‘clean slate’. A retrospective view of past approaches and lessons learned
Pascal Haubenreisser MB 152
Most OEMs over time have launched in their domestic market, and then expanded their operations over time into additional markets, appointing dealers and hiring staff as they roll out. They also follow an operating model of how vehicles are ordered, funded, stocked and delivered that drives their working capital and profit reporting. In the course of this, they have also created a legacy that can be a barrier to change, extending not only through their own organisation, but also through dealer investors and the expectations and behaviours of their customers. We have conducted a detailed evaluation of OEM brand launches of the past 20 years, to establish whether there is a pattern to the launches we have seen, as well as the variety of interdependent common and individual reasons for past initiatives failing.
The Block Exemption review: exploring 'digital' competition
Andrew Tongue MB 151
As the process of reviewing and renewing the Block Exemption regulations that govern franchise distribution in the automotive and other sectors steps up a gear, the European Commission is busy soliciting views and data from interested stakeholders. At the same time, broader issues in the policy environment that may need to be reflected in the new regulations are coming more firmly into focus. Whilst it is too early in the process to talk about potential outcomes, we are now seeing the list of ingredients going into the melting pot. This Briefing gives a reminder of how the review processes will run, before going on to explore one of the major questions facing the regulators in updating the legal frameworks: how to handle the rapid growth of ‘digital’ competition, and the emergence of powerful online platforms connecting producers, retailers, and consumers.
Large European Dealer Groups – will they be given the task of managing dealer consolidation in OEMs’ future network plans?
Pascal Haubenreisser MB 150
Tracking developments in the automotive and general retail environments is a core activity within ICDP’s research programme. Alongside our annual survey of OEM sales and service networks in our European Car Distribution Handbook (ECDH), we have recently assessed the evolution of large dealer groups at EU-5 market-level, concluding that some players have found growth opportunities against a backdrop of declining network numbers, accompanied by steady ongoing consolidation in the number of actual dealer investors. Nevertheless, these larger players across Europe must adapt further if they are to cope with the intensifying pressures on the current dealer model. Simultaneously, OEMs are still struggling with the ongoing challenge of improving overall network efficiency whilst trying to provide a consistent omni-channel experience across their networks. Could a new, joint network approach with the large dealer groups solve some of these issues, and what might it look like?
This briefing draws in particular on data from our national Top dealer group rankings by revenue, from our 2018 “Guide to Europe’s Largest Dealers” published by Automotive News Europe (both covering non-manufacturer-owned operators only), and from data obtained through our recent dealer investor survey with 140 CEOs of major European dealer groups (Investors are the total number of different owners involved in the franchised dealer system).
How might the Independent Aftermarket ‘ecosystem’ evolve?
René Herrmann MB 149
The aftersales strategies implemented by a number of OEMs might finally be showing signs that they could succeed in capturing a greater market share of the available repair and maintenance business. The recent strength of the new car market in many European countries has fed a more stable supply of younger cars into the aftermarket, with their owners likely to remain loyal to main dealer or authorised repairer (AR) workshops (collectively termed FWS, or franchised workshops), at least whilst the car is still under warranty. This effect has been reinforced by the broader implementation of loyalty tools such as inclusive service plans, menu-priced service, and extended warranties. In addition, we see further benefits to FWS retention from both electric vehicles (EV) and connected car technologies.
However, even though these retention effects are likely to remain in place over the coming years, this will happen against a backdrop of a continued decline in aftermarket volumes, as confirmed by ICDP’s aftermarket simulation model. Overall, we forecast a market share decline of between 3% and 7% for the independent aftermarket (IAM) between now and 2024 in the big 5 European markets (France, Germany, Italy, Spain, UK).
So, it looks like their strategies might finally pay off for the OEM-franchised sector, and that IAM operators will be pushed back. This development could accelerate if the independent repairers (IRs) cannot keep up with a variety of looming operational challenges, including access to technical information, fault diagnosis, parts identification, and skills requirements for new technologies. In the future, it looks like there will be a risk that IAM operators will struggle to preserve their market share unless they are able to evolve in response to these pressures.
This management briefing focuses on how the IAM sector is responding to the ongoing pressures coming from the changing aftermarket. Will its response be sufficient to safeguard its future survival?
Used Electric Vehicles: just another used car market?
Christophe Guillaneuf MB 148
Although still marginal, the e-used car market benefits from the acceleration of new BEV sales. Mainly fed - for the time being - by ex-lease cars and ex-demos.
A positive future for the used BEV market will depend largely on an acceleration of the sales of new battery electric vehicles, and analysing new vehicle registrations data across Europe, the trend is quite clear: sales of new BEVs are growing rapidly, from 11,000 new BEV sales in 2011 to 128,000 in 2017.Whilst data on the new BEV market is relatively easy to find, given the smaller scale of the used-BEV market, data has proven difficult to find, or in some cases unreliable.However, thanks to deep-dives into national sources, we have been able to assemble data for the main 4 European markets over 2013 - 2017 which shows the number of e-used car transactions, and the share these transactions represent of the total used car market.
Subscription - what are the new choices offered to retail customers?
Ben Waller MB 147
Subscription has been hailed as a new segment for automotive retail customers, most obviously in the US where several OEMs are piloting new services – even if the term subscription is used to describe a range of retail offerings. In the broadest sense, subscription offers customers access to product as service. The term ‘Servitisation’ has been used to describe a broader long-term and cross-industry trend away from selling products to the provision of product as a service. The aviation industry is often cited as an example where sale of engines to the aircraft owner has been replaced by power-by-the-hour provision of aircraft engines, a service only billable when the aircraft is actively in use by the owner. In the IT sector, high bandwidth connectivity has allowed a shift from selling software, via licence, to a full, on-demand software and service maintenance offering in the form of cloud computing, and whilst many corporate customers of systems and software could clearly locally host and manage their own IT requirements, many value the convenience of contracting the entire service. The language of subscription can be seen to have emerged within this wider economic shift from ownership to use, and in this context, subscription can be described as the right to access a service for a given period of time.
There are two broad types of service currently being marketed as subscription to automotive retail customers. The first group of offerings are best described as a car-pooling service; this offer gives the customer exclusive access to a car until the customer wants to hand it back, much like car rental, and with most costs except fuel included as is typical for a fully-managed lease in the fleet sector.However, unlike car rental, the customer pays a flat monthly fee and is free to swap the car for another within the ongoing contract period, and unlike leasing, the customer has no long-term contractual commitment. The second group of offerings are those that we would describe as bundled leasing, where the customer commits to a long term leasing contract, a contract that includes the provision of insurance, replacement vehicles, breakdown recovery, service and repair; Volvo, Hyundai, and LeasePlan all offer this type of lease to retail customers.The term subscription is also commonly used in many press headlines to describe both types of offer.However, we would define subscription, in as much as it represents a new segment and service, as more closely linked to the car-pooling model.We would then consider bundled lease to be a better description of the second type of offering. The imprecise use of the term subscription, where the same language is used to describe very different types of offer, may currently be causing unnecessary confusion in the customer’s mind, but as the different types of offer mature, we can expect a clearer common language to evolve.
Contributing not cannibalising: how OEM online sales channels should fit into the omni-channel network
Pascal Haubenreisser MB 146
Consideration of how the process of selling cars is changing and will continue to change in the future is at the core of ICDP’s research, and an area we have been tracking from different angles. For this research, we looked at current OEM online sales channels for new cars, concentrating on those with at least some final transactional capability (so which allow customers to place a firm order or actually to complete their car purchase), and excluding those that are solely focused on linking customers to dealers, or on used cars. Reflecting customers’ increased usage of online channels, offering transactional capability is the logical next step for many OEMs in developing their existing online channels, particularly as they have the resources and capabilities to manage online transactions in a way that especially their smaller dealers might not. This possibility has been recognised by many OEMs in recent times, at the same time as they have seen the growing moves by brokers and new entrant third party platforms to get more involved in the customer’s online buying journey, in some cases to the point of offering online sales facilities themselves. The risk of losing control of, or influence over, some of the online touchpoints in the customer’s online new car buying journey, plus the recognition that a growing proportion of customers are now keen to complete the full sales transaction for their new car online, have together driven a number of brands to develop online channels which offer either partial or full transactional capability. As in other industries, the end-goal is the integration of these online channels within the overall channel mix, allowing customers to switch seamlessly backwards and forwards across different channels and formats as part of their buying journey.
In this research, we interviewed a number of OEMs and online channel specialists across the EU-5 markets to gain more insights around the challenges of implementation, and combined this with desk research into current examples to assess the role of online transactional channels within the overall customer buying journey.
Exploring the viability of micro-outlet formats
Pascal Haubenreisser MB 145
Consideration of how retail and aftersales channels are changing and will continue to change in the future is at the core of ICDP’s research, and an area we have been tracking from a number of different angles. In this piece of research, we looked at new physical formats – micro-outlets – which in a growing number of cases have been implemented by car manufacturers in collaboration with their dealers. Despite these usually being temporary formats, their location close to other forms of retail means that they can potentially reach higher numbers of possible buyers when compared to traditional dealerships. This has been recognised by many players recently, resulting in the launch of a number of new initiatives such as the Opel Cayu store concept in Germany, or the Volvo Studio in Milan, opened both in the second half of 2017. However, the location and specific fit-out required for micro-outlets translates into a high level of upfront investment, especially the outlets and their systems need to be integrated with other channels and formats. This raises questions on the one hand over whether these outlets should have an ‘active’ selling role, and on the other hand over the extent to which OEM financial backing can be justified for formats which are usually operated by dealers. For this research, we spoke to a number of operators, including dealers, OEMs and service providers across the EU-5 markets to gain insights, and combined this with secondary material to create a financial model to examine the preconditions for viability of micro-outlet formats.
People and skills in automotive retail – how to adapt to an omni-channel world?
Pascal Haubenreisser MB 144
In this research, we have been looking at issues around customer-facing staff at dealership level, either salesmen or service assistants – who in the majority of cases are located at physical sites, but increasingly work in back-offices to answer calls, emails and live chats. As staff quality has a significant influence on the decision-making process for new car buyers, the retail level must ensure that it employs people with the right attitude, including more soft skills capabilities alongside hard skills, which in many cases is the opposite of the traditional and persistent approach in the sector of following short term objectives, leading to high staff turnover. However, this need has recently been recognised by a number of larger dealer groups, resulting in the emergence of new approaches towards recruiting, training, developing and rewarding customer-facing staff. Nevertheless, there is still room for improvement, especially in addressing the gap in soft skills and attitude, plus the related question of new approaches to remuneration. For this research, we spoke to a number of large dealer groups, service providers and accreditation authorities across the EU-5 markets to gain in-depth insights, and supported this with desk research.
Reshaping parts distribution in the independent aftermarket
René Herrmann MB 143
The ongoing consolidation amongst spare parts distributors (PDs), often now happening as a result of the involvement of private equity funds, is leading to the emergence of more international ‘super parts distributors’. These players now enjoy significant economies of scale in both their parts sourcing and in the provision of services for independent repairers, to the point where traditional smaller distributors are finding it harder and harder to compete.
In order to understand the impact that this consolidation is having on the overall competitive landscape of the parts distribution sector, we turned to the well-known ‘Five Forces’ model developed by Michael Porter. Through this, we can illustrate:
The competitive rivalry between parts distributors
Pressure from digital entrants
The bargaining power of repairers
The threat of substitute products
The bargaining power of parts suppliers