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Disruption in the Auto Industry: Technology to Replace Car Salespeople?

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The automotive industry is a multi-billion dollar market and sales of new passenger cars are projected to exceed 88 million units in 2033.  The distribution model of new passenger cars sales has not evolved since the mass production of Ford’s T-Model in the early 1900s. Typically, car buyers visit the car dealers to look, test drive and order the car.

Tesla Motors was the first major car dealer to purchase new cars online. Elon Musk, Tesla founder and chairman, revealed that the company received almost $10 billion worth of pre-orders for its newest car, the Model 3, in just two days.

Online search is the primary source

A car is typically the second most expensive purchase by a consumer, after a house. Beyond the price of the car, there are many associated costs to car ownership – maintenance, repairs, petrol, parking and interest on a car loan – throughout the whole lifetime of owning the car. One would think that most potential car buyers would want to test drive and look at the actual model rather than the image of the car on a screen. More than two-third (68%) of new car buyers started off not knowing what car to buy, according to a survey conducted by Google in 2017. These car buyers relied on online searches (96%) as the primary source of information, followed by online video (80%), word of mouth (77%) and test drives (63%).

Ordering a Tesla

Source: Tesla

Informed buyers

Increased usage of mobile and internet have significantly changed the way consumers access information and make purchasing decisions. Connected consumers are becoming more informed and more powerful as they spend more time researching products, making purchases and reviewing them. Consumers can compare prices and specifications between car models from the same manufacturers or against its competitors, and source the best deals.

Often, car dealers are located on the outskirts of cities, and operating hours are restrictive. Moving to online sales of new cars will satisfy connected consumers who are used to buying other products and services at their own convenience, at any time they want. The popularity of smartphones and VR / AR glasses allow car buyers to experience the car without visiting the showroom.

Trusted brands

Mass-market brands dominated the JD Power Study in 2018, accounting for more than half of the brands with the least number of problems experienced by car owners during the first 90 days of ownership. Hyundai Motor Group ranked top, with all three of its brands (Genesis, Kia and Hyundai), ahead of established luxury brands like Porsche, Mercedes-Benz and Lexus.

Car buying is an emotional experience as much as a rational process. For car buyers looking at mass-market brands, the rational experience would be typically stronger than for someone buying a Ferrari or any sports car. With ever improving build quality among mass-market brands, consumers can confidently order online rather than going to a local car dealer.

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