The true impact of the pandemic can only be gauged at the end. However, some post-pandemic consequences are becoming clear. Firstly, a major economic crisis will sweep across several regions, reducing consumer appetite for big spending. Fear of contagion is driving travelers away from public transport and that will take a while to recover even after the pandemic. Lockdown and social distancing are making organizations and individuals more favorable to digital processes like online sales, contactless services and remote collaboration. They will become part of the way we live and work.
Automotive and mobility companies must already prepare for the future, starting by what we already know rather than waiting for what we don’t know. While some see COVID-19 putting the mobility sector transformation on hold, this will not be the case. A more digitally-minded society means mobility companies must further strengthen their digital centricity. But how should they define their post-pandemic strategy?
Avoid budget lockdown, invest intelligently
During economic turmoil, many companies tend to cut practically all expenditure but the very basic to keep lights on — because that’s the easiest way to deal with instability. However, this also means they won’t be winners on the long run, just because this is the ‘law of least effort’ for any company.
As seen previously, companies who demonstrated agility and intelligent investment during the 2008-10 financial crisis also grew the most afterwards. Automotive companies must focus on a strategy of continuity: select investments that are necessary to tackle the pandemic – such as remote collaboration – but will also be useful later on, both for cost optimization and for adapting the business model to a new reality. Look at it as moving forward in small steps instead of a big step forward and two steps back – like dismissing talent that you will need in some months. At the same time, it avoids companies from strangling themselves by not having resources to harness growth when recovery starts.
A good example is end-to-end online car sales. For instance, Tesla and Geely have used their online sales platform to gain market share in China during lockdown. Being essential during the pandemic, online sales also allow future cost optimization opportunities by reducing investment in physical retail. Looking farther, it will also be of added value when EV and ADAS widespread considerably lower revenue from maintenance and collision repair.
Accelerate digital transformation, focused on cost optimization
Focus on digital projects with short payback period that can progressively shape into your long-term strategy. Start by digital processes that gained public or corporate acceptance in the pandemic. Several areas arise as possible candidates:
- Widespread adoption of remote work will reduce office costs and improve collaboration across global teams. Also will make talent search easier.
- Online sales and customer contactless processes will reduce retail/after-sales costs.
- Stronger shift of marketing budgets toward digital campaigns.
- Several AI applications in customer service, R&D and manufacturing can be rolled out with limited investment, enabling cost optimization.
- Adoption of SaaS applications for several cases will provide better scalability and an important reduction in CAPEX.
Adapt your business model to changing customer needs
The incoming economic crisis will reduce the appetite to own, but not the need to use a car. Accelerate the transition from ownership to usership, from car to digital platform. Vehicle connectivity will allow carmakers to offer car usership models with reduced financial commitment from customers. These models also enable greater flexibility in changing car models.
This usership model is the starting point for a post-pandemic recovery plan. But it’s also the way to transition customers to a digital user platform. This will enable a continuous relationship and a more recurring revenue generation model.
However, don’t try several mobility experiments at once. Focus on a winning model and follow through.
Garter recommended reading (just for customers)
- Automotive CIOs’ Guide to COVID–19 Crisis Management
- COVID–19: Technology Can Mitigate Car Sales Slump
- COVID–19 Scenarios for Automotive and Transportation CIOs
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