The Global Report on Automotive Retailing

These and many other crucial industry questions are comprehensively addressed so you can make the right decisions to stay ahead of the competition.

Report coverage:

Market and branding
The global automotive industry currently spends an estimated $35 billion a year on advertising and promotion. If incentives and other opportunity costs (eg dealer-level price discounts), that figure probably exceeds $70 million. This is far more than any other industry spends, and far eclipses total industry profits. Furthermore, it is becoming clear that increases in advertising and promotion have little correlation to increases in market share at the company level. Clearly, spending more to build stronger, more profitable brands is a dubious proposition, made more so by the probable near-term slowing of demand and the increasing price pressures the markets will witness. And yet many OEMs seem unable to do anything else. How did we get here?

The Internet: attractive but elusive
The Internet has already become a deeply integrated part of the automotive industry, and will become even more important as time goes on. Auto dealer 'disintermediation' will remain the exeption rather than the rule in the three major markets, and the Internet will further accelerate the value capture capabilities of consumers by improving pricing and inventory transparencies. The benefits to OEMs will include perhaps ephemeral opportunities at CRM and more substantial opportunities to increase demand prediction accuracy, understand emerging trends and, of course, to sell cars.

Europe: regulators in the driving seat
The continued integration of the European Union is having a tremendous impact on the automotive retailing business. It seems logical that during such a period of instability players will jockey for advantage in as many ways as possible. Clearly, despite changes in the block exemption, the automotive manufacturers will remain the dominant force in the industry. Beyond the block exemption, one has to note the veritable crush of new regulations descending on the industry, and note it with increasing alarm. While most of these ideas are undoubtedly worthwhile, combined they could make motoring a decidedly expensive proposition in Europe in the very near future.

North America: the retail revolution misfires
The year 2002 marked the bitter end of many of the attempts made in the past seven years to refashion the automotive distribution landscape in the United States. From Ford’s ignominious retreat from owning dealerships to the utter defeat of many Internet-based car-buying experiments, the US auto retailing model has proven harder to “revolutionise” than most people thought. The classic franchise dealer model remains entrenched with many built-in defences, and automotive original equipment manufacturers (OEMs) apparently remain committed to spending billions on customer incentives. Not every experiment has gone awry, however. OEMs continue to test the downstream waters incrementally, for example by selling tyres and accessories through their dealer networks, capturing greater percentages of aftermarket parts sales and offering fee-based telematics services in their vehicles. But clearly, the dramatic pronouncements of a total restructuring of the retail network have not come true, and perhaps never will.

Japan: an end to the melancholy market?
Mired in a decade-long series of deep recessions, the Japanese retail automotive market appears to be stuck in low gear and remains far from the sales records set in the late 1980s, before the speculative investment bubble burst. Clearly, the retail market for new cars is being held hostage by broader forces in the Japanese economy, including the long-running bank debt crisis. Dealer profits remain poor from a historical perspective, and various attempts are being made by OEMs to restructure retail networks. Changes sweeping Europe and United States, such as the increasing influence of the Internet (the US and Europe) or the emergence of powerful dealer groups (the US), have taken longer to penetrate Japan for reasons as varied as the lower percentage of homes with personal computers to the tight hold OEMs have over their dealer relationships.