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The auto industry can satisfy consumers post-COVID-19… but will it?

05 /05 /2020 Business
The auto industry can satisfy consumers post-COVID-19 | IE Building Resilience

Understanding shifts in consumer preference is key to developing the next generation of cars.

By Maruan El Mahgiub, Adjunct Professor of the Master in Customer Experience and Innovation at the IE School of Human Sciences & Technology. He is also Director of Business Strategy at Mormedi.

 


 

Most movement around the world has halted. But, once people are able to travel again, will they return to traditional ways of getting from one place to another?

It is unlikely.

When considering the future of the automotive industry specifically, one thing is clear: the COVID-19 crisis will change consumer preferences forever.

I predict two main—but somewhat opposing—shifts for consumers.

Firstly, more people will prefer to use a car rather than public transport.

It is fair to assume that many people will be reticent to use crowded public transport on a daily basis to get to and from work, for fear of being in close proximity of one other and touching dirty surfaces, and thus exposing themselves and their family to possible infection.

Not to mention that falling oil prices could make car use more attractive, at least from an economic perspective… if and when a decrease in oil prices is translated to what consumers pay at the pumps.

Secondly – and paradoxically – less people will want to buy a car.

While the value of personal space is clear, the economic crisis will prohibit people from being able to afford a car. The immediate macro-economic impact of the crisis has led to high unemployment, which will directly translate into less demand for new cars.

For those who continue to work, teleworking has become the new normal and will likely remain prevalent once the coronavirus crisis is over. This means that there will be fewer commuters and thus less people willing to pay for an expensive/new car.

Furthermore, the widespread focus on sustainability has had an intense impact on customer sentiment regarding transportation and this will continue to have a downward effect on demand for new, privately owned cars. Within this past year, in addition to COVID-19, the Australian bushfires brought forth the highly visible, immediate, and tangible effects of the lack of respect for and acknowledgement of the limits of the environment. Yes, fuel prices might fall, but an increase in fuel consumption and the purchasing of cars will not be considered a valid answer by consumers at large.

Given that people will be less willing to use public transport and to buy a new car, my prediction is that there will be a surge in demand for shared (and preferably electric) vehicles.

In the short term, this will be a boon for electric shared car service providers such as Ferrovial’s Zity, VW’s WeShare, and Daimler/BMW joint venture SHARE NOW, but there are two key pain points that these services do not address:

  • Peace of mind around the service: How does the service provider guarantee that the in-car environment—particularly the steering wheel, touchscreens, etc.—is not contaminated?
  • Fitness for purpose of the vehicle: Given that these vehicles were designed for the private ownership market rather than the ride share market, do they deliver what consumer expect? What could be improved if these cars were built, first and foremost, for sharing?

Both challenges strike at the heart of automakers’ traditional weaknesses, but they may also prove to be sources of opportunity.

Designing a mobility service for the post-COVID-19 world

It is no secret that automakers’ traditional strengths and core competencies in manufacturing have caused them to lag behind in how to successfully design for, and capture value from, Mobility as a Service. To date, most automakers have instead relied on a traditional waterfall design approach beginning with the vehicle and considering mobility service as a mere add-on.

How much more powerful would it be if an automaker really looked at the shifts in consumer behavior, and designed new mobility solutions based on consumer need,  enabling vehicle form to following function?

We have seen mobility service providers quickly roll out minimum viable solutions to the coronavirus challenge. For example, Didi Chuxing (China’s answer to Uber) started sticking up protective plastic dividers between drivers and passengers in its cars, setting up 46 shield installation points and 9 disinfection stations around Beijing. But this was in response to taxi drivers taking matters into their own hands and making makeshift barriers themselves, or even wearing hazmat suits.

These temporary solutions illustrate a real problem.

What can service providers—automakers, ride hailing companies, and car sharing companies alike—do to ensure not only that vehicles are safe, but that people feel safe?

To successfully address consumers’ concerns, companies must firstly make sure that they understand what consumers care about and, secondly, make service design a priority.

Designing a vehicle for the post-COVID-19 world

Even if services are added with the purpose of giving users peace of mind, the fact remains that these vehicles were never initially intended to be shared and were not built for this purpose. Some upstart companies—Chinese/Swedish Lynk & Co, for example—have created cars with shareability in mind, but not as the sole purpose. We are still a long way from a car that has been designed specifically for the needs of car sharing.

Once upon a time, interactions with the car and the use cases for a car were limited to those dictated by one owner. Today, the scenario becomes more complex. Shared cars will be used by multiple people for multiple different purposes on any given day. How can one car adapt to multiple needs? How should a car allow interaction with a multitude of different people?

What does a purpose-built shared car look like?

Answering these questions would require a deep study of customer needs and behaviors in different contexts, and an integrated approach that takes in service design and digital touchpoints, as well as the physical design of the car.

Any car company that pursues this will build themselves a differentiated advantage. It is here that automakers could shine, since Uber and other service providers cannot suddenly start building cars.

Driving forward

All companies must prepare to address the new concerns and endeavor to understand the new consumer preferences in the post COVID-19 world, auto industry included. To do this demands an integrated design approach across service, digital, and physical touchpoints.

The company that is able to understand the new preferences of consumers and to use this knowledge to make a vehicle that is adaptable, sustainable, and with a service that feels secure, will have a place in the post-COVID-19 world.