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Most Indian automobile OEMs are behind the curve in digital investments, spending 10-11% of their total marketing expenditure on digital mediums in 2016. Photo: Bloomberg
Most Indian automobile OEMs are behind the curve in digital investments, spending 10-11% of their total marketing expenditure on digital mediums in 2016. Photo: Bloomberg

70% of auto sales to be digitally influenced by 2020: Bain-Facebook report

The report by Bain and Facebook says social media will influence about 40% of vehicle sales valued at $23 billion by 2020, up from 20% today

Mumbai: By the turn of the decade, sale of seven out of 10 vehicles in India will be digitally influenced, a report by Bain & Co. and Facebook Inc. said.

The aggregate value of such sales will rise to $40 billion from the current $18 billion, the report Changing Gears 2020: How digital is transforming the face of the automotive industry said.

The report, which dwells on the impact of digital technologies in the automotive industry, said digital engineering, 3D printing, smart sensors and the Internet of Things (IoT), are poised to disrupt auto research and development, manufacturing, sales, marketing and after-sales services. It said social media will influence about 40% of sales valued at $23 billion by 2020, up from 20% today.

The report is based on responses collated from 1,551 Indian customers who had bought a vehicle in the last 12 months and a survey of 87 dealers and conversations with top management teams. It also drew insights from Bain’s Global Automotive Consumer Survey that included respondents from the US, the UK, Germany, China and India.

As digital technologies cause disruption across the value chain from manufacturing to after sales service, rules of the game are changing and new opportunities and threats are emerging for auto makers, Karan Singh, managing director at Bain & Co. India said in the report.

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“It is important to evolve the business model to tap into shifting profit pools," Singh said, pointing out that India is likely to witness digital leapfrogging given consumers’ openness to new technologies. It’s critical for consumers and companies to adopt a digital mindset, he added.

Yaquta Mandviwala, partner at Bain and co-author of the report said companies will need to keep up with the changing customer behaviour, differentiate the retail format into brand experience centres, use product digitization to create deeper relationships and invest in analytics.

The report said 80% of online research is on mobile phones today and this is expected to rise further.

It said people aged 35 and below will lead the digital charge pointing out that 49% of consumers younger than 35 report digital influence on purchases today compared with 40% of those older than age 35. As this cohort ages and a new younger cohort enters the market, digital influence is set to increase, the report said.

More than 40% of consumers report using app-based taxi services more than three or four times a week. Umang Bedi, managing director, Facebook India said digital has struck the automotive world with lightning speed and this transition will only accelerate.

Almost 72% of customers sought a vehicle brand and 49% chose the model before stepping into a dealership. As a result, the dealer contribution is often limited to influencing the variant. Though dealers have begun making greater digital engagement, more than 85% of dealers surveyed said they still use bulk SMS and database calling to find customers.

Most Indian automobile OEMs are behind the curve in digital investments, spending 10-11% of their total marketing expenditure on digital mediums in 2016. The report suggests automotive OEMs should redefine their marketing and customer engagement efforts to reflect the current behaviour and usage patterns of automobile buyers.

Digital disruptions are likely to cause a drop in profits from the core activities of car makers like vehicle engineering, manufacturing and sales by about 8% in the decade to 2025, even though industry profits are projected to grow about 35% in the same period, the report said. The sector will witness the emergence of new players, such as software and mobility platform providers, with non-traditional sources of competitive advantage who will gain an increasing share of sector profits.

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