The Future of Automotive Sales & Aftersales (Germany)
Impact of current industry trends on OEM revenues and profit until 2035
The German automotive industry is on the cusp of a monumental transformation. Automotive megatrends such as connectivity, alternative drivetrains, shared mobility and autonomous driving are reshaping the landscape of automotive sales & aftersales from the ground up. The goal of our study is to provide a clearer picture of current trends and their implications for the future of vehicle sales and aftersales from now until 2035. It also aims to identify key challenges and offer approaches for OEMs (original equipment manufacturers) navigating the uncertainties of future developments.
With more than 830,000 employees, the sector is a heavyweight in the German economy, but the outlook for the future poses challenging questions for all stakeholders involved, such as:
- Does the future of automotive sales lie online, or will consumers stick to the tradition of purchasing at stationary retailers?
- Will OEMs be able to compete at eye-level with tech players to create cutting-edge technologies and services?
- What impact will connected customers have on the existing OEM retail network with approximately 36,700 dealerships and service partners in Germany?
- What will be the effect of alternative drivetrains on the aftersales business?
With current trends potentially closing doors in the traditional automotive space, new business opportunities could arise in a reshaped mobility industry. Should OEMs move into these innovative markets, leverage development efforts of third parties, forge alliances or even stay out of it entirely?
Automotive megatrends: Game-changers for the industry
In our study on the future of automotive sales and aftersales, we outline how current industry trends will affect OEM revenues, profits and sales channels until 2035. Deloitte has forecasted four main trends shaping the automotive industry during this period:
By 2035, we assume that 100% cars will have basic connectivity, with around one-third operating at full connectivity. Consumers are expected to attach higher value to connected services and shift strongly towards online purchasing.
- Alternative drivetrains
In the future, we assume that various drivetrains will coexist, with battery electric vehicles leading the way. The emergence of alternative drivetrains is mainly driven by decreasing production costs, local and EU regulation, charging infrastructure and increasing performance.
- Shared mobility
Shared mobility will increase utilization per vehicle and shift ownership from private customers to fleet operators. Growth in mobility services is expected to accelerate with the emergence of autonomous driving.
- Autonomous driving
The largest technological hurdle lies between level 3 and level 4 autonomous driving. We expect at least level 4 to be applied initially in specific use cases only by 2035.
Design of the future of automotive sales & aftersales study
In our study, we evaluate qualitatively and quantitatively how industry trends affect OEM revenues and profits in traditional and new business segments. To provide a more nuanced view of trend effects on each OEM business segment, we created different scenarios of trends emergence. The complete analysis is executed by means of a proxy OEM to take into account individual strategic decisions taken by OEMs in the lead-up to 2035.
Key findings of the study: The future at stake
Following results represent a “base case” with trend assumptions most likely to occur and with the proxy OEM not significantly engaging in corporate transformation. In a more disruptive scenario, results are expected to be even more drastic.
In general, we can summarize that the traditional business segments vehicle sales and aftersales will strongly decline until 2035.
New vehicle sales are expected to drop by overall 7% which can be strongly attributed to socioeconomic factors, such as aging population but also shared mobility. Aftersales revenues will suffer from a shrinking overall car parc and the emergence of alternative drivetrains putting 12% of overall current OEM profits at risk. Maintenance & services revenues are affected strongest and expected to decline by 84% for a proxy OEM in Germany and without engagement in large-scale corporate transformation. The implementation of a direct sales network and the restructuring of stationary retail formats are urgent to address growing fleet and online sales in both business segments.
Financial services revenues experience constant growth in credit and leasing revenues driven by an improved residual value management and new business models around used car remarketing. Beyond that, the OEM generates revenues from transaction fees generated through its proprietary payment solution platform for third parties.
Opportunity in new business segments?
Revenues in new business segments involve large market potential but cannot easily compensate the loss in traditional business segments.
In Mobility as a Service, fleet services revenues rise in line with an increased share of fleet customers. Moreover, if industry trends emerge strongly, the OEM can expectedly address a 16.7bn€ market when providing ride hailing and ride pooling services in urban areas. Not all OEMs will be able to capture significant market share: In particular, mobility services, which will take place closely to the end users, will be exposed to a competitive “winner takes all” market dynamic. High investments and a holistic portfolio strategy are necessary to yield profitability and correspond to future user needs. Direct revenues with Car as a Platform services, such as value-added services or data-as-a-service may not contain the expected revenue potential. Nevertheless, investments in connectivity are in all respects urgently required to capture revenues in other business segments and improve bottom line.