Automotive brand value in the age of disruption

Doug Karnes
In the midst of unprecedented disruption, automotive brands find themselves evolving from being one-off transaction-focused to enduring-relationship-oriented. Today’s brands that invest wisely in technology to enhance the customer experience will not only survive, but thrive.

Electric cars, driverless cars, ride sharing, vehicle subscription services, and, someday, flying cars: This is the talk of the automotive industry today, a centuries-old business that is undergoing massive systemic change. Things were generally steady for a solid 80 years: design, build, and sell vehicles with proven engineering, safety, and quality and (assuming you had the requisite capital as a manufacturer) you could go to market with a product and compete in this marketplace. The industrial revolution drove the industry for decades, and manufacturing volume was king. Carmakers focused on economies of scale that pushed new products to market, and by doing so, they created their own demand. That is all changing now.

These are unprecedented times, from Tesla as the future-forward startup that still maintains mind-boggling market value to the numerous all-new, China-based electric vehicle (EV) manufacturers betting on the future. Add the technology disruptors that are vying to get their piece of the automotive action, like Amazon or Google’s Waymo, and you have a nearly perfect storm. That is, a storm for the established auto brands that have enjoyed slow and steady for so long. Today, they are forced to rethink the fundamentals of their business and find ways to transform themselves from production-based automakers into mobility providers. At the same time, they need to remain relevant and competitive in the marketplace — to serve both current customers and demonstrate value to their shareholders.

As we study auto brands to determine their brand values, we consider a number of both internal and external measures, along with the financial and market performance of each company. As a whole, the automotive sector remains strong within our Top 100 list, with a total value increase of x% in 2018 over 2017. The auto manufacturing industry is robust, but most forecasters continue to predict a slowdown in sales growth in the coming years, and, in fact, expect a decline on the five-plus-year horizon. This is due largely to predictions that vehicle ownership will decrease as ride sharing and other technologies gain momentum, especially in the mature markets that represent a majority of global sales, such as Europe and North America. Urbanization is another force that is impacting vehicle ownership, as more people move closer to city centers and develop new preferences for transportation. China’s population and economic growth might help that region (now the single largest auto market globally) counter the downward trend, but even that is open to debate. China is the global leader in electric vehicle technology and manufacturing, with some 110 EV makers now chasing this emerging future*. With electrification come autonomous driving and the promise of highly efficient fleets to offer consumers new mobility services, thereby reducing the need for individual car ownership. In North America, for example, both Ford and General Motors (GM) are making sizable investments in autonomous vehicle technology, through their own R&D efforts and partnerships or acquisitions. GM’s Cruise and Ford’s newly formed Ford Autonomous Vehicles are new businesses helping these companies develop technology faster and create new value propositions for the market. In both cases, ride-sharing fleets are a key strategy, including the formation of new revenue streams to replace lost vehicle sales. All of this is happening to compete with a growing list of the disruptors that are creating new solutions for a future customer who will be empowered with convenience and choice.

It is a balancing act for auto brands to get from today to tomorrow. One clear advantage that established brands now have that their new competitors don’t have is customers. That base of loyal customers is golden. If existing car companies deliver on their customers’ expectations today while transforming themselves in the background to meet future needs, they will not only survive, they will prosper. While the startups and disruptors have technology advantages and nimbler organizations, they have few automotive customers today, and they certainly don’t have established retail networks that provide important customer touchpoints.

In the future, choosing to stay with a brand might mean another vehicle purchase or a subscription to a fleet of branded vehicles. Or perhaps access to mobility services when you need to move around in the city where you live or visit. Market success in the future won’t necessarily mean another car sale, but it will mean loyalty to a brand that can provide access and solves the mobility problem. Notably, established European carmaker Groupe PSA (Peugeot and Citroën) is planning to reenter the US market, after exiting in 1991. In doing so, it made a splash last year with a precursor to actually selling cars through the launch of Free2Move, a mobility service. It has yet to announce which vehicles it will bring to the US or how it plans to sell them. As an automotive brand, it is starting as a mobility provider first, carmaker second. As stated by Larry Dominique, PSA North America’s President and CEO: “The decision to launch a service that helps people move around in the most efficient way underscores our commitment to the future of Groupe PSA. As mobility services evolve and innovate based on the way people think about and consume mobility, bringing Free2Move stateside provides us with a unique way to address consumer demands, as well as a flexible platform to roll out future products.”

A fundamental part of the automotive ownership experience is getting your car or truck serviced, whether it is for maintenance or a repair. EVs don’t require as much maintenance and have lower repair costs compared to internal combustion engine (ICE) vehicles, which bodes well for future consumers as that segment grows. But EV adoption is still slow, and there are an estimated 1.2 billion ICE vehicles now on the road globally that require regular service and will for a number of years. For auto brands, this is a significant opportunity to delight customers and generate loyalty by delivering exceptional experiences. Tesla is the market leader in deploying remote diagnostics and over-the-air updates for their models. Customers can get their Tesla Model S “serviced” by simply parking in their driveways and letting data flow from satellites to the onboard computers, similar to the way you update your desktop software or mobile phone. Other carmakers are bringing this technology to market now, and it certainly delivers a better experience than the hassle of going to a traditional dealership. Some car companies, especially the luxury providers, are also deploying concierge services to bring new levels of convenience to their customers. Audi, for example, offers Audi Assist, a new program that sends a service technician in a loaner vehicle to the customer’s home or workplace to diagnosis their car. If it is warranted, the technician leaves the loaner and returns to the dealership with the customer’s vehicle for the appropriate service. There’s little hassle in an experience centered on you as a cherished Audi customer.

In summary, while this great industry is undergoing unprecedented change, and disruption is all around, automotive brands that invest wisely in technology for the future while delivering great customer experiences today will be well positioned for success. The centuries-old production-based model that churned out new cars in volume is going away, and quickly. The future of automotive will be about creating brand value through the formation of brand ecosystems that can deliver great customer experiences at every opportunity. We are moving from transactions to relationships. Those automotive brands that understand this and can deliver delight to their customers today will thrive in the future and command the greatest brand value tomorrow. The race is on.

Senior Director, Automotive