Warning: Speed Bumps Ahead for Automakers

October 8, 2019 Ginna Hall

Auto sales are declining after years of growth and manufacturers are struggling. Ten years ago, the industry predicted annual global sales would top 100 million by now. Instead, they’ve stalled, falling to 94.2 million last year, down 1 million from 2017, according to Bloomberg. 

Want to learn how to improve your auto marketing? Don’t miss our session at the J.D. Power Auto Revolution, Connecting in a Fragmented World, with Paula Skier, VP, Business Development, Nielsen Auto Cloud.

Identifying the reason for the stall is complicated in an industry that’s facing a number of existential threats. Automakers must confront this new reality and decide the best course of action. If they don’t adapt, they face the risk that car ownership will go the way of DVDs, fax machines and payphones: technology that still exists but is rarely used in the digital era.

So what are these threats? They fall under the heading of “alternatives to purchase” such as ride hailing apps, car sharing, electric scooters and even robo-taxis. These alternatives have dramatically changed car-buying consideration, particularly among Millennials and subsequent generations.

According to Bloomberg, young people are less likely to purchase their own cars or even learn how to drive. In 2017, only 26% of U.S. 16-year-olds earned a driver’s license, down from almost half 36 years ago, and the number of 17-year-olds taking driving tests in the U.K. has fallen 28% in the past decade.

Reasons for Declining Auto Sales

Many in the auto industry are especially concerned about sales in urban areas populated by younger people and the impact of ride hailing services. Since Uber entered the scene in 2009, followed quickly by Lyft in 2012, app-enabled ride hailing has redefined transportation.

While owning a car was once the most convenient way to travel, rising sticker prices, concerns about the cost of maintenance, fuel, and parking as well as traffic, city gridlock and pollution have driven consumers to question the need for their own set of wheels.

Older, suburban dwellers also fear economic uncertainty, the effects of tariffs and volatile interest rates that impact any major purchase. And the industry itself has caused increasing fragmentation and choice with expanding lineups and innovations such as electric and self-driving cars.

For these reasons, many people are delaying the purchase of a new car. The average age of autos on U.S. roads reached a record 11.8 years in 2018, according to Automotive News. Some major urban centers such as London, Madrid, and Mexico City are restricting cars’ access. These constraints, along with ride hailing and car sharing, have made automakers very nervous.

The Real Impact of Ride Sharing

Although most automakers assume that ride sharing has led to ownership leakage, some research shows that it’s real impact is on public transportation.

Anyone who’s traveled with friends has done the math and realized that the cost of an Uber is usually less than the combined cost of subway fare and may get you there a little quicker, depending on the time of day. Late-night commuters are much more likely to opt for a quick trip home at the end of a long day of work or evening out, especially in cities that don’t have 24-hour train service such as Boston.

Ride sharing’s ultimate disruption of the industry may turn out to be on the types of cars manufactured. Today, automakers roll out expanded lines of niche vehicles that meet consumers’ demands for personalization and customization. Manufacturers are trying to retain loyal, repeat buyers that will return to a brand and recommend it to their friends and family.

Disloyal customers challenge every industry and the car industry is no exception. According to Nielsen research, only 8% of global consumers are loyal to the brands and products they’ve always bought.

Riders in general want the car they hail, like a traditional taxi, to be clean, safe and big enough for all passengers. They don’t particularly care if it has state-of-the-art sound system or navigation features. These are perks that car owners care about, but not necessarily riders. When you need to get to the airport, you don’t care whether the seats are leather or cloth.

Responding to Threats

How can automakers respond to these threats and fight back against car ownership leakage?

While manufacturers may not be able to stem the tide of ride sharing, there are steps they can take to respond to this new reality.

The first is getting smarter about consumer behavior. As technology has advanced, so too has the way that consumers shop for cars. Multiple visits to a series of dealerships are out. Today, the majority of consumers begin the car-shopping process online, researching options and making purchase decisions before ever stepping onto a dealer lot.

Automakers must meet consumer demands for a digitally enhanced experience when researching and buying a car. According to Nielsen’s 2018 Auto Marketing Report, capturing people’s attention when they are weighing their options is critical.

The real threat to automakers is consumers’ increasingly complex path to purchase. Car brands must constantly identify and attract large audiences of “in market” buyers and current owners in order to meet their business goals. This takes an understanding of how different channels and touchpoints should be leveraged along the path to purchase to retain existing customers and win over new ones.

Automakers and their advertising partners must work together to determine the marketing strategies and tactics that best resonate with target audiences, so they can optimize consumer experiences and drive desired outcomes, both online and offline.

Only then will automotive marketers be able to connect with prospects and customers to increase dealership traffic, accelerate sales, improve customer lifetime value and avoid speed bumps in the road ahead.

Learn More: Connecting in a Fragmented World

Join auto industry veteran Paula Skier, VP Business Development for Nielsen Auto Cloud, as she shares how you can harness data to acquire a single view of customers. She will highlight how the automotive industry can utilize granular insights to inform their marketing decisions and drive improved performance.

J.D. Power Auto Revolution 2019
Nielsen Session
Thursday, October 24, 2019
1:55 - 2:40 pm

You’ll learn how to:

  • Use data-driven tactics to deliver personalized messages and eliminate waste
  • Leverage people-based metrics across channels to drive success
  • Gain a 360-degree view of your audiences and reach them across channels
  • Improve performance and ROI

Unable to attend the session? Stop by our booth #104 to learn how Nielsen and J.D. Power’s exclusive partnership brings together the best data, activation and measurement in the industry. 

Learn More

To learn how you can be a better marketer in the digital era, download our ebook: Untangling Attribution's Web of Confusion: A Primer for Marketers

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