Finding a new or used car online is as ubiquitous as the internet itself, but actually ordering online? It’s a whole different story. Currently, only 2% of all car sales in Europe and the United States are made online, according to an estimate by UBS. The Swiss banking giant, however, predicts that in just eight years, half of all vehicles will be purchased this way.
By 2030, tens of millions of shoppers will click the order button without going to a car dealership first, according to UBS, and many won’t even have seen the vehicle first. The COVID-19 pandemic has also made consumers more open to the idea, he says, while new technologies and the energy transition will make it easier to make big purchases like a car online without a major hitch.
Tesla: Showrooms but deal concluded online
Electric car makers like Tesla and Rivian have taken the lead in automotive e-commerce. They have mostly done away with traditional dealerships, opting instead to rent space in malls and stadiums to allow potential buyers to view their vehicles before ordering online. Luxury automakers are increasingly relying on 360-degree videos, and even virtual reality headsets, which allow shoppers to virtually test-drive cars from their couch.
Many car manufacturers now offer advanced video and virtual reality technology to visualize their cars
Matthias Schmidt, a Berlin-based car analyst, described how the car market is undergoing “clicification”, in part because electric vehicles have far fewer options than combustion engine models, making them easier to sell. in line.
“Electric cars essentially offer a standard product with different battery sizes and allow manufacturers to cut out long lists of options in order to become more cost effective and profitable,” Schmidt told DW.
As Tesla has shown, “customization that was traditionally done at car dealerships before the buying process can now be done online through various configurators,” he added.
Schmidt agreed that the shift to buying cars online is likely to accelerate now that the European Union has proposed making the sale of non-electric vehicles illegal by 2035. The German government, in its coalition agreement reached last November agreed to phase out sales of combustion engine vehicles before the deadline proposed by Brussels.
Traditional automakers, like BMW and Ford, have also begun to move away from brick-and-mortar franchise networks, stepping up online sales and using existing dealerships as agents.
Online sales will save money
UBS has predicted that by 2030, around $50 billion (€47.5 billion) in costs could be saved through what it calls the automotive distribution ecosystem, which the bank says would benefit dealers and manufacturers. The report says that while dealerships may lose market share to the many new online automotive platforms, they will benefit from lower selling costs.
But the bank also warned that the switch to electric could lead to an overall decline in vehicle ownership, due to the potential for increased car sharing. This would mean fewer transactions.
Going online will also allow automakers to offer subscriptions, like Tesla with its autopilot capabilities, or companies that offer all-inclusive insurance, charging stations and maintenance deals.
“Manufacturers are increasingly looking to move that profit center away from the showroom and invest it in digital services where products can be constantly purchased and updated, not just the day the product is ordered. vehicle,” said automotive analyst Schmidt.
“Some options can also be used in a similar way to Netflix where a subscription is paid monthly and can be canceled at any time, where the selected option (navigation system for example) will be removed,” he told DW.
Boom of online car sales platforms
Other players in the auto industry that are seeing huge growth are online used car platforms like Carvana in the US and Auto 1 in Europe. Last year, Carvana launched overnight delivery service in more than 300 US cities and achieved sales of more than 425,000 vehicles. Germany’s Auto 1 has expanded to 30 countries and sold nearly 600,000 cars in 2021, generating revenue of 4.8 billion euros ($5.05 billion).
UBS noted that two other European startups have recently launched initial public offerings (IPOs) focused on automotive e-commerce, namely Aramis and Cazoo. Several other smaller platforms have been launched in recent years, while dozens of auto-classified websites – some dating back to the print-only days – also have room to reinvent themselves, becoming platforms complete e-commerce.
The UBS report warned that consumers should feel as comfortable buying vehicles online as ordering consumer electronics and appliances, where in the UK more than half of purchases are done online.
UBS benchmarked how UK consumers buy goods online, with cars accounting for just 2% of all sales
Skeptics could slow online growth
But questions remain about whether the Tesla model will fit across the automotive sector. While early adopters of electric vehicles may be willing to shop online, less tech-savvy shoppers may not want to give up human interaction.
Data from UBS Evidence Lab suggests that consumers in five markets are ready for the transition, with one-fifth of respondents saying they have already bought a car online and nearly two-thirds saying they were ready to do so.
However, separate data released last week by Deloitte suggests shoppers still prefer to shop in person. The accounting firm found that the willingness to buy online was between 3% and 6% in the United States, China, Germany and much of Asia, while in India the figure was by 10%.
Where consumers were open to virtual shopping, they still preferred buying from an authorized dealer rather than a third-party manufacturer or retailer, Deloitte found in its survey of 26,000 people in 25 countries, meaning that automakers and online platforms may have some distance to travel to gain consumer trust.
Edited by: Hardy Graupner