A presentation that I gave titled 'Will automotive manufacturers sell cars direct to consumers?' as part of the Automotive Management, Digital Dealer Fair, at The Motorcycle Museum, Birmingham UK on 16th March 2001 (when I was marketing manager for Oneswoop.com - one of the first online new car retailers in 2000). This presentation provided a perspective of the potential market for online direct car sales and manufactures that had made a very early step into direct sales pre-Broadband at the dawn of the new millennium.

1. 1
Will Manufacturers Sell Direct?
Dowshan Humzah, Marketing Manager
Oneswoop.com
Automotive Management, Digital Dealer Fair
Friday 16th
March 2001

2. 2
Expanded list of questions...
Can they…
Should they...
Have they…
Are they…
Will they...
…manufacturers sell direct?

3. 3
Too much media and industry focus has been insular - focusing on the
industry dynamics, legal and regulatory climate
Focus more on consumer and technological changes
Take the ceiling of our thinking and explore the possibilities
Focus

4. 4
Consumer Perspective
“What a business thinks it produces is not of first importance especially
not to the future of the business and to its success. What the customer
thinks he is buying, what he considers ‘value’ is decisive – it determines
what a business is, what it produces and whether it will prosper”
Peter Drucker

5. 5
Industry Perspective
“The internet is arguably going to be the biggest change…to the automotive
industry, since the invention of the moving assembly line.”
“I think dealers will stay in business – they are a very valuable part of the
process, but I foresee great changes nonetheless.”
Nick Scheele (Ford Motor Company, President)
EuroBusiness: October 2000 Vol 2 Issue 5

6. 6
Current Situation - Consumer
Consumer needs and requirements are changing
Increased fragmented consumer segments
Decreasing brand/product loyalty – more experienced based
Increased demand for self-defined individual treatment
Rapidly increasing internet and ‘personal device’ penetration
Pursuing more direct means to interact and transact with manufacturers

7. 7
Current Situation - Technology
Will continue to provide new solutions to old problems and new challenges
• Ensuring a far more efficient cost base
Computing power will continue to increase exponentially
• Faster, greater capacity, Artificial Intelligence
Communications will become more pervasive, easier and cheaper
• Ubiquity and Intimacy
Technology enabled processes will reduce time and distance to a minimum
• Advanced Manufacturing Techniques, Build-to-Order
Dead-time between tasks will disappear
• Seamless processes

8. 8
Current Situation - Industry
Automotive industry is in a time of major change
Automotive retailing is still locked into historical structure
Manufacturers have a vested interest in the maintaining status quo
Industry still product and production driven
Strong EU labour laws - with automotive industry a top employer
Likely end of EU Block Exemption

9. 9
Mercedes Benz UK
Cut back on British showrooms
90 British dealerships given 12 months notice of termination of their franchise
arrangements
Plans to operate sites in major cities and limit its franchise dealerships to 27
large sales territories
Loosening contracts between manufacturers and their dealers

10. 10
Ford UK
Set up Fordjourney.com
Consumers can search manufacturer stocks to check if a model is available
UK site takes consumer requirements and searches compounds of stored
vehicles for the right model
Once customer has completed the transaction online – dispatched to a dealer
Differs from USA site – which is dealer referral based
“There are a lot of benefits other than sales. You can talk directly to customers
and collate data on their preferences, which can be fed directly to the
manufacturing plants.”
Steven Parker (Ford UK, Business Strategy)

11. 11
Opel AG
Sell cars at a discount over the internet to boost sales and re-vamp image
Direct online sales activity to be piloted from Q3 2001
Offer a selected range of vehicles up to 11% discount to showroom price
Customers will have to pay a DM100 reservation fee – reimbursed when
sale goes through
After placing order online – salesperson will contact customer to arrange
a test drive and meeting with dealer

12. 12
General Motors (Brazil)
Testing direct online sales to customers bypassing dealers
60% of 30K GM Celta compact cars bought since September were sold
online either from home or web kiosks located within Chevy dealerships
The $6,955 online price was 6% less than the dealer sticker price
Dealers bought into programme as it increased sales without increasing cost
For every Celta delivered, the dealer received a 6% cut
Success in Brazil contrasts to GM’s relatively slow progress in direct online
sales in USA

13. 13
General Motors (USA)
Many USA states prohibit manufacturers from selling direct to consumers
Established e-commerce unit ‘e-GM’ with 250 employees
Built strategic alliances with websites attracting 10k visitors per hour
GMBuyPower.com originated in the USA – now operates in 10 countries. The
number will grow to 45 during 2001. Already attracts 1.2m visitors per month
More than 6,700 participating dealers and more than 1m new and approved
used vehicles available
Last year GMBuyPower.com generated 31K conquest sales, contributed to
400K sales and accounted for GM sales worth $8 billion
Customers can configure their vehicle, find it in a dealer’s inventory, access
finance tools and incentives – including internet-only offers

14. 14
LikelihoodtobeontheNet
Likelihood to be purchasing a car
In-market &
on the Net
Not in-market
& on the Net
In-market &
not on the Net
Not in-market &
not on the Net
In market 0-12 months In market 12+ months
European Market Target Audience
4.6M consumers
A sizable market segment is appealing to manufacturers

15. 15
Online New Car Market Forecast: Europe, Germany, France and UK
Volumes /
(,000s)
2000 2001 2002 2003 2004 2005
Europe 53 273 826 1,431 1,990 2,857
Germany 18 76 178 359 637 948
France 4 14 43 110 189 344
UK 19 53 140 281 427 603
Source: OneSwoop.com combined from new car sale forecasts, Forester Online Research, AT Kearney, SMMT
The market will grow rapidly to become a significant segment which will continue
to be appealing to manufacturers

16. 16
Online New Car Market Forecast - UK
0
100
200
300
400
500
600
700
2000 2001 2002 2003 2004 2005
Volume/'000s

17. 17
Manufacturer Concerns
Do not want to alienate an already weary dealer body
Prefer to retain their dealer body
Do not want to surrender the web (virtual channels) to internet and new players
With the likely end of Block Exemption, internet and new players can become
full service car retailers

18. 18
Sales and After-Sales: Car Lifetime Value Contributions
Source: Fletcher Research, SMMT, McKinsey, newspaper clippings, FT Automotive, EIU, Lex
Sundries (petrol, oil etc)
Second Hand Commission
Accessories
Parts
Repairs/servicing
Finance/insurance
Dealer’s margin
Value of new car
17,930
1,467
13,040
5,624
9,780
734
11,410
29.5%
2.5%
21.5% 9% 16%
1%
19%
815
60,800Total
1½%
A new car purchase generates 3x its basic value in total lifetime value transactions

19. 19
The Future Role for Dealers
High level of business closure - large scale consolidation
More loose relationship with manufacturers
Need to re-evaluate their business model to see where they can add and
gain greatest value (consumer and shareholder)
Distribution points and fulfilment agents
Multi-brand service point
Increased focus on quality used vehicles
Form partnerships to have a strong presence across platforms

20. 20
The Future Role for Internet Players
Initially to help facilitate change
Evolve via consolidation, strategic alliance and partnership
Lead the thinking and innovation from a consumer point-of-view
To be true multi-brand ‘one-stop shop’ offerings – comparative shopping
Strategic role for being an impartial provider
Specifically, for Oneswoop:
• To grow to the point of being the leading multi-brand demand aggregator for
new cars in Europe on a build-to-order basis for manufacturers and dealers
• To work with all participants in the European motor industry to help them take
advantage of great new online opportunities

21. 21
In Conclusion
Consumer dynamics and less rigid regulation will provide environment
conducive to change
Technological innovation will boost efficiency - realising the dream of the ‘3 day
car’
• Direct-to-Consumer interaction via increased efficiency of virtual channels
• Advanced Manufacturing Techniques via increased robotisation and Artificial
Intelligence on production lines
• Build-to-Order via linking consumer front ends to manufacturing planning systems

22. 22
In Conclusion
Manufacturers will increasingly sell direct
More transactions will be web and virtual channel based
Role of dealer will more evolve to facilitators and fulfillment agents
Further large scale industry consolidation and partnering as key players
aim to acquire the assets and competencies to go direct to consumers

23. 23
In Conclusion
Big winner is the automotive consumer
Empowered with more information and more choice than ever before
…that list of expanded questions…

24. 24
…Answer is resoundingly...
Can they… YES
Should they… YES
Have they… YES - to a limited extent
Are they… YES - more pilot/test schemes
Will they… YES - increasingly so
…manufacturers sell direct?

25. 25
Closing Thoughts
‘It’s not the strongest, nor the most intelligent species that survives. It’s
the species that shows the greatest ability to adapt to changes. Unless
we adapt our skills to this new environment we will not survive.’
Charles Darwin

26. 26
Closing Thoughts
‘…if we acknowledge and embrace the changes in consumer dynamics,
seize the opportunity of technological advancement, work in partnership
with each other then not only will we survive but we will thrive...’