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Automotive the way we see it Cars Online 09/10 Understanding Consumer Buying Behavior in a Volatile Market

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Page 1: Capgemini  Cars Online 1009

Automotive the way we see it

Cars Online 09/10

Understanding Consumer Buying Behaviorin a Volatile Market

Page 2: Capgemini  Cars Online 1009

Contents

Introduction 2

Executive Summary 3

Developing Markets: Buying Trends Evolve Rapidly 5

How Consumers Buy: Target Your Marketing Mix 8

Green Vehicles: A Force for the Future 11

The Role of the Web: Consumer Usage Pattern Emerges 14

Online Buying: ‘No Hassles, No Negotiations’ 17

Customer Interaction: Loyalty and Satisfaction Rates Improve 20

Aftersales/Servicing: Focusing on the Post-Sale Experience 24

Conclusion and Recommendations 27

Page 3: Capgemini  Cars Online 1009

This year’s report focuses on bothmature and developing markets. Theresearch involved more than 3,000consumers in Brazil, China, France,Germany, India, Russia, the UnitedKingdom and the United Sates.

In this edition we take a deeper lookat top-of-mind issues such as onlinebuying of vehicles andparts/accessories, alternative-fuelvehicles and aftersales/servicing. Inaddition, we asked consumers tothink about the biggest changes theyexpect to make in how they shop forand buy vehicles in the coming years.Their responses provide valuableinsight into consumer expectationsabout the future of the vehicle buyingprocess. Look for their direct quotesthroughout the report.

We hope that the findings of CarsOnline 09/10 will provide automotivemanufacturers and dealers withinsights into changing consumerdynamics in both mature anddeveloping markets, and will help theindustry gain a better understandingof consumer buying behavior intoday’s turbulent climate.

Mergers and acquisitions. Bankruptcyfilings. Government intervention.Vehicle scrapping and rebateprograms. The past 12 months havebrought fundamental changes to theautomotive industry around the globe.

Last year ushered in an unprecedentedglobal downturn that originated in2007. What started as a financialcrisis soon expanded into the largereconomy, affecting mature anddeveloping markets alike. Theautomotive industry has been one ofthe hardest-hit sectors. The downturnhas led most automotive businesses toput in place initiatives aimed at short-term survival and mid-term stabilitywith the focus largely on cost cuttingand cash preservation. Tomorrow’swinners, however, will shift theirfocus to longer-term prosperity withthe emphasis on future differentiationand competitive advantage.

To achieve this objective and regaintheir footing, automotive companiesmust have a deep understanding ofconsumer buying behavior. CarsOnline 09/10 – Capgemini’s 11thannual global automotive study –aims to provide insight into howconsumers shop for vehicles, whatleads them to buy and what they arereally looking for from the full vehiclelifecycle experience.

Cars Online 09/10 2

Automotive the way we see it

Introduction

“I believe the whole car industry will soon look verydifferent. Those companies owned by the government andunions will be bust. Those that listen to the public andoffer value, fair prices and the right features willprosper.” U.S. consumer

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With vehicle sales suffering in mostmarkets today and automotivecompanies focused on cost cuttingand cash preservation, it’s easy to takeyour eye off the consumer. But, in aclimate characterized by volatility,consumer insight is more importantthan ever as buying behavior patternsevolve rapidly. How do car buyersresearch vehicles? What types of carsare they looking for? What triggersthem to buy? Where – and how – dothey want to buy? How do they wantto communicate with manufacturersand dealers?

Capgemini’s Cars Online research aimsto answer these questions and more toprovide insight that can helpautomotive companies respond fasterand more effectively to changingconsumer needs and demands.

Key FindingsThe research uncovered a number ofkey findings:

1 Usage of the web as a keyinformation source during the

vehicle buying process has becomepervasive across most markets.Almost 90% of consumers today usethe Internet to research vehicles, upfrom 61% in 2005. A clear onlineusage pattern has emerged, withconsumers turning initially to searchengines, which jumped up the list ofinformation sources this year; then tomanufacturer and dealer sites forfactual information about vehicles,prices and availability; and finally toconsumer-to-consumer tools likediscussion sites for qualitativeinformation and opinions.

The ability to interact online and holdreal-time discussions with automotive

environment as the primary reason:26%, up from 19% the previous year.This trend was particularly evident inthe U.S.

4 Improvements in brand anddealer loyalty and overall

satisfaction with the buying processbode well for the industry. Withplenty of bad news for automotivecompanies these days, our researchuncovered a bit of good news. Morethan two-thirds of respondents saidthey were likely to purchase the samemake/brand as their current vehicle,up from 61% last year. Similarly,dealer loyalty also rose, with 63% ofconsumers saying they were likely topurchase from the same dealer wherethey bought their current car, up from59% the year before.

Satisfaction with the overall buyingprocess was also up somewhat.However, consumer approval wasmore muted in the mature markets,demonstrating that there is still workto be done to improve the customerexperience in the U.S. and WesternEurope.

5 Developing markets show earlysigns of trending toward mature

markets, as consumers in the BRICcountries become more familiarwith buying cars. For example, thisyear the gap between the factors thatimpact vehicle decisions in mature vs.developing markets was muchsmaller. Greater convergence willlikely still take a number of years, andmarket differences will remain forsome time. For instance, maturemarkets increasingly look forinformation online, whereasdeveloping markets are still keen toget information from more traditional

3

Executive Summary

experts or other consumers in-marketis an important trend, which grewstrongly this year. Traditionalinformation sources such as TVadvertising remain important indeveloping countries, however, andshould be part of the marketing mix.

2 Consumers want to buy vehiclesand parts and accessories

online as they look for lower pricesand an alternative to the traditionaldealer model. Nearly 40% ofrespondents said they would like tobuy a car over the Internet (thecomplete end-to-end process) and halfwould buy parts and accessories.While lower price is the leadingreason, many respondents said theysimply did not want to negotiate priceor interact with the dealer in person.Consumers seem to be polarized intheir desire to negotiate: about one-quarter wanted the ability to negotiatea better deal, but another one-quarterfelt this was something they preferredto avoid.

3 Green vehicle ownershipcontinues to rise as

environmental concerns grow.Consumers indicate a growingconfidence in their understanding ofso-called “green” vehicles. Thisincreased knowledge is influencingbuying decisions. In this year’s study,41% of consumers said they currentlyown a fuel-efficient or alternative-fuelvehicle, up from 36% the year before.Another 30% said they plan to buy afuel-efficient or alternative-fuel vehicle.

Interestingly, the reasons behind thesebuying decisions are evolving. Whilefuel economy remains the leadingdriver, a growing number ofrespondents named impact on the

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Cars Online 09/10 4

Automotive the way we see it

sources such as TV advertising andtrade shows. And mature marketsfocus on permanent value whenchoosing a vehicle, whereasdeveloping markets show greaterinterest in more transactionalmarketing such as cash-back bonuses.

Now is the time for automotivecompanies to focus attention onproviding a positive customerexperience in developing countrieswhile loyalty and satisfaction levelsremain higher than in maturemarkets.

6 As the duration of the vehiclebuying cycle contracts,

automotive companies have lesstime to influence purchases.Consumers today can quickly andeasily get vast amounts of informationabout the vehicles they are interestedin, resulting in a shrinking buyingcycle. What used to take six months isnow likely to take only four, withshowroom visits coming ever closer tothe point of purchase. More than two-thirds of respondents begin theresearch process two to four monthsbefore they plan to buy and 60% visitthe showroom for the first time withintwo months of purchase.

Connecting with shoppers during theresearch period and providing themwith the right tools and information iscritical in influencing buyingdecisions. By the time they visit theshowroom it is often too late.

7 Consumers want the car buyingprocess to be easier and faster.

A number of indicators point to agrowing desire for improved ease andspeed of transaction. For example,more consumers expect a dealer or

‘‘Many of the formalities of car purchases will soon be athing of the past. The selection and purchase process willbe faster, easier and nicer.’’Russian consumer

manufacturer to respond to an onlineinquiry within four hours. In China,consumers are even more demanding,with more than half expecting aresponse within an hour. In addition,almost one-quarter of respondentspoint to ease and speed of transactionas the key reason for buying a vehicleonline, and 30% say it is the drivingfactor behind their desire to purchaseparts and accessories over the web. Itis important to note that most of thesefactors leading to consumerfrustration seem to be down to poorbasic management and are in theindustry’s own hands to resolve.

8 Less than half of consumerswith cars still in-warranty have

their vehicles serviced at thepurchasing dealership. Thisrepresents a significant missedaftersales opportunity for dealers.And it may also impact repurchasedecisions, as consumers tend to bemore likely to buy their next vehiclefrom the servicing dealer rather thanthe prior purchasing dealer.

While this topline review provides asummary of key findings from thisyear’s Cars Online study, the sectionsthat follow offer more in-depth dataand analysis focused on key topicssuch as buying behavior patterns, webusage, online buying, customerinteraction and aftersales/servicingexpectations.

About the Study

Capgemini worked with SmartRevenue,a Ridgefield, Connecticut-basedresearch firm, to conduct the survey forCars Online 09/10. All analysis andinterpretation of the data has beenmade by Capgemini in collaborationwith the Car Internet Research Program(CIRP) of the University of Ottawa,Canada. In total, more than 3,000consumers were surveyed in eightcountries: Brazil, China, France,Germany, India, Russia, the UnitedKingdom and the United States.

The composition of the consumersample in each country was based onprojectable national samplesrepresentative of the population in termsof region, age and gender. Allconsumers surveyed were in-market(24% plan to buy or lease a vehiclewithin three months; 29% in four to sixmonths; 11% in seven to nine months;and 36% in 10 to 12 months).

Page 6: Capgemini  Cars Online 1009

5

Developing Markets: Buying TrendsEvolve RapidlyDeveloping markets are not alike in every respect, as our research identifiesvariances in buying behavior from one country to another.

Don’t Call Them “Emerging”On a recent visit to a large Chineseautomotive manufacturer, wediscussed the market and its potential.During the conversation, a companyexecutive took issue with the term“emerging,” often used to describe theChinese market. He noted that giventhe size and growth of the automotivebusiness in his country, “emerging”hardly seemed accurate anymore.

We took his point. This year we referto the BRIC countries as “developing”markets, because as the Chineseexecutive pointed out, these marketshave already emerged.

In this year’s study we again trackconsumer buying behavior in thedeveloping markets of Brazil, Russia,India and China. The findings fromthe four BRIC countries offer a glimpseof how these dynamic and growingautomotive markets are evolving.

The developing markets have seenstrong vehicle sales growth in recentyears. However, just like the maturemarkets, they have suffered somewhatin the past 12 months. For example,according to the Association ofEuropean Businesses, Russian carsales fell by 49% in the first half of2009, and a similar drop is projectedfor the second half of the year. InBrazil, ANFAVEA (the BrazilianNational Association of Motor VehicleManufacturers) expects car sales to fallthis year for the first time since 2003.1

The picture is brighter in China andIndia. Nevertheless, the potential forsignificant long-term growth remainsstrong in all four markets.

Following are some of the key trendsnoted in the developing regions.Additional variances by market arediscussed throughout the full report.

Signs of Convergence AppearThis year we found early signs ofconvergence in Russia, Brazil andIndia as consumers in these marketsbecome more familiar with buyingcars. As a result, some of the trendsare beginning to move closer towardthose in the mature markets. We haveseen a similar rationalization in Chinain recent years too.

For example, this year the gapbetween the factors that impactvehicle decisions in mature vs.developing markets was muchsmaller. Last year, consumers in theBRIC countries tended to rate all ofthe factors as more important thandid respondents in mature markets.This year, the numbers were much

1 “April car sales in Brazil fall 13.7% from the previousmonth,” http://en.mercopress.com/2009/05/08/april-car-sales-in-brazil-fall-13.7-from-the-previous-month,May 8, 2009

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Cars Online 09/10 6

Automotive the way we see it

closer to those in the mature markets,with the exception of short-termfactors such as low financing andcash-back incentives, which are stillmore important in developingcountries than in mature markets.

Customer loyalty and online buyingtrends also show signs of convergence,with slight declines in some of thedeveloping markets as they begin tomove closer to the levels typicallyseen in the mature markets.

The shift toward convergence isparticularly pronounced in Russia,where many vehicle buying patternsresemble those in western markets, atrend that was apparent last year aswell. For example, Russian consumersare more likely than those in the otherdeveloping markets to rely on web-based information sources and less soon traditional sources such as TVadvertising and auto shows. This patternmirrors consumer behavior in themature markets, particularly the U.S.

A similar trend is apparent in the typeof vehicle consumers plan to buy.Russian respondents are more likelythan their counterparts in the otherBRIC countries to want to buy a usedvehicle, no doubt helped by recentgovernment tax changes. About one-quarter said they plan to buy a usedcar, which is about the same as thenumber in the U.S. The stronger usedcar market in both the U.S. andRussia likely accounts for the fact thatconsumers in those countries aremore inclined to use service stationsand auto repair shops for servicing. Inaddition, Russian consumers showstrong interest in buying a sportsutility vehicle, again similar toconsumers in the U.S.

Differences Between Developingand Mature Markets RemainDespite the trend toward convergence,significant differences betweendeveloping markets and maturemarkets remain. For example,consumers in most of the developingcountries are more likely to rely ontraditional information sources suchas TV advertising when researchingvehicles. Respondents from maturemarkets primarily use web-basedsources. This is likely due to the factthat consumers in the developingmarkets are still new to the car buyingprocess and want as muchinformation as possible from a widerange of sources.

Consumers in Developing Markets Consider More Vehicles (% consumers saying)

0%

20%

40%

60%

80%

100%

Mature Markets

How many different makes/models of vehiclesare you currently considering?

More than 7

6-7

4-5

2-3

1

816

67

14

12

60

27

41

Developing Markets

Source: Capgemini

“I have confidence thatwe will see big changes inthe kinds of cars we buy;they will be friendly to theenvironment and to mypocket.”Brazilian consumer

Page 8: Capgemini  Cars Online 1009

7

Interestingly, however, respondents indeveloping countries who do use theInternet are more likely than theircounterparts in mature markets toturn to new tools such as blogs, videosites and RSS feeds. They may be newto the vehicle buying process, but notto technology.

Consumers in developing markets arealso more likely than those in maturemarkets to consider a greater numberof makes and models before buying.One-third of respondents from theBRIC countries look at four or moremakes/models, compared with only17% in the mature markets.

In addition, consumers in developingmarkets are prepared to spend asignificantly higher proportion of theirincome on a vehicle. In the U.S., forexample, the majority of respondentsexpect to spend less than 25% of theirannual income on their next vehicle,compared with the developingmarkets where the majority ofconsumers will spend up to 50% oftheir income. In Russia, one-third areprepared to spend more than 50%.

Variances in Buying BehaviorAmong BRIC MarketsIt is important to note that alldeveloping markets are not alike inevery respect and that we seevariances in buying behavior from onecountry to another.

Brazil stands out in a number ofrespects. For example, Brazilianconsumers are more likely than theircounterparts in the other developingcountries to look at a greater numberof vehicles. More than half said theywill consider four or moremakes/models.

Russian consumers tend to visit moredealers than do shoppers in the otherdeveloping markets. Almost one-thirdof respondents in Russia said they willvisit four or more dealers beforebuying, compared with only 7% inBrazil, 13% in India and 4% in China.This may be due to the fact that thereare more dealerships in Russia tochoose from than in countries such asIndia and China.

Differences were also apparent interms of the types of vehiclesconsumers plan to buy. Brazilianrespondents show a much greatertendency toward buying smaller carsand place greater emphasis on hybridor other alternative-fuel cars.

Dealer Visits Vary in Developing Markets (% consumers saying)

Total U.S. WesternEurope

Russia Brazil India China

How many dealerships will you visit before purchasing/leasing your next vehicle?

Don’t know

More than 5

4-5

3-4

2-3

1-2

1

0%

10%

20%

30%

40%

50%

60%

Source: Capgemini

“I would like to see apoint system for providingfeedback on a blog orforum site, which wouldenable you to get somekind of discount from thedealer or manufacturer.”Indian consumer

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Cars Online 09/10 8

Automotive the way we see it

Vehicle Buying Cycle ShrinksTraditionally, the vehicle buying cyclehas been shown to last about sixmonths. Our research indicates thatthis period is compressing as consumersare able to gather significantinformation about vehicles quicklyand easily over the web. More thantwo-thirds of respondents begin theresearch process two to four monthsbefore they plan to buy and 60% visitthe showroom for the first time withintwo months of purchase. This patternis fairly consistent across markets.

Understanding the shifting timeframeis vital, as the research period is thecritical time to reach in-marketconsumers with the right informationand the right response mechanisms.By the time a consumer visits theshowroom, it is often too late toinfluence the vehicle decision.

What triggers a consumer to movefrom the research stage into theshowroom? It is not so much aparticular point in time but rather ashift in mindset.

The Shrinking Vehicle Buying Cycle (% consumers saying)

TotalTotal

How long before your planned vehicle purchase/leasedid/will you begin to research vehicles?

How long before your planned vehicle purchase/leasewill/did you visit a dealership showroom?

<2 weeks

2-4 months

8-10 months

2 weeks-1 month

4-6 months

10-12 months

1-2 months

6-8 months

>12 months

<2 weeks

2-4 months

8-10 months

2 weeks-1 month

4-6 months

10-12 months

1-2 months

6-8 months

>12 months

611

22

27

23

11

3 1 1 1

14

23

25

17

7

3 3 20%

5%

10%

15%

20%

25%

30%

0%

5%

10%

15%

20%

25%

30%

Source: Capgemini

How Consumers Buy: Target YourMarketing MixVehicle buyers are taking less time to research and visit showrooms and areincreasingly turning to web-based information sources.

Page 10: Capgemini  Cars Online 1009

9

In earlier consumer research conductedby the Car Internet Research Program(CIRP) and Capgemini, we found thatthe switch from researching to dealervisits typically occurs when “enough”information has been gathered and aconsumer feels ready to negotiate. Ofcourse, what constitutes enoughinformation will vary from one buyerto another. However, from a power-struggle perspective, it typically meansthat the customer knows what hewants and how much he is ready topay. When that state of mind isreached, the buyer is ready to enterthe showroom.

Ensuring that your showroom isamong those visited by consumers is achallenge as consumers visit fewerdealerships today than in past years.About one-quarter of respondents saidthey visit only one or two dealershipsbefore buying a vehicle.

The Search for InformationWhere do consumers go for theirinformation during the research stage?Most turn to the web. Almost 90% ofconsumers say they use the Internet toresearch vehicles. This year, the use of search engines

jumped considerably, moving up tothe third spot from seventh positionlast year. Search engines areincreasingly becoming a key startingpoint for consumers as they search fornew models and brands, as well asinformation about automotive-relatedblogs, reviews and other types ofresources that might help them duringthe research process.

Usage of manufacturer websites aswell as automotive blogs, forums anddiscussion groups also increased.While most web-based sources showgains in mature markets this year, theuse of more traditional sources suchas TV advertising and auto shows,continues to decline among Westerncar buyers. In contrast, whileconsumers in developing markets usethe web to research vehicles, they stillrely on traditional sources too. This isparticularly true in Brazil, India andChina, though less so in Russia. Forexample, 30% of consumers in theBRIC regions use and value TVadvertising, compared with only 16%of respondents in the mature markets.

These trends point to the importanceof targeting your marketing mix to thespecific market. This approach has

Expected Use of Information Sources (% consumers saying)

0% 10% 20% 30% 40% 50% 60%

Dealer websites

ManufacturerInternet sites

Search engine

Family and friends

Information websites

Independent carvaluation services

Manufacturer-specificfranchise dealer

Used car dealer

Specialist motoring/automotive press

Internet news sites

Print advertising

Independente-tailer sites

Auto shows

TV advertising

Web forums, blogs orInternet discussion groups

Mature Markets

Developing Markets

Source: Capgemini

“There should be a realprice for a vehicle and areal warranty with no fineprint.” U.S. consumer

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Cars Online 09/10 10

Automotive the way we see it

already resulted in some significantshifts in spending. For example, in theU.S. local broadcast TV spending inthe automotive category fell morethan 50% in the first quarter of 2009,according to the Television Bureau ofAdvertising.2

Reliability and SafetyMatter MostOnce the research process is complete,what factors ultimately determine the

vehicle that a consumer chooses? Asin prior years, the top four factorsacross the board are reliability, safety,price and fuel economy. In acontinuation of our findings fromlast year, consumers in developingmarkets are more likely than theircounterparts in mature markets toemphasize transitory factors, such ascash-back incentives and coupons/options for third-party providers.

Importance of Factors in Consumers’ Choice of Vehicle(% consumers saying “important/very important”)

Reliability of brand

Safety

Price of vehicle

Fuel economy

Vehicle availability and/or reliabilityof sales and delivery date

Quality of interior styling

Aftersales service

Brand name of vehicles,products and services

Extra options at no cost

Treatment by the manufacturerduring my previous ownership cycle

Treatment by the dealer duringmy previous ownership cycle

Ability to research informationon the Internet

Low emissions

Product features/optionsto fit my needs

0% or low financing

Cash-back incentive

Option for additional warrantycoverage or service credit

Coupons/options forthird-party providers

Hybrid or otheralternative-fuel cars

Mature Markets

Developing Markets

0% 20% 40% 60% 80% 100%

Source: Capgemini

2 “A World Without Local Car Dealer Ads?” Advertising Age, June 12, 2009

“Petrol vehicles willbecome a thing of the pastand more emphasis will beplaced on safety, theenvironment andeconomical vehicles. I willconcentrate more onmanufacturer andgovernment websites forinformation.”UK consumer

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“Time We Got Off the OilWagon”When consumers were askedabout the changes they expect to seein the way they buy vehicles overthe next decade, mentions of moreenvironmentally friendly cars viedwith online buying as the majorchange. “I am hoping that soon mychoices for alternative-fuel/green vehicleswill be much larger. It’s time we got offthe oil wagon,” said one respondentfrom the U.S.

That sentiment was echoedthroughout the eight markets studied.Even in Germany, where vehicleperformance was a key factor formany consumers, one respondentnoted that “A fast car is not exciting if itconsumes a lot of fuel.”

Considerable focus today is being puton developing more fuel-efficient andalternative-fuel vehicles by most majorcar manufacturers, as well asgovernments, energy companies andother industries. This growing focuson “green” is being strongly fueled byconsumer demand stemming fromeconomic and environmental factors.In our research, 41% of consumerssaid they currently own a fuel-efficientor alternative-fuel vehicle, up from36% the year before. And another30% said they plan to buy a fuel-efficient or alternative-fuel vehicle.

Consumer Confidence AboutGreen Knowledge Is HighConsumers in most markets today aregaining a better understanding ofwhat green really means. Three-quarters of all respondents say theyare confident or very confident intheir knowledge of green vehicles.The degree of confidence is highest in

Brazil, which is not surprising giventhat ethanol-based and flex-fuelvehicles have been sold in that countryfor a number of years. Almost 90% ofBrazilian respondents say they have astrong understanding of green vehicles.

Evidence of rationalization betweendeveloping and mature markets isapparent in this area. Confidence ingreen knowledge was up in the U.S.and level in Western Europe, but downsomewhat in developing markets.

Green Vehicles: A Force for the Future

11

“I think the auto industryis going to make acomplete change within 10to 15 years. I hope therewill be no emissions, 100%clean fuel.”U.S. consumer

Growing interest in fuel-efficient and alternative-fuel vehicles will lead tofundamental shifts in consumer buying behavior over the coming years.

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Why Consumers Buy GreenWhile fuel economy remains thenumber one reason that consumersown or plan to buy a fuel-efficient oralternative-fuel vehicle, environmentalimpact is a growing factor. Anincreasing focus on environmentalissues overall, combined with lowerfuel prices during the past year are thelikely drivers. The trend wasparticularly apparent in the U.S.where 20% of respondents said theenvironment was their primary reasonfor choosing a fuel-efficient oralternative-fuel car, up from just 9%the previous year.

Consumers in Western Europeremain the most focused on theenvironment, with 31% indicatingthat environmental impact is theprimary reason for owning orplanning to buy a fuel-efficient oralternative-fuel car. This number isup from 22% the year before.

Cars Online 09/10 12

Automotive the way we see it

Ownership of Green Vehicles Increases (% consumers saying)

2009

2008

41

36

30

30

16

19

13

15

Own a fuel-efficient/alternative-fuel vehicle

Plan to buy a fuel-efficient/alternative-fuel vehicle

Thinking seriously aboutbuying a fuel-efficient/alternative-fuel vehicle

Do not own/not interestedin buying a fuel-efficient/

alternative-fuel vehicle

0% 10% 20% 30% 40% 50%

Source: Capgemini

Most of the developing markets alsosaw an increase in the focus on theenvironment. In India, for example,32% of respondents pointed to theenvironmental impact, up 10 percentagepoints from the prior year. Similarly inChina, 32% identified environmentalimpact as the primary reason behindgreen vehicle decisions, an increasefrom 20% in 2008.

Hybrids Lead the WayAccording to our research, gas/electrichybrids are the primary type ofalternative-fuel vehicle that consumerscurrently own or plan to buy. This isparticularly true in the Westernmarkets. In the U.S., for example,60% say they own or plan to buy agas/electric hybrid car, up from 52%in 2008. Gas/electric hybrids are lessdominant in the developing markets,where consumer interest is alsofocused on natural gas or natural gashybrids and all-electric vehicles. In

Brazil, ethanol or gasoline/ethanolflex-fuel cars are popular.

It is not surprising that electric vehicles,particularly hybrid gas/electric cars,would be at the top of consumers’list of alternative-fuel choices. Theyare the most commercially matureand viable of the various kinds ofalternative vehicles and havedemonstrated the potential toreduce fuel consumption andexhaust emission.

“I think we will start seeing an awful lotmore cars available in electric form,”said a consumer from the UK. “Andgreater pressure will be put on drivers tobe more green aware.”

Although sales of hybrid electricvehicles still represent only a smallshare of overall car sales and despiteslower sales this year, future demandis expected to grow. This isparticularly true in markets like theU.S. and Japan as prices of hybrid andother types of electric vehicles beginto drop. By some estimates, globalsales of hybrid electric vehicles maysurge at a compound annual growthrate as high as 12% over the next fewyears. Developing markets like Brazil,India and China are also expected tocontribute to this growth as they putmore focus on environmental issuessuch as CO2 reduction.

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13

Will Consumers Pay for Green?While consumer interest in greenvehicles is strong and growing, costremains an issue. Our research foundthat consumers show somewillingness to pay for improved fuelefficiency, although about 70% ofrespondents said they would pay nomore than 10% extra for a fuel-efficient or alternative-fuel vehicle.And in the mature markets, close to20% said they were not prepared topay any premium at all.

“I will purchase an alternative-fuel car asI am very concerned about theenvironment,” said a U.S. consumer.

“But I hope that prices will come down asit will encourage others to purchase thistype of vehicle as well.”

Prices are expected to drop over thecoming years, but it is still early in thecost-reduction curve. Government-sponsored programs in the form ofboth consumer credits/rebates andbattery development incentives in theelectric vehicle business provide somecost relief. However, the price gapbetween gas-powered and alternative-fuel vehicles will need to shrinkconsiderably if the mass market is toaccept green cars.

“I would consider ahydrogen-powered sedan.The maintenance isaffordable and it’s good forthe environment too.”German consumer

Why Consumers Buy Green Vehicles (% consumers saying)

Total U.S. WesternEurope

Russia Brazil India China

Other

Preserve residual value of vehicle

Cost

Tax credit

Impact on the environment

Fuel economy

0%

20%

40%

60%

80%

100%

57

63

46

69

5954 52

2620

31

19

22 32 32

4 23

26

3 611

2

1311

17

3 1 29 11 11 6

4

Source: CapgeminiBase: Consumers who own/plan to buy a fuel-efficient or alternative-fuel vehicle

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Use of the web during the vehiclebuying process is now at nearly fullsaturation in most markets. Theexception is China, where Internetpenetration remains low in someregions. A clear pattern has emerged,with many consumers starting theirresearch with search engines, thenmoving to manufacturer and dealersites, and finally to consumer-to-consumer tools like blogs anddiscussion sites.

What Consumers Wantfrom the WebAs Internet sophistication grows,consumers look to different kinds ofsites for targeted information. Frommanufacturer and dealer sites,respondents say they want to find afull range of product information andbase pricing above everything else.This has been the case now for anumber of years.

Cars Online 09/10 14

The Role of the Web: Consumer UsagePattern EmergesAs Internet sophistication grows, consumers look to different kinds of sites fortargeted information.

Automotive the way we see it

Wide Use of the Internet to Research Vehicles (% consumers saying)

0%

20%

40%

60%

80%

100%

Total U.S. WesternEurope

Russia Brazil India China

2009

2008

2007

2006

2005

Source: CapgeminiNote: Russia, Brazil and India were not included in the research until 2008

The importance of features such ascomparators and configurators wasdown somewhat this year. Leastimportant to consumers are featuressuch as dynamic graphics, the abilityto check dealer inventory, availabilityof a website in their native language,and online information about thelatest ads and promotions.

Some differences were apparent bymarket. For example, comparatorsand cost calculators were somewhatmore important to consumers in themature markets, especially the U.S.Respondents in the developingmarkets, particularly those from India,were interested in the ability to getguidance and advice over the web andto communicate with their dealer orcar company online to solveproblems, buy accessories, etc.

“I want to look for avehicle that is more fuelefficient and will beresearching at greenwebsites and differentcar blogs becauseconsumer opinionsreally matter to me.”U.S. consumer

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15

New Tools Provide NewInformationAfter doing research via manufacturerand dealer websites, an increasingnumber of consumers are turning toonline consumer-to-consumer toolssuch as automotive blogs, forums,discussion groups, video sites and RSSfeeds. The use of these tools duringthe research process has grown inrecent years and is particularly high inthe developing markets.

Indian consumers are among the mostlikely to use automotive blogs (46% ofIndian respondents vs. an average of40%), online video sites (50%, comparedwith the average of 32%); and RSSfeeds (28% vs. 12% overall). Respondentsfrom Brazil are the most likely to usesocial messaging/micro-blog sites likeTwitter (30% vs. the average of 13%)and mobile phone applications (27%,compared with 10% overall).

Consumers rely on these sitesprimarily to gain more qualitative,objective information about vehiclesand dealers. This year respondentsplaced growing emphasis oninteractive discussion sites, ratherthan static information such as vehiclenews. For example, 29% said theylook for discussions with otherconsumers, up from 21% in 2007;and 28% participate in discussionswith automotive experts, an increasefrom 20% two years ago.

Not only do these kinds of toolsprovide consumers with additionalinformation as part of the research

Reasons for Using Consumer-to-Consumer Online Tools (% consumers saying)

2009

2008

2007

Opinions/reviews aboutspecific car brands/makes

Discussions with other consumers

News about new vehicles

Helpful hints

Discussions with automotive experts

Information about vehicle recalls

Opinions/reviews aboutspecific car dealers

Personal stories

Discussions about aspecific automotive topic

Information about automotiveevents/auto shows

Other car images/videos

Spy photos/videos

0% 10% 20% 30% 40% 50% 60%

Source: CapgeminiNote: Multiple responses allowedBase: Consumers who use consumer-to-consumer online tools to research vehicles

“I would like to see one centralized website where itwould be possible to find information on all offers for allbrands. It would be a more flexible and simple way tochoose a car.”Russian consumer

Page 17: Capgemini  Cars Online 1009

Cars Online 09/10 16

Automotive the way we see it

Building Relationships Via the Web

What if consumers had the chance to speak to a vehicle manufacturer adviser as theynarrowed down their vehicle selections? Someone who could help them by answeringtechnical questions, or identifying resolutions to their specific needs (as a hotline would);or by being reassuring – offering an ear, a human voice and advice (like a coach).

In research conducted by the Car Internet Research Program (CIRP) and Capgemini, wefound that consumers saw value in pioneering flexible web services, such as virtualassistance, particularly during the critical time period during the research process beforethey enter the dealer showroom.3

Our research made it clear that implementing a service like a “Virtual Adviser” into amanufacturer’s web model can engage early-phase shoppers interactively and set thestage for building a superior customer relationship experience. This can provide thefollowing benefits:

• Enhance the probability of a shopper choosing your brand as one of the two modelsthey will closely examine.

• Increase the likelihood that your dealership will be the one they visit.

• Improve the chances that the shopper will arrive at the dealership feeling morecomfortable, with a greater level of trust.

• Complement the dealership distribution model by providing broader consumercoverage, particularly in new or expanding markets.

Most importantly, we found that a Virtual Adviser program has the potential to drive anenhanced prospect funnel with improved conversion rates.

3 “Before the Door,” Car Internet Research Program (CIRP) and Capgemini, 2009

process, they can influence buyingdecisions. More than two-thirds ofconsumers said they would be morelikely to purchase a particular vehicleor buy from a certain dealer if theyfound positive comments posted onblogs, forums and the like. Thenumbers were even higher in Braziland India.

Conversely, 57% of respondents saidthey would be less likely to buy aparticular make or from a specificdealer if they found negativecomments on these kinds of sites.

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Western Europe and Russia, theresults were consistent with last year.

Consumers are more likely to want tobuy a new rather than a used car overthe Internet. This is no doubt due tothe fact that new cars are presumed tobe of a high quality and in good workingcondition. Consumers are less willingto buy a used car sight unseen.

Why Buy Online?While price discount is the leadingreason consumers are interested inbuying a car over the Internet, morethan one-quarter said they wanted toavoid interaction or price negotiationwith the dealer in person. Consumersalso expect an online transaction to beeasier and faster.

In India and China, respondents wereparticularly inclined to prefer theInternet in order to avoid interactingwith the dealer. In those markets, aprice discount was a secondary reasonfor buying a car online.

It is important to point out that whilemany consumers dislike the pricenegotiation that typically goes oninside the dealership, others actuallyenjoy bargaining over price and saythat the inability to negotiate pricewould be a barrier to buying online.

This dichotomy in negotiationpreferences was apparent in earlierresearch published by the Car InternetResearch Program (CIRP) andCapgemini.4 In that study, we foundthat the process of negotiating thepurchase or lease of a vehicle arousesstrong emotions and correspondingreactions. Different consumers adopt

“In 10 years, I expect buying a car onlinewill be more like buying a replacementmirror on eBay. Choose which one youwant, pay for it and have it shipped toyour front door. No hassles and nosalesman negotiations.” – U.S. consumer

“It will be possible to order a car and allthe necessary features online – pay, get aloan, insure and arrange a pick-uplocation (delivery to home or a salescenter). All this without leaving yourhouse.” – Russian consumer

There is no question that consumersexpect to buy their vehicles over theInternet in 10 years’ time. But manyare not willing to wait that long.

Consumers today have demonstrateda clear interest in online buying of

cars and parts/accessories, a trend webegan tracking in our Cars Onlineresearch two years ago after nothaving focused on it for a number ofyears. This year, we explored the topicmore deeply.

Nearly 40% of consumers said theywould buy a vehicle online (thecomplete end-to-end transaction) ifthat capability existed. This was downa few percentage points from last year,reflecting a rationalization in thedeveloping markets. Brazil, India andChina all experienced a drop in thenumber of respondents saying theywere likely to buy a vehicle online,although the rates are still far higherthan those in the mature markets. Thenumber increased to 21% in the U.S.,from 17% the previous year. And in

Online Buying: ‘No Hassles,No Negotiations’

17

Consumers want a cheaper, faster, easier way to buy cars.Their answer: the Internet.

Likelihood to Purchase Vehicle Over the Internet (% consumers saying)

Total Consumersintending to

acquireNEW vehicle

Consumersintending to

acquireUSED vehicle

5 (Very likely)

4

3

2

1 (Not at all likely)

0%

20%

40%

60%

80%

100%12

25

23

18

22

14

27

21

17

21

8

17

25

22

28

Source: Capgemini

4 “‘Am I Being Taken?’ Inside the Dealership: The Impact of Consumer Negotiation Preferences and Strategy,” Car Internet Research Program (CIRP) and Capgemini, 2008

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different types of negotiation strategies;in some cases they are more opaqueand in others they are fairly transparent.

Transparent shoppers are at ease withthe salesperson and are open abouttheir interest in the vehicle as well aswhy they like it. They are more likelyto enjoy the negotiation process.Opaque consumers, on the otherhand, are less confident in their abilityto get a good price, and so do notenjoy the bargaining process. Thissecond group of car buyers representsa potential market for online vehiclebuying.

Barriers to Online BuyingAgain this year, we asked respondentsto identify the barriers they see toonline vehicle buying. And again, wewere struck by the fact that theprimary hurdles – such as theinability to test drive a vehicle, seephotos/video of the vehicle or receivefull product and price information –are clearly surmountable.

Cars Online 09/10 18

Automotive the way we see it

Primary Reason to Purchase Vehicle Over the Internet (% consumers saying)

Price discount

Do not want tointeract/negotiate price

in person with dealer

Ease and speedof transaction

Ability to purchasevehicle that is not

available locally

Do not want to betalked into buying something

I do not want

0% 10% 20% 30% 40%

36

28

22

8

6

Source: Capgemini

“I would like to buy a cartotally on the Internet andhave it delivered to myhome. Perhaps therewould be only onedealership in town withone of each model for testdrives and to look over.Then you would go homeand order over the Internetthe car you want with theoptions you want.”U.S. consumer

For example, a car could easily bebrought to a consumer’s home for atest drive. Some consumers evensuggested using virtual reality tools tomake online test drives possible.

Some differences by market wereapparent, with test drives being moreof a concern in mature markets andthe lack of information about avehicle’s history a greater concern indeveloping regions.

Many respondents do not rule out arole for the dealer in online vehiclebuying. Close to one-third said pricenegotiation would be the primary roleof the dealership, while 28% pointedto test drives and 17% said providingservice packages. Additional functionsincluded serving as a location to pickup a vehicle after buying it online, aswell as a place to view the vehicle inperson and to acquire additionalinformation before buying online.

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19

A similar sentiment was echoed by arespondent from the U.S., who said,“Talking one-on-one with a real person tofinalize a purchase is invaluable. I doubtthat I would ever purchase a vehicle fromthe Internet, no matter how easy it is toresearch makes, models, pricing, extras.”

Significant Interest in BuyingParts/Accessories OnlineThis year we took a closer look at thebusiness of selling parts and accessoriesover the Internet, an area of considerableinterest to consumers. Half ofrespondents said they would like tobuy parts and accessories online. Aswith online vehicle buying, the trendis growing in the U.S., is consistent inWestern Europe and Russia, and isdown somewhat in the otherdeveloping markets.

Price discounts and dissatisfactionwith the dealer/retailer process are thekey reasons consumers want to buyparts and accessories over the web.Overall, 35% of consumers expect aprice discount when they buy vehicleparts and accessories online; 30%point to ease and speed of transactionas the key reason; 21% look for widerselection and availability; and 10% donot want to interact in person with adealer or parts retailer.

These reasons are fairly consistentacross markets, with a few exceptions.In Russia, the wider selection andavailability of parts and accessoriesresonated most strongly with carbuyers. In India, ease and speed oftransaction was somewhat moreimportant than price discount. And inChina, 31% of respondents said theydid not want to interact in personwith a dealer or parts retailer.

Practical Items Lead the ListOverall, respondents want to buypractical items such as seat covers,floor mats and tires online rather thancustom accessories like spoilers,specialty headlights/taillights andcustom wheels. There were somenotable market differences, however.

For example, in-car entertainmentdevices and systems lead the list inRussia, named by about half ofrespondents, compared with anaverage of 34%. Consumers in Indiawere also more likely than average toconsider buying in-car entertainmentsystems over the web, while theseitems were at the bottom of the list forChinese respondents.

However, many consumers do notexpect to see dealer lots full of cars ifonline buying takes off. “There will beonly test cars,” said a U.S. respondent.“Cars will be made to your specifications,thus eliminating dealer inventory on thesales floor.”

Some respondents see a grim futurefor dealers. “Dealerships will becomehistory,” said a consumer in India.“Everyone will buy their cars online andhave them delivered at their doorsteps.”

Not everyone is sold on onlinebuying, however. “I hope that we’ll stillhave our local dealers because of theirproximity and their knowledge of theircustomers,” said a consumer fromFrance. “I think that most of the researchwill be done on the Internet but finalizingthe deal will be face-to-face with thesalesman. It’s too important a purchasefor everything to be done virtually.”

Barriers to Online Buying (% consumers saying)

Mature Markets

Developing Markets

Inability to test drive vehiclebefore making final decisionInability to see photos/videoof the vehicle inside and out

Inability to receive fullproduct/price information

Inability to negotiate pricing online

Inability to receive a reportdetailing the vehicle’s history

Inability to contact and interact witha representative online or by phone

Inability to match a vehicleto my exact specifications

Inability to conduct final negotiation online

Inability to negotiate trade-inof old vehicle online

Inability to apply for financing andconduct financing approval process online

Inability to have vehicledelivered to your home

Other

0% 10% 20% 30% 40% 50% 60%

Source: CapgeminiNote: Multiple responses allowed

“It will soon be possible to order everything online,starting from the build and color and finishing withaccessories.”Russian consumer

Page 21: Capgemini  Cars Online 1009

of consumers are likely to return tothe same dealer, and where, in fact,one-quarter of consumers wouldactively search out a new dealer fortheir next vehicle purchase.

Building Loyalty ThroughCommunicationSo what can dealers and manufacturersdo to maintain customer loyalty?Communication is key. Consumersshow a strong receptivity to a widerange of communications, such asbrochures about the vehiclebought/leased, service reminders,post-test drive surveys, welcomepacks, satisfaction surveys andpersonalized repurchase offers.

However, those items that areintrinsically most useful, such asservice reminders and personalizedrepurchase offers near the end of alease or warranty period, are morelikely to influence future buyingdecisions. For example, 30% ofconsumers said these two items wouldmake them more likely to buy theirnext vehicle from the same dealer ormanufacturer, the highest rating forany form of communication.Personalized repurchase offers areparticularly influential in the U.S.,Western Europe and Russia, but lessso in the other developing markets.

Some consumers suggested thatmanufacturers go even further in theircommunication initiatives and involveconsumers in the development of newvehicles. “It would be good to use onlinesurveys to get views and guidance fromexisting users before manufacturing newvehicles,” said a respondent from India.

Automotive companies could use a bitof good news and our researchprovides it in the form of improvedcustomer loyalty. This year we saw aspike in brand loyalty in mostcountries, perhaps a reflection of theever-increasing reliability of mostvehicles on the market today as wellas improved lead management andcustomer communication programs.

Overall, 68% of respondents said theywere likely to purchase the samemake/brand as their current vehicle,up from 61% last year. Improvementswere seen in the mature markets aswell as most of the developingcountries, with the exception of India.

Similarly, dealer loyalty also rose,with 63% of consumers saying theywere likely to purchase from thesame dealer where they bought theircurrent car, up from 59% the yearbefore. This may be due to thecontraction in the dealer business aswell as improvements in quality andservice resulting from investments incustomer lifecycle managementsystems.

Some variances by market areapparent. The U.S., Western Europeand Russia all registered smallincreases in dealer loyalty, whileChina saw a bigger jump. However,both Brazil and India recorded smalldeclines, which again may be a sign ofconvergence beginning to occur insome of the developing markets.

Despite this year’s gains, dealer loyaltystill remains lower than brand loyalty,indicating that consumers are morelikely to trade dealers than tradebrands. This is particularly true inmature markets, where less than half

Cars Online 09/10 20

Customer Interaction: Loyalty andSatisfaction Rates ImproveIn a year full of bad news for the automotive industry, our research found brightspots in brand and dealer loyalty and customer satisfaction with the vehiclebuying process.

Automotive the way we see it

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21

possibility to schedule serviceappointments online, and onlineavailability of a vehicle’s servicehistory. Less important are invitationsto owners’ club events and thepossibility to meet, blog or chat withother owners.

Consumers in the developing marketsshow a much greater willingness topay for these kinds of features,compared with their counterparts inthe U.S. and Western Europe.

Speed Is of the EssenceWhile consumers demonstrate awillingness to interact withmanufacturers and dealers, theyexpect responsiveness when they do.Every year, consumers become moredemanding about the speed of

In addition to various types ofcommunications, some companiesrely on member clubs to drive loyaltyand a positive customer experience.Consumer interest in these kinds ofclubs varies by country, withconsiderably less interest in themature markets. For example, only24% of U.S. consumers and 22% ofthose in Western Europe say they arecurrently or would consider becominga member of a vehicle owners’ club.This compares with 76% ofrespondents from Brazil, 64% fromIndia, 56% from Russia and 47% fromChina.

The features of an owners’ clubdeemed most valuable or useful tendto be practical items, such as vouchersfor service and accessories, the

Consumer Views on Communication (% consumers saying)

0% 20% 40% 60% 80%

Valuable/useful

More likely topurchase as a result

Brochures about the vehicle bought/leased

Service reminders

Post-test drive survey

Welcome pack after purchase/lease

Customer satisfaction survey after purchase

Customer satisfaction survey after service

Personalized repurchase offer 2 years after purchase

Personalized communication/gift after a complaint

Brand magazine

Newsletters

Invitations to special events, clubs, open-house days

Other sales offers

Source: Capgemini

“Buying a car will bemore convenient andquicker. There will be moreservices but fewerdocuments, and a shorterwaiting period for vehicledelivery.”Chinese consumer

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response to inquiries. This year is noexception. More than half of allconsumers surveyed expect to receivea response within four hours, upseveral percentage points from lastyear. The increase was particularlynotable in the U.S. with a jump of 10percentage points.

China remains especially demanding,with 71% of consumers expecting aresponse within four hours. In fact,more than half of Chinese consumersexpect to receive a response within anhour, an increase from the prior year.

Fast response time has proved to be akey factor in consumers’ vehiclebuying decisions. Almost three-quarters of all respondents say theywill look for another manufacturer,another dealer or both if the responsetime is too slow. Consumers in Brazilare most likely to walk away, withalmost 90% saying they will goelsewhere.

Satisfaction Levels ImproveMirroring loyalty trends, consumersatisfaction with the overall vehiclebuying process increased somewhatthis year. Overall, 69% of consumerssaid they were satisfied or verysatisfied with the buying process, up acouple of percentage points from theprevious year. Variances by market areapparent, however. The U.S. andRussia showed the greatestimprovements, with satisfaction levelsup about 10 percentage points.Western Europe and China recordedsmaller improvements, while Braziland India showed slight declines.

While this is a trend in the rightdirection, satisfaction levels remainconsiderably lower in mature markets

Cars Online 09/10 22

Automotive the way we see it

Required Speed of Response from Manufacturer/Dealer to Consumer Query(% consumers saying)

0%

20%

40%

60%

80%

100%

Don’t know

More than 48 hours

24-48 hours

<24 hours

1-4 hours

<1 hour

Immediately

Total U.S. WesternEurope

Russia Brazil India China

10

19

22

35

11

2

5

14

24

46

911

4

14

19

51

111

7

26

29

30

611

6

21

25

23

22

21

11

14

18

40

14

21

25

27

20

16

7321

Source: Capgemini

“I’d like there to be less human interaction and need tohaggle price. Computer-operated kiosks could greatly addto the customer buying experience because there wouldbe no feeling of sales pressure.”U.S. consumer

Page 24: Capgemini  Cars Online 1009

23

than in most of the developingregions. And with trends in the BRICmarkets beginning to move closertoward those in the Western countries,automotive companies have cause forconcern. Maintaining customersatisfaction in those markets that offerthe greatest potential for growth isimperative for future success.

What can manufacturers and dealersdo to improve consumer satisfaction?The number one factor that consumerspoint to is a willingness to provide aprice discount, which is perhaps areflection of the current economicenvironment. But respondents are alsodissatisfied with the negotiation sideof the buying process and the amountof administrative effort involved. Theyare looking for an easier, fasterprocess, which is leading someconsumers to view the Internet as aviable alternative to the traditionalmethod of buying or leasing a car.

Said one U.S. respondent, “I wouldlike the process to be much quicker, lesshaggling, less paperwork, less trying toget us to buy extras. I don’t care whereI buy it from, I just want to betreated well.”

Consumers in Russia were particularlylikely to point to administrative effortas the key area of dissatisfaction. “I’dlike simplicity of purchase, speed oftransaction, fast and easy loan processing,”said a Russian respondent.

What Would Make You More Satisfied with the Vehicle Buying Process?(% consumers saying)

More willingness to provide a discount

Free extras with purchase

Less administrative effortduring buying process

More knowledgeable sales staff,ability to answer all questions

Shorter waiting time to receive vehicle

Faster response to inquiries fromthe manufacturer or dealer

Greater friendliness of salesstaff at dealership

Direct delivery of vehicle to my home

Better atmosphere andservice in the showroom

Follow-up call from manufacturer/dealershortly after delivery of vehicle

Improved manufacturer ordealer website functionality

Other

50

40

35

28

27

20

20

17

16

12

8

3

0% 10% 20% 30% 40% 50%

Source: CapgeminiNote: Multiple responses allowed

How Satisfied Are You with the Vehicle Buying Process?(% consumers saying “satisfied/very satisfied”)

0%

20%

40%

60%

80%

100%

2008

2009

Total U.S. WesternEurope

Russia Brazil India China

67

69

40

49 55

59

53

65

91

87

84

80

75

77

Source: Capgemini

Page 25: Capgemini  Cars Online 1009

Purchasing Dealers MissAftersales OpportunityOverall, 40% of consumers rely forservicing on the franchised dealerwhere they bought their car, 23% turnto a service station or auto repairshop, and 13% take their vehicle to afranchised dealership where they didnot buy their car. The pattern wasfairly consistent across markets,although consumers in the U.S. andRussia were more likely than theircounterparts in other countries to usea service station or auto repair shop.

Not surprisingly, consumers with carsstill in warranty were more likely touse the purchasing dealership forservicing. However, the number waslower than expected, at 49%,compared with 36% of consumerswhose cars are out of warranty.

In the face of stagnant or decliningvehicle sales, many automotivecompanies are putting greater focuson the aftersales business. Whathappens post-sale can be as importantas the sale itself. For one thing,service and spare parts operationsoffer a profit margin that is typicallyup to 10 times greater than that of theinitial sale.

On average, post-sale service, partsand accessories can account for 20%to 30% of revenue and as much as50% of profits. In addition, servicecan be key to securing customerloyalty, fostering a manufacturer’sbrand name and maintainingcompetitive differentiation.

Cars Online 09/10 24

Aftersales/Servicing: Focusing on thePost-Sale ExperienceService, parts and accessories represent a significant profit opportunity, but whatdo consumers want from their aftersales experience?

Automotive the way we see it

Location for Vehicle Servicing (% consumers saying)

Franchised dealer wherevehicle purchased

Service station/auto repair shop/garage

Franchised dealer where didnot purchase the vehicle

Independent dealer wherevehicle purchased

Independent dealer where didnot purchase the vehicle

I service the vehicle myself

Friend/family services the vehicle for me

0% 10% 20% 30% 40%

40

23

13

11

6

4

3

Source: Capgemini

Page 26: Capgemini  Cars Online 1009

25

Extended Warranty Key Featureof Service ContractsService contracts represent animportant source of profit for dealers,but, in many cases, sales have sufferedalong with vehicle sales. This putspressure on companies to identify thekey features that consumers wantfrom service contracts.

Topping the list are extendedwarranties. Beyond that, however,variances exist by market. For example,providing a replacement vehicleduring servicing and the inclusion oftowing/roadside assistance are ratedhighly by consumers in maturemarkets, but are less important indeveloping countries. In contrast,

This represents a significant missedaftersales opportunity for dealers. Andit may also impact repurchasedecisions, as consumers tend to bemore likely to buy their next vehiclefrom the servicing dealer rather thanthe prior purchasing dealer.

Satisfaction levels for servicing weresomewhat higher than for the vehiclebuying process, with 72% ofrespondents indicating they weresatisfied or very satisfied with theirmost recent aftersales/servicingexperience. Consumers in Russia werethe least satisfied, while those inBrazil, India and China expressed thehighest degree of satisfaction.

What Consumers Want in Vehicle Service Contracts (% consumers saying)

Extended warranty

Vehicle insurance

Replacement vehicle whenown car is being serviced

Inspection included

Repair labor included

Wear parts included

Towing/roadside assistance included

Tire replacement included

Other repairs included

Customer care

Leasing/financing of vehicle

Other

0% 10% 20% 30% 40% 50%

48

44

34

34

32

30

29

24

24

21

20

1

Source: CapgeminiNote: Multiple responses allowed

Page 27: Capgemini  Cars Online 1009

Automotive the way we see it

Cars Online 09/10 26

respondents in the BRIC regions aremore interested in vehicle insuranceand having other repairs included.

It should be noted that typicallymanufacturers and dealers do notoffer their own vehicle insurancepolicies for consumers. However,some may cooperate with insurancecompanies and incorporate vehicleinsurance as a feature of a servicecontract. The inclusion of vehicleinsurance in service contracts wasclearly desired by consumers,particularly in developing markets,and may indicate a demand for morecomprehensive “mobility” services.

The desire for all-around protection isthe primary reason consumers saythey purchase a service contract,followed by “convenience whendriving and servicing my vehicle”and “the vehicle plus service packageis a good deal.” This pattern wasconsistent across markets, althoughconsumers in the U.S. and WesternEurope also expect to save money inthe long run by purchasing a servicecontract.

Service Contracts Can InfluenceFuture Buying DecisionsService contracts not only offer animmediate profit contribution, butthey can also play a role in buildingcustomer loyalty. Almost three-quarters of respondents said thathaving the right service contractsavailable would make them morelikely to buy a vehicle from aparticular manufacturer or dealer.This was especially true in thedeveloping markets. But even in themature markets, more than 60% ofconsumers reported a positive linkbetween the right service contractsand their future buying decisions.

Conversely, 55% of all respondentssaid that not having the servicecontracts that were important to themwould make them less likely to buyfrom a dealer or manufacturer. Again,this was particularly true in the BRICcountries, but less so in the maturemarkets.

Profiting From Improved Automotive AccessoriesForecasting and Planning

The accessories business represents a tremendous revenue opportunity for vehiclemanufacturers, which is particularly critical given the static sales in many mature marketstoday. Yet automotive companies currently are not well positioned to take advantage ofthis opportunity. Most use existing service parts models to run their accessories supplychain. To capitalize on the accessories business, it is imperative that manufacturers stoptreating accessories like service parts.

To effectively manage the accessories value chain, manufacturers need to adopt a retailbusiness model and leverage the fundamentals of the “4P” approach: Price, Promotion,Product and Placement. Leveraging the same principles used in other best-in-class retailchannels yields more efficient planning.

Further, companies need to build an adaptive, flexible and responsive supply chain foraccessories through end-to-end integration, collaboration and visibility. The goal shouldbe to make it easier for dealers to sell and install accessories. To accomplish this,manufacturers need to implement penetration-based forecasting, which uses vehiclevolume forecasts to drive accessories forecasts. This concept of market penetration-based forecasting for accessories is new to the automotive industry but has the potentialto cause a revolutionary change in the way automotive manufacturers manage theiraccessories business.

“I hope that aftersalesservices get better. Somespare parts should bereplaced free and vehiclesshould be simplifiedso servicing is easier.”Chinese consumer

Page 28: Capgemini  Cars Online 1009

This year’s Cars Online research offersboth a quantitative and qualitativeview of changing consumers needsand buying patterns. Following arerecommendations to help companiesbetter meet these needs and demandsin today’s volatile market.

1 Eliminate the bureaucracy andinefficiency inherent in the

current buying model. Consumerswant a faster, easier way to buyvehicles. Improved lead managementsystems, dealer optimization andonline buying capabilities are amongthe tools that can be implemented tohelp achieve this objective.

2 Get serious about onlineselling. Consumer interest in

buying vehicles and parts andaccessories over the Internet is real.Providing a viable online option willbe a key to maintaining customerloyalty in the coming years. Modelsmay vary – ranging from servicesoperated by individual manufacturersor dealers, to sites run entirely bythird-parties such as eBay, to jointventures between the two – but onlinebuying will become the preferredapproach for a significant group ofconsumers.

3 Focus on the aftersales andservicing experience. Keeping

in-warranty consumers coming backto the purchasing dealership forservicing is imperative, particularly ata time when vehicle sales are slow.Service and spare parts operationstypically offer a profit margin up to10 times greater than that of theinitial sale. In addition, the serviceexperience can be a factor in securingcustomer loyalty and driving futurerepurchase decisions.

4 Manage your marketing mixaccording to each market. A

one-size-fits-all marketing approachwon’t work in today’s diverseautomotive marketplace. Understandwhere to spend on the web and whereto continue to invest in traditionalmedia. And be sure to incorporatenew media channels such as blogsand discussion groups into the mix.Web-based discussion groups, inparticular, are growing in popularity.Consider how you, as a manufactureror dealer, can facilitate or participatein these kinds of discussion sites.

5 Communicate with consumersbefore they reach the

showroom. By the time vehiclebuyers enter a dealership they arelikely to have done a considerableamount of research and reduced theirlist of choices to one or two vehicles.The opportunity to influence themis nearly lost. Using new types ofsuch as a Virtual Adviser, can helpautomotive companies grab consumers’attention before it is too late.

6 Go green now. Consumers,automotive companies,

governments, utilities and other typesof businesses will increasingly focuson alternative-fuel vehicles. In thenear future, “CO2” will become asimportant as “mpg” in vehicle buyingdecisions. It is becoming clear thatalternative-fuel vehicles have thepotential to be a market-changingforce. However, the continueddevelopment of this business willrequire collaboration both inside and,more importantly, beyond theautomotive industry.

Conclusion and Recommendations

27

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Global/United KingdomNick Gill+44 870 904 [email protected]

Brazil/Latin AmericaFelix Massun+54 911 4422 [email protected]

ChinaWill Zhang+86 21 6182 [email protected]

FranceEric d'Arche+33 01 49 67 98 [email protected]

GermanyChristian Hummel+49 89 9400 [email protected]

IndiaFloyd D’Costa+91 22 6755 [email protected]

RussiaLyudmila Mashkova+7 495 980 97 [email protected]

United StatesMohit Takyar+1 313 887 [email protected]

Turning these recommendations intoreality is critical to future success forautomotive companies. Themanufacturers and dealers that trulybenefit from today’s uncertainty willbe those that look over and beyondthe horizon.

Winning tomorrow will require adifferent mindset and a different set ofsupporting tools and techniques toimprove the vehicle buying experiencefor consumers. The good news is thatthose capabilities – includingstreamlined processes, faster responsemechanisms, online buyingcapabilities, greener vehicles andimproved aftersales servicing – areentirely in the hands of manufacturersand dealers.

Capgemini’s Cars Online 09/10 studypresents many of the findings of ourextensive automotive consumerresearch. Yet there is much more thatcan be explored and applied to yourown organization. For additionalinformation about our Cars Onlineresearch or on how we can help yourcompany better understand thedynamics of consumer behavior intoday’s volatile market, please contact:

Cars Online 09/10 28

Automotive the way we see it

“Like most things today,I feel the car buying andownership process willbecome more streamlinedand tailored more to theindividual. The focus willhopefully be on providingexcellent customer serviceand working for yourbusiness like companiesused to have to do.”U.S. consumer

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Copyright © 2009 Capgemini. No part of this document may be modified, deleted orexpanded by any process or means without prior written permission from Capgemini.

Capgemini, one of theworld’s foremost providers

of consulting, technology and outsourcingservices, enables its clients to transformand perform through technologies.

Capgemini provides its clients withinsights and capabilities that boost theirfreedom to achieve superior resultsthrough a unique way of working, theCollaborative Business ExperienceTM. TheGroup relies on its global delivery model

called Rightshore®, which aims to get theright balance of the best talent frommultiple locations, working as one teamto create and deliver the optimumsolution for clients. Present in more than30 countries, Capgemini reported 2008global revenues of EUR 8.7 billion andemploys 90,000 people worldwide.

More information is available atwww.capgemini.com

About Capgemini and theCollaborative Business Experience

About Capgemini’s Global Automotive Practice

Capgemini’s Automotive practice serves 14 of the world’s 15 largest vehicle manufacturersand 12 of the 15 largest automotive suppliers. The sector generates value for companiesthrough global delivery capabilities and automotive-specific service offerings such asIntegrated Lead Management, B2C Web Strategy, Service and Parts Management, SupplierTransformation, Optimization of Dealer-Focused Operations and Global Emerging-MarketSourcing. For more information: www.capgemini.com/industries/automotive/

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www.capgemini.com/carsonline

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