In the rapidly evolving landscape of automotive retail, a shift is underway from traditional, product-centric, and dealership-focused sales models to customer-centric, digitally delivered approaches. Understanding consumer behaviours and expectations is crucial in navigating this transition.
The EY Mobility Consumer Index (MCI) survey reveals that while enhancing the digital experience is important, the physical dealership remains a powerful attraction for consumers who place a high value on the human element when purchasing a car. Moreover, the dealership is a vital hub for long-term value creation, a key driver for sustainable growth sought by both OEMs and dealers.
The EY MCI report, now in its fourth year, provides in-depth analysis of mobility trends and car-buying intentions based on responses from 14,500 consumers in 20 countries. The findings indicate that for both electric vehicle (EV) and internal combustion engine (ICE) car buyers, the dealership continues to play a significant role. Consumers prioritise the dealership experience when purchasing a new car, seeking not only to experience the vehicle physically, but also to gain assurance that they have made the right choice. The relationships consumers build with dealership staff drive loyalty and, in turn, value creation. Even digitally savvy EV buyers prefer having dealership staff answer their questions about relatively new and rapidly evolving EVs compared with the familiarity they have with ICE vehicles.
At the same time, the use of digital channels is on the rise for various aspects of the buying journey, particularly for initial stages like pre-sales research and information gathering. This complex landscape challenges the prevailing narrative of an all-encompassing digital transition. Beneath the surface, various groups of automotive customers prefer different combinations of digital and physical channels. The challenge for both OEMs and dealers is to become genuinely customer-centric by offering the omnichannel experiences consumers desire while maximising long-term value by tapping into the new and existing value pools.
Digital-first but dealers stay strong
For all car buyers, whether interested in ICE or EV vehicles, the buying journey increasingly begins online. Initial research and information gathering online, including the use of social media, third-party apps, and dealership and/or OEM websites, is preferred by 83% of ICE buyers and 90% of EV buyers. Digital channels are also favoured for pre-sales activities such as using online car configurators, virtual reality car viewers and booking test drives.
Adopting a digital-first approach does not mean abandoning the dealership entirely. As the buying journey progresses, consumer preferences shift to include visiting dealerships to interact with salespeople, experience the vehicles in person and obtain in-person quotes.
Various groups of automotive customers prefer different combinations of digital and physical channels
In terms of actual purchases, buyers’ preference for dealerships over online channels has steadily increased from 54% in 2021 to 61% in 2023. Surprisingly, EV buyers, often considered more digitally savvy, show the strongest preference for dealerships, with 64% choosing to make a purchase at a dealership rather than online, compared with 58% of ICE buyers. Cars are not like mobile phones, and even digital natives seek in-person reassurance when making a significant financial commitment.
Consumers rely on dealerships for three key aspects of the car-buying experience. Especially for EVs, which are still relatively new, consumers seek knowledgeable dealer staff to provide a deeper level of interaction and assurance in making the right vehicle choice. While virtual tours are valuable, consumers prefer to physically experience a car before committing to a purchase. The proportion of all car buyers visiting dealers to experience a car has increased by 3% from 2022 to 66%. Then there is pricing. Despite the growing popularity of fixed-price retail with OEMs, over 60% of both EV and ICE buyers prefer visiting multiple dealers to secure the best quote for a particular vehicle. The proportion of all car buyers visiting dealers to get quotes has increased by 6% compared with 2022.
Reassure the enthusiasts, convince the skeptics
The MCI Survey segments respondents based on their level of EV-mindedness, from EV enthusiasts to EV skeptics. Dealers play a crucial role in addressing the needs of these groups. EV enthusiasts represent 13% of all buyers. These consumers are committed to sustainability, prioritise performance over cost, and are inclined toward using digital channels for initial research. Despite their digital affinity, they still prefer to visit dealers for quotes and to experience the vehicle, with 64% choosing a dealer for their final purchase.
EV skeptics represent 11% of all buyers. Skeptics are conservative, cost-conscious and eco-doubters. They heavily rely on dealerships at all stages of the buying process, showing a preference for in-person interactions tailored to their concerns.
Shifting sales models
To adapt to evolving customer behaviours and accelerate the transition to EVs, OEMs are revamping their sales models from product-centric to customer-centric approaches. Two alternative sales and distribution models are challenging the traditional dealership model.
The direct-to-consumer model, favoured by new entrant OEMs, offers more control over pricing and the customer journey. However, building reach and scale requires substantial OEM investment.
In general, incumbent OEMs seeking to transition their legacy dealer networks prefer the agency model. It provides exposure to customers, control over pricing and leverages existing dealership distribution networks.
Many OEMs are experimenting with these models, such as making new outlets agency-only in some regions or differentiating sales models between powertrains (EVs via agency route and ICEs through traditional dealerships).
Too far, too fast?
The shift to customer-centric models is built on certain assumptions about consumer behaviour, including the preference for fixed prices, the replacement of physical channels with virtual ones, and the predominance of online channels for car purchases. However, real-world consumer behaviour and preferences challenge these assumptions.
Consumers, even digitally savvy ones, prefer visiting multiple dealers for quotes and opt to make their purchases in-person, not online. Virtual experiences are seen as complementary to physical ones. In the eagerness to embrace digital channels and cut dealership-related costs, OEMs risk damaging their established relationships with dealers and, paradoxically, becoming less customer-focused. There’s a risk of moving too far ahead of consumers, detracting from the buying experience rather than enhancing it.
Physical plus digital is the key that will unlock value
True customer-centricity means giving customers what they want, and the MCI data suggests that consumers desire both physical and digital elements in their buying experience. Personal interactions at dealerships are still highly valued, forming the core of the purchase journey even for tech-forward consumers.
Furthermore, EVs remain relatively new and fast-changing in consumers’ minds, with diverse groups of car buyers at different stages of their EV journey. OEMs must meet customers on their own terms, using the mix of physical and digital channels they prefer, rather than expecting customers to conform to predefined expectations.
The right blend of physical and digital not only enhances the customer experience but also catalyses value creation by opening doors to emerging value pools beyond traditional revenue streams. Opportunities include areas like insurance, finance, telemetry-based maintenance, alternative ownership models, micromobility, and mobility-as-a-service. Unlocking these opportunities requires OEMs and dealers to work collaboratively and focus on data-driven decision-making, innovative price management, and operational transformation.
The blend of EV vs ICE needs to be even more centric to customer wants with EVs becoming a preferred choice vs mandated. Continued improvements in model choice, range, charging infrastructure, charging time and cost are still needed to fuel that choice.
About the author: Randy Miller is EY Global Advanced Manufacturing & Mobility Leader