Automotive Industry: The Shift to Mobility

The automotive industry is changing, both in the Middle East and globally. New mobility solutions are all around us – a change that comes with many benefits – perhaps the most important of which is increased choices for the customers.

In the past, consumers had limited choices. Today, we are seeing both the number of choices and level of access to these choices increase. This shift is being led by many factors, including:

• our rapidly digitizing world;
• a sharing economy;
• an increasingly globalizing market; and
• changing customer preferences away from "traditional car ownership" to "utility of mobility."

This shift, while innovative, has far-reaching implications on the auto industry – especially on prevalent dealerships and general distributors in the Middle East. It’s important to note the following:

1. Profit margins are continuing to decrease. This means companies have to be more efficient in extracting & preserving value, as well as work with an increased focus on operational efficiency and lean & nimble organizations.
2. Profit margins are shifting across the value chain. With 50-70% of the profit now expected after sales, the auto industry must move from a product sales industry to a customer experience industry. It is customer retention and loyalty that are the key to remaining players in the space.
3. Innovation is paramount. Traditional products and business models are being commoditized and innovative mobility solutions are expected to continue reshaping the profit pool. This includes new products such as EV and AVs, as well as new solutions such as car subscription solutions. Therefore, the industry needs to listen to both the customer and the market, as well as have the ability to react quickly.
4. An impending battle for ownership of customers Is on the horizon. Simply put: He who owns the customers and their data will ultimately “win.” There is an increased need to better know and understand the customers.

Going forward, the challenge for most automotive distributors, should they choose to evolve into mobility companies, will be how to balance enhancing their traditional businesses that pay the bills today and investing in & nurturing future models that may disrupt existing models.

With so much uncertainty, there is a lot to balance and consider – but one thing can be said: the landscape will be redefined and there will be new winners. 

Connect with our Alvarez & Marsal Middle East team to learn more: https://www.alvarezandmarsal.com/global-locations/united-arab-emirates

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