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Automotive Japan – Broader lineups call for new sales channel concepts

2014

In order to continue to achieve or stay on track for growth, the Automotive industry is in the midst of unprecedented change manifest in two global macro trends: Firstly, the revolutionary move from a platform strategy to a more flexible modular architecture system of manufacture, resulting in a hitherto unseen abundance and frequency of model updates. Secondly, the revolution in drivetrain technology from gasoline and diesel powered internal combustion engines to a variety of electric, natural gas or hydrogen powered engines.

Both trends are extensively discussed. Notably, however, not in conjunction to one another and rather from a production than from a sales perspective. Yet it is the combination of both trends that will bring unprecedented choices to the automotive customer and challenge automotive wholesale as well as retail: progressively more car models need to be marketed, displayed, and repaired on given shop floor. Particularly for European premium car makers it is a pressing issue.

This is particularly true for saturated markets, where unit volume growth is limited and margins are tight. At wholesale level, more choice will result in lower sales per model, putting fixed cost for launch and sales & marketing on the spot. At retail level, more choice will demand the optimization or even expansion of limited retail floor space, display and demo car fleets, as the customer will continue to appreciate the driving experience and not just brand image to make a final buying decision. As simple capacity expansion will further erode margins, innovative concepts are needed to further optimize critical resource usage.

Metropolitan Japan may serve as a reference case. In the case of foreign automobile import, wholesale and retail levels are nowadays often not cooperating sufficiently along the retail sales value chain, limiting benefits from centralization. Also, since the cost of capacity expansion is very high, automotive retail is in particular need for innovative ways to optimize capacity in the coming years.

In fact, for dealers of leading foreign automobile importers in Japan alone, Roland Berger estimates an investment need of several hundred million Euros in the next five years, which has to be addressed in due course.
Not only the Japanese market calls for action. Some OEMs have started to proactively address this challenge also on a global level. Others which currently have other priorities may have to pay the price for it later on.  

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