How OEMs and lenders can jump-start the stalled auto market

The auto finance industry is facing three headwinds.

First, it continues to grapple with a sector-wide slowdown that began in 2018 as many markets reached 'peak car' or maximum vehicle saturation. Second, customer expectations continue to change, with the growth of ride-hailing and car-sharing schemes weighing on auto demand. Third, the fallout from the pandemic has resulted in rising debt and a global shortage of semiconductor chips that has brought vehicle production to a halt.

The outcome for the auto industry? Rising costs, stalled sales, higher vehicle returns, reduced cash flow, and threats to customer service quality.

But there's no time to take a beat. The need to transform for the future remains – only now with an immediate imperative to rationalize costs while improving customer experience. This requires a strategic shift. And there's one standout solution – integrating original equipment manufacturers (OEMs) and their captives, keeping customers at the center.

OEMs make the cars, and captives finance them. Despite serving the same customers, their cost structures run parallel. And so far, initiatives to cut costs, increase sales, or improve experiences have run parallel too.

But this won't work long term because, although the OEM and captive have different jobs, the customer journey and experience remains unified. The only real solution for tackling current and future problems is for the OEM and captive to unify too.

And problems to solve abound. On the revenue side, servitization is the future of industry growth: customers are looking for alternatives to the traditional one-car one-owner mode. They want usage-based options, products in bundles (such as a car plus tailored insurance), seamless online service, and flexible finance packages. On the cost side, automakers and lenders are dealing with more inquiries from customers, fewer employees to handle them, and pandemic-shuttered dealerships. And they are having to invest heavily in electrification too.

However, if automakers and lenders unify – and implement the right digital solutions –they not only have a good shot at cost-cutting to survive the immediate downturn, but they can also board the on-ramp to transformation, enabling them to thrive in a future of autonomous, connected, electric, and shared (ACES) vehicles.

Automakers, or OEMs, currently view customers in terms of vehicle purchase, usage, and maintenance. And they handle things like questions or concerns about vehicles and assistance with in-vehicle technology. Auto lenders, or captives, on the other hand, see customers in terms of credit quality, financial health, and payment terms. They handle things such as insurance repair issues and payoff quotes, servicing these needs separately, and in parallel. As a result, customer experience suffers.

Unifying OEMs and captives means replacing the old model – of siloed service over contract periods – with one that's driven by a 360º view of customers over their lifetime.

Here's how.

The first step is to combine customer data from the OEM and lender. This provides access to all information about that customer over their lifetime.

Then, the new entity can use deep data analytics to better segment customers and organize them by detailed personas. This enhances the ability to identify new opportunities to derive value from these customers – for example, by working out the next best offer for the customer based on their particular life stage, creditworthiness, and likelihood of delinquency.

The new, combined entity can also use similar processes to more accurately assess the value of used vehicles to build transparent pricing structures and understand remarketing readiness. And it can implement technologies such as text analytics software to listen and learn from customer interactions and meet customer needs more readily.

But data analytics does more than enable OEMs and lenders to sell more vehicles across customer lifetimes. It also enables better management in the contract stage – essential when personal finances become strained, as they have today. Holistic data alongside predictive analytics can help to manage delinquencies and roll out efficient collections strategies while keeping the cost to collect low.

Currently, many OEMs and captives run separate contact centers that service the same customer base. This no longer makes sense, especially in the current climate. By creating a single, digital contact center that integrates sales, customer service, and collections, it's possible to both form a 360º view of the customer and enhance the customer experience. For example, a centralized digital contact center allows customers to select their preferred mode of interaction, accelerating and smoothing their contact experience and improving the OEM and captive's efficiencies. Likewise, chatbots and customer self-serve portals mean OEMs and captives are available anytime, anywhere. They also help tackle the two-headed problem of a reduced workforce and increased customer contact, bringing down call wait times and abandon rates and boosting visibility for customer queries.

Accelerated transformation of the back office can reduce cost pressures too. By reimagining back-office processes with artificial intelligence, optical character recognition (OCR), and robotic process automation, captives and OEMs can enhance efficiencies. And hosting these transformed processes in the cloud can help the combined entity to access data more nimbly and increase system flexibility when mandating that employees work from home.

Customers are now used to seamless digital services in nearly every area of life – from entertainment and shopping to banking and healthcare. They can order or administrate almost anything online, and customer expectation is that automakers and lenders deliver the same.

Some OEMs have already met this need by allowing customers to select, configure, and purchase vehicles online. But many auto lenders are still unable to originate financing remotely. Using technologies such as digital application input, integrated e-signing, and document verification through OCR, captives can bridge this customer service gap and make both the selection and purchase of the vehicle entirely touchless.

OEMs and captives are in a unique position to simultaneously tackle current headwinds and transform their businesses for the future. By combining their strategic efforts, they can develop a holistic, 360º view of customers and use it to create a suite of curated product bundles and tailored financing that meet customer needs now and put them in pole position for tomorrow's ACES vehicle model too.

The market that stays separate stays stalled. But by fusing OEMs and captives, automakers and lenders can operate more efficiently and unlock crucial investment to fuel top-line growth.

This article was authored by Jason Osborne, global head of consumer and commercial banking and auto finance, Genpact, and Kanta Mishra, global auto finance practice leader, Genpact, and first appeared in Auto Finance Journal.