Market spotlight: How the digital revolution is transforming South Africa’s automotive industry

South Africa has seen various sectors completely transformed by the digital revolution in recent years—the automotive industry being one of them. With the rapid advancement of technology and changing consumer preferences, OEMs and retailers are reimagining the way cars are sold and serviced.

Let’s delve into how the digital revolution is reshaping the automotive landscape in South Africa.

Car ownership by brand in South Africa as of December 2023

The rise of digital channels 

Gone are the days when consumers relied solely on visiting dealerships to purchase a car. Today, OEMs are embracing digital channels to reach a wider audience and provide a seamless buying experience. From virtual showrooms to online configurators, customers can now explore different car models, customise specifications, and even arrange test drives from the comfort of their homes.

OEMs in South Africa are investing heavily in online platforms and mobile apps to cater to the evolving needs of tech-savvy consumers. Buyers can access a wealth of information on these digital platforms – including configurators, pricing, financing options, and user reviews – which empowers them to make informed decisions.

I’ve noticed that even now, when I visit most OEMs websites, despite being impressed by high quality production values and beautiful product images, I often struggle to find the information I need. Creative agencies do a great job at design but often miss the key moments that matter in the consumer journey, such as ‘I need to find’, ‘I want to try’, ‘help me choose’, and ‘I want to buy’. Don’t take my word for it, just ask Google about ‘moments that matter’ and you’ll find the largest and most in depth study of consumer behaviour and a life in moments.

South Africa’s most popular marketplace sites

Consumers naturally turn to marketplaces to compare and buy a whole range of things. Let’s take a look at the automotive marketplace sites getting the most traffic according to Screen.co.za:

Auto Trader
(5,960,000 monthly visitors) 

Arguably South Africa’s most well-known and reputable used car website, with several million monthly users, Auto Trader offers prospective car buyers complete peace of mind when searching for a pre-owned vehicle. You can search more than 67,000 cars across all vehicle categories and criteria. Plus, you can take advantage of advice and other related services offered by Autotrader, including direct links to auto dealers whose cars are available on the site: Cars.co.za.

Cars.co.za
(1,650,000 monthly visitors) 

The second largest South African used car site, cars.co.za, offers the widest range of vehicles we could find – nearly 70,000 nationwide. They are also numbered by region, making it easier to narrow your search (unsurprisingly Gauteng comes first, with nearly 40,000 vehicles). Like Auto Trader, the make and model search functionality is combined, so you can easily search for any kind of vehicle available on the site, which also features a rich library of other car-related content.

As consumers, we feel at ease shopping on marketplace sites. They are reminiscent of the classified ads at the back of newspapers, which people of my generation are all too familiar with. They are the only form of media advertising readers willingly turn to and therefore never get in the way of whatever else they are doing. It won’t surprise you that Amazon dominates the global online marketplace and sets consumer expectations in this area.  

Adopting innovative sales models

Many OEMs are experimenting with new sales models to streamline the car-buying process and to meet the customer where they are. One such model that’s gaining traction is direct-to-consumer sales – known as an agency model – where manufacturers bypass retailers and sell vehicles directly to customers. This enables OEMs to offer competitive pricing and greater transparency, which enhances customer trust and builds loyalty. The agency model is currently being trialled by JLR in South Africa, and the soft launch has been successful so far, but the scale has yet to be truly tested in other countries.

Mobility as a Service

Subscription-based services and leasing options are becoming increasingly popular in South Africa, especially among urban millennials who generally prefer flexibility and convenience over long-term commitments. These monthly subscription services allow customers to access a fleet of vehicles with the added convenience of maintenance and insurance bundled into one package.  

Here are some popular subscription services in South Africa: 

• FlexClub is a car subscription platform that originated in South Africa before expanding into other markets. It allows people to subscribe to cars for a fixed monthly fee which covers the cost of the vehicle, insurance, maintenance, and roadside assistance. Users can choose from a variety of vehicles and subscription plans based on their needs and preferences.
• Renault South Africa has launched Renault On-Demand, a car subscription service that enables customers to access Renault vehicles without the need for long-term contracts or ownership. Subscribers have access to a range of Renault models, and the monthly subscription fee includes maintenance, insurance, and roadside assistance
• Jaguar Land Rover South Africa launched a service that allows customers to access Jaguar and Land Rover vehicles through a monthly subscription. The subscription fee covers the cost of the vehicle, insurance, maintenance, and roadside assistance. Customers can choose from various Jaguar and Land Rover models and customise their subscription based on mileage and duration.
• Avis South Africa offers a subscription service called Avis Flex, which provides customers with flexible access to rental cars. Subscribers can choose from a range of vehicles, including saloons, SUVs, and luxury cars, and they can select their desired rental period. The subscription fee covers the cost of the vehicle, insurance, maintenance, and roadside assistance.

Retailers embrace digital innovation

While OEMs drive digital transformation from a manufacturing standpoint, retailers are also adapting to meet changing consumer expectations. Traditional dealerships are evolving into ‘digital dealerships,’ equipped with interactive displays, augmented reality tools, and online booking systems to deliver a more immersive and personalised shopping experience.

Furthermore, retailers are leveraging data analytics and AI-driven technologies to anticipate customer preferences and offer targeted promotions. Harnessing the power of big data, dealerships can tailor their marketing strategies, optimise stock inventory management, and enhance aftersales service, thereby improving overall customer satisfaction and retention.

Driving loyalty

Whenever I visit a market, I always ask my Uber driver what the most popular vehicle make and model is and why. Not the most scientific or statistically robust approach, I know, but it’s a useful question, nonetheless.

During my visit to South Africa, my driver told me that Toyota was the most popular brand due to its reliability, plus when anything does go wrong it’s usually fixable (ironically, most of the Ubers were driving Mercedes).

Loyalty and retention are without question the most profitable ways for retailers to drive business, and they’re cultivated in the aftersales space. One of the most impressive aftersales innovations that has been tested in the market is Volkswagen’s LeadInbox, which was launched in South Africa ahead of its global rollout.

LeadInbox’s integrated technology can trigger an action or event to the connected vehicle or other sources like in-app, online, or email notifications. Customers are notified to take action to maintain or service their vehicle. The whole journey of this technology relies on multiple technology and consulting partners to link the OEM’s CRM system into the retailer network and DMS system, delivering a modernised aftersales experience.

Technology like LeadInbox enables a more automated event-based experience, which means takes work off the customers hands and makes the whole in-life experience feel intuitive and easy.

Overcoming challenges

Despite the clear benefits of digitalisation, South Africa’s automotive industry faces certain challenges on its digital journey. These include infrastructure limitations, cybersecurity concerns, and regulatory hurdles. Additionally, the digital divide between urban and rural areas poses accessibility issues for some segments of the population, necessitating inclusive strategies to ensure equitable access to digital services.

The digital transformation of the automotive industry in South Africa is well underway, driven by the convergence of technology, changing consumer expectations, behaviour and industry innovation. OEMs and retailers are embracing digital channels, innovative sales models, and data-driven strategies to stay ahead in a rapidly evolving market.

To overcome these challenges, collaboration between tech, fintech, and infrastructure partners, along with a customer-centric approach, will be crucial. But one thing is clear: by continuing to harness the power of digital technologies, the automotive industry in South Africa can unlock new opportunities, drive efficiency, and deliver enhanced value to customers across the country.