Navigating New Roads: The Evolution of Automotive Ecommerce

Faced with unprecedented challenges — from pandemic-induced lockdowns to intricate global supply chain disruptions — the automotive industry has navigated through turbulent waters only to emerge more digitally savvy than ever.

Note: For the purposes of this guide, the automotive industry is defined as sales of new and used motor vehicles commonly referred to as automobiles, vans, sport utility vehicles or trucks having a manufacturer's rated capacity of one ton or less. This guide also includes vehicle parts, equipment, replacement tires, service repair, collision repair and accessories, and other items sold after the sale of the original vehicle.

Like most industries, automotive sales suffered from pandemic lockdowns and global supply chain issues. While global car sales may return to something like prepandemic levels, ecommerce has changed the car- and automobile-related goods and services buying experience forever. 

Let’s examine where the automotive industry has been and where it's heading.

Global revenue picture

The size of the global car and automobile sales market in 2023 was $4.3 trillion, marking a 0.6% decline year-over-year since 2018 according to IBISWorld. The global automotive aftermarket was estimated at $406.6 billion in 2023 and is expected to reach $559.9 billion by 2030. The automotive aftermarket has been traditionally recession-resistant. In the United States, the auto aftermarket captured $16 billion in market share through ecommerce in 2020 — nearly a $2 billion increase over initial forecasts for the year.

Globally, car sales are slowly regaining the momentum lost during the pandemic. Statista reports that worldwide car sales grew to around 75.3 million automobiles in 2023, up from around 63.8 million units in 2020. China was the first to recover from the pandemic in car sales, with 7x the sales as the next three markets in 2021. But that growth has since plateaued. 

India is a growing market for automobile sales, driven by a rising middle class and a young population. Mordor Intelligence reports that the “Indian passenger car market was valued at USD 32.70 billion last year, and it is expected to reach a value of USD 54.84 billion in the next five years while registering a CAGR of over 9% during the forecast period.”

Forecasts for future growth are cautiously optimistic. McKinsey predicts that “Overall global car sales will continue to grow, but the annual growth rate is expected to drop from the 3.6 percent over the last five years to around 2 percent by 2030.” It's projected that the global automotive industry will generate about $3.8 trillion from auto sales by 2030, with the most significant increase coming between 2025 and 2030. 

The wild ride of the U.S. car market

Overall, U.S. car sales have been trending downward for decades. In 2000, around 9 million vehicles were sold. In 2020, that number fell to only 3.5 million. Nevertheless, Statista reports that revenue in the passenger cars market is projected to reach $555.9 billion in 2024. But the future is less bright for passenger cars. With an anticipated annual growth rate of -1.07%, this should result in a projected market volume of $532.5 billion by 2028.

McKinsey attributes the “new normal” of a slightly smaller U.S. automotive market to prevailing macroeconomic factors and one emerging trend: the rise of new mobility services such as car sharing and e-hailing.

Dense areas with a large, established vehicle base are fertile ground for these new mobility services. While these services may result in a decline in private-vehicle sales, the decline is likely to be offset by increased sales in shared vehicles that need to be replaced more often due to higher utilization and related wear and tear.

With the volume and revenue picture for automobile sales for the near future clarified, we can talk about how the car buying experience is being shaken up by ecommerce.

The Rise of Ecommerce in the Automotive Industry

Who Is Shopping Online for Cars and Automotive Parts? 

Emerging Automotive Ecommerce Trends

Cutting-edge technologies like in-vehicle payments and immersive VR/AR showrooms are setting new standards in convenience and experience. It's clear that the integration of advanced technologies and digital strategies is not just shaping the present but paving the way for a revolutionary future in automotive sales and customer engagement.

In-vehicle payment services market

The global market for in-vehicle payment services is big and getting bigger. Valued at $5.36 billion in 2022, it’s expected to experience substantial growth, with a projected compound annual growth rate of 13.2% from 2022 to 2030. And that growth isn’t surprising. Modern vehicles, equipped with advanced Internet of Things (IoT) technology, let drivers make cardless transactions for various services, including road tolls, fuel and drive-thru orders directly from their dashboards. This integration simplifies the payment process and provides valuable insights into consumer behavior and fuel consumption patterns, potentially optimizing fuel usage and reducing fuel theft.

VR and AR: redefining the showroom experience

Technology is also expanding into the showroom. Virtual and augmented reality technologies are allowing customers to explore and customize vehicles in immersive detail without stepping foot into a dealership. Examples include Audi's VR Experience and Jeep's augmented reality program, which let customers customize the vehicle while developing a deep connection with it. These digital showrooms have improved customer satisfaction and significantly boosted sales, illustrating the transformative power of VR and AR in traditional sales models.

Geographic expansion through ecommerce

The adoption of ecommerce in the automotive sector has also removed traditional geographic limitations, allowing dealerships to reach across regional and national borders and expand their customer base. This expansion also benefits customers — allowing them to explore and purchase vehicles from anywhere. This trend underscores the strategic importance of a strong digital footprint in capturing market share and driving sales in the competitive automotive industry.

EV charging infrastructure: powering the future

As the automotive world shifts toward electric vehicles (EVs), dealerships face a growing need for comprehensive EV charging infrastructure. With McKinsey predicting that EVs will make up about 53% of all passenger car sales by 2030, dealerships need to gear up with the necessary charging facilities. This isn't just about meeting industry standards — it's a smart move to future-proof the business. Dealerships that offer robust charging solutions are better positioned to attract environmentally conscious buyers, showcasing a broader move toward sustainable and electric transportation.

What Has Drawn Automotive Ecommerce Shoppers Online

Customer experience and car buying

Experience is everything. Deloitte's annual Global Automotive Consumer Study found that consumers younger than 35 prioritize the customer experience three times more than vehicle design when making a purchase decision. For Gen Y, a winning dealer experience means offering more value and greater convenience throughout the entire vehicle ownership lifecycle.

Dealers face the challenge of keeping up with these evolving values, ensuring that the experiences they offer meet customer expectations. Most importantly, dealers have to make a buyer feel at home with the automotive brand they choose.

For many, car shopping happens in two stages: online research and narrowing down options, followed by in-person test drives and transactions. While a smaller segment is happy to complete the entire process online and have the car delivered, most still visit dealerships for the final purchase. According to Hyundai's research, over 95% of car purchases still happen at the dealership, though this may change as fully online transactions become more normalized.

An Automotive Shopper Study found that 95% of vehicle buyers use digital sources for information, with twice as many starting their research online versus at a dealership. Car dealerships should be aware of the qualities shoppers are looking for in the online experience, including speed, convenience, selection and ease of negotiations.

Benefits of online automotive shopping

Automotive ecommerce also gives customers more control over their buying experience, which can lead to higher satisfaction, greater brand loyalty and favorable dealer ratings. More control can also mean any number of things beyond when and where they shop.

They can take their time or go as fast as they want. Customers can use external tools to research, compare and calculate financing. They have more freedom to ask for guidance from family or friends than if they were physically in the dealership. Customers can also explore different car models in virtual showrooms without a salesperson looking over their shoulder. 

Customers crave convenience

Customers want to buy a car the way they buy every other product. Digital retailing is the all-in-one sales process that makes it easier and more exciting for customers to shop for cars at your dealership. 

Online shopping lends itself to better research

Vehicle detail pages (VDPs) are the first touchpoint with a vehicle for most consumers, allowing them to compare descriptions, pictures and prices with other vehicles. This makes high-quality listings essential; successful dealerships deliver consistently accurate, informative and appealing VDPs to create a positive connection and drive consideration. Videos, 360-degree spins and descriptions written like a human are all important facets of a VDP. As more dealers are expanding inventory to reach beyond the immediate market and DMA, a VDP can make or break an online business. 

But consumers are not the only ones who see the appeal — and the benefit — of the shift to digital retailing.

Online shopping provides a better experience for the consumer and the dealer

Sixty-one percent of franchised dealers note that digital retailing efforts are allowing them to spend less time on a sale; more than half believe it helps them improve the customer experience. Importantly, 75% of dealers agree that digital retailing provides shoppers a more customized experience, a key to higher satisfaction with the shopping process.

To be sure, research consistently demonstrates that automobile shoppers still have a strong desire to spend quality time at the dealership, test driving the vehicle and setting up their new vehicle after purchase — both hands-on activities that are a lot more fun and informative than filling out paperwork and waiting.

Improve Ecommerce Automotive Sales With Better CX

We’ve mentioned ease and convenience to attract and maintain customers. That means making the shopping experience easy. Customers need to find what they’re looking for, make a purchase and shop on your store again. Here are some tips to make that happen.

Evaluate your site search performance 

Make sure that your search and filtering functions yield useful results. Your site’s search bar should be easy to find and use, and your filter-setting process should flow smoothly. You can enhance site performance by adding AI to your site’s search capabilities. This will help you identify how your customers shop and personalize their future experiences. 

Optimize your checkout process to reduce cart abandonment 

Your checkout process should be easy to follow and offer options. In our original research, we found that millennial and Gen Z consumers prefer to pay with digital wallets, while older consumers still like to use credit cards. Knowing who is shopping and making sure you have options for them is key.

Prevent fraud and false declines 

Invest in a fraud prevention solution that balances instant decisions on clearly valid orders and a closer look at potentially fraudulent transactions. The worst thing you can do is rely solely on fraud filters that are likely to turn away valid customers and send them to social media to complain about their experience. 

How ClearSale Helps Automotive Ecommerce Businesses

ClearSale employs a comprehensive approach (in addition to fraud prevention rules and filters) to prioritize order approvals while preventing fraud. 

First, we study fraud as a discipline. Our knowledge of fraud patterns and trends stems from our longest history in the industry and our unmatched experience fighting fraud. We’ve worked with businesses around the world in some of the most high-risk regions and industries to help eliminate fraud threats and prevent false declines, while approving more orders, faster. 

Our massive transaction database is constantly learning as more orders are processed. This makes it easier for us to identify fraud trends as soon as they emerge and use those insights to make more accurate decisions.

Next, we’ve built a multilayered process to distinguish legitimate orders from fraudulent ones.

Machine learning/AI

We utilize artificial intelligence and machine learning to screen all orders, processing transactions and refining fraud models based on customer behavior. Each order receives a fraud score. Orders that achieve a score within customer-specific thresholds are automatically approved, while those with questionable or suspicious scores are flagged for additional review.

Contextual fraud review

In cases of suspicious and questionable orders, our data scientists and fraud analysts conduct secondary reviews. They apply their expertise and knowledge of current fraud trends, sharing insights with the client’s team to assess the validity of transactions. Furthermore, if requested, our analysts can contact customers directly in a friendly and diplomatic manner to verify purchases, simultaneously training your team in these practices.

Interactive client dashboard

Our interactive dashboard enables clients to review all orders and participate in contextual reviews, including information about VIP clients and orders that may be automatically approved in the future. The dashboard is also used by clients to monitor chargebacks on approved orders, facilitating easier dispute resolution by ClearSale’s comprehensive chargeback management team.

Post-processing audit

Post-processing uses machine learning/AI to validate decisions and identify emerging patterns. Our auditing program, for instance, provides a secure testing environment to analyze randomly selected declined transactions, exploring potential outcomes had the orders been approved. This helps in assessing the accuracy of automated rules set by our clients and allows for their ongoing refinement.

By working with a trusted third-party vendor such as ClearSale, you can better protect your online automotive sales, profits and customers from fraud and other types of commerce abuse. To find out more, contact us today.