For immediate release, 12 September 2002. The car industry's traditional way of doing business in Europe is threatened by the European directive to abolish the so called block exemption, a rule which allowed manufacturers to maintain preferential ties with exclusive franchise dealers. In addition increased competition from new retail outlets is enhanced by the possibilities of new media, particularly streaming media products and services. Ovum, the analyst and consulting company believes players in the car industry must change their way of doing business, embracing new technology leading to enhanced efficiencies, and increased sales.

The current system of sales and promotion via exclusive dealerships, allowing dealers and manufacturers to promote their own brands through outlets is no longer tenable. European law will change in 2003 to allow independent sales channels to have the same opportunities as dealers. Autotrader, the largest independent retailer in the UK, is leading these changes, and has commissioned Akamai, a leading content delivery network, to provide streaming flair to its website.

The premium segment of the car industry is entering a highly competitive phase, as Japanese car manufacturers have become established players in this segment and European Companies which traditionally focussed on the mass market are launching an increasing array of models into this segment. Electronic media and streaming media via the Internet can help drive marketing and promotions to new, and broader audiences. Henning Dransfeld, Senior Analyst, Ovum explains:

"Investment in websites, requires very few sales for a complete return on investment.
"Less quantifiable, but no less important, raising the car's brand image with young consumers, makes the Internet very attractive.

"The use of streaming media, which is in effect visual or audio delivery of information direct from the home site with no need for additional software, such as real player, means people can quickly and easily see and experience new car models," he says.

A recent promotion in Australia, by Ford Motor Company, utilised the Internet. Young people were approached in bars, clubs and at street cafs and had their photos taken with a digital camera. They were then encouraged to visit the website to download the picture of themselves and their friends. The website (www.fordfocus.com.au), advertised the new Ford Focus car, clearly aiming at a youth demographic. The next step will be for companies like Ford, to provide images of the car driving, or other features, to the consumer via streaming media.

It is not just external marketing and promotion where the car industry is seeing the benefits of new media applications. Multiple points of sale, administrative and production centres mean that people are scattered geographically, and internal training delivered via electronic form is extremely effective. Dransfeld looks at a company that has recently taken this approach:

"Daimler-Chrysler in the US has launched a streaming media application for internal and external staff training. A series of highly technical training videos now accompany all new and existing models. These are streamed to over 16, 000 staff, allowing them instant access to product information. Feedback from staff is that this approach is far more effective than sending static diagrams," he says.

Formula One Car Racing, is streaming towards the finish line, each and every race. Streaming a video clip showing a broken component, or a failed engine can provide crucial benefits to engineers track-side, allowing engineers in the home factory to see the problems visually and instantly. This is important when one team may be at the track in Sepeng, Malaysia and others in the home factory, in Hamburg, Germany.

Ovum's research shows that the car industry is starting to embrace new media technology, for promotion, training and use during events such as Formula One Grand Prix. However there is still some resistance, and feeling that the proprietary dealer ownerships are the only way to sell cars.

Dransfeld summaries:
"There needs to be a change in the culture of people within the industry coupled with increasing use of new media, to promote cars, train staff about cars, and showcase F1 vehicles' capabilities.

"Although most consumers will still want to test drive a car, using new media applications to set the scene may make the difference between them coming to see your brand of car, or going somewhere else," he concludes.

About Ovum

Ovum, the analyst and consulting company, is a global leader in the rapidly changing world of converging technologies and markets. Genuinely original thinking coupled with exceptional knowledge and experience allows the company to provide its customers with a definitive map of this complex environment and to guide them through it.

Ovum serves the world's telecoms operators and service providers, telecoms equipment suppliers, IT and software vendors, IT service providers, consultancies, investors, regulators and large users of IT solutions. Working with both the supply-side and the user community gives the company a unique insight into the demand and the drivers for future technology and market opportunities.

Ovum's analysts and consultants are located at centres of expertise in London, Boston, San Francisco, Seoul, Melbourne and Sydney.