What if Your Commute Could Change the World? An Interview With Keith Tomatore, Automotive Industry Leader.

Keith (00:09):

If you look at an automotive buyer, it's usually a three-month process, right? And during those three months, there's 900 interactions from the consumer. An average consumer today will explore 12 brands. They will consider six, and they'll make a decision on two.

Jim (00:26):

Welcome to What If? So What? The podcast where we explore what's possible with digital and discover how to make it real in your business. I'm your host, Jim Hertzfeld, and we get s**t done by asking digital leaders the right questions. What if, so what? And most importantly, now what? Hey everyone, I have a really great guest on the podcast. It's an industry veteran, a great colleague, and someone who's done some really special work recently he's gonna share with us. And that's Keith (if you know him, KT) Tomatore. Keith, welcome to the podcast. Once you open up, tell us about yourself, what you do here at Perficient, and how you got here.

Keith (01:01):

Well, first off, Jim, thank you for having me humbled and honored to be on your podcast. I am excited to be having this conversation with you. In terms of what I do at Perficient, I run the global automotive practice. I've been here for about two years, and my industry experience is pretty vast. I've worked with Ford Motor Company directly and at their agency, GTB. In terms of what I did, there was, I did all the performance marketing solutions. I ran all of the dealer war rooms. And then, after that, I became CEO of a marketing solutions company that focused on tier two automotive and tier three automotive. So pretty deep into automotive. But Jim, I would say that's part of why I'm here. The other part is I'm an entrepreneur in many ways, right? My career has been that, and I'll just tell you a funny story.

Keith (01:47):

My first job outta college, and I grew up with modest means, so it's probably more like my second job because I had to work full-time while I went into college. And I look at that as a great gift because when you grow up modestly, you become very innovative in what you do. So, I took a job at Swiss Army Brands, and the job was a customer service job. They put me in the lowest rung of that, which was the B2B business and then the B2C business. I was in the B2C business. Nobody wanted to do it because it's just consumers. And essentially, I learned a couple things. One is the job title was manager of consumer products. The consumer products were toothpicks, tweezers, and scissor springs, which were the knife implements. And basically, customers would call up and request a replacement part that they've either lost or broke.

Keith (02:34):

And I would send it to them. That was the job. But in that job, I decided to, you know, I'm talking to the customer, the end customer. So that's a big advantage whenever you're talking to customer. You know, businesses exist to serve a customer. So, what I did was Excel was invented in 1985, and this was 1989. So basically, I created a consumer database, and, I created a little survey. I asked the consumers right before I gave them their tweezer toothpick, what they liked about Swiss Army, what they wanted, what they needed. I created this database that eventually became a business plan and eventually became the focus point for the consumer products division, which was watches and sunglasses and suitcases and all that stuff you see today. So, it was really a couple things that came through in that job. One customer is so important, and if you're not talking to the customer and listening to them, you're probably, you know, doing something wrong. Secondly, things aren't always as they appear, but you can turn them to your advantage and to the company's advantage with a little hard work and innovative thinking. Yeah. Anyhow, I'll just share that with you.

Jim (03:40):

Yeah, I didn't know that story, KT, and by the way, you've unleashed a whole slew of Swiss Army knife metaphors that we can use to describe you. So that, that's great. <Laugh>. And you brought up something that we talk about on this podcast quite a bit, which is just customer empathy, right? And there's no substitute for that direct contact. So, that's awesome to hear that you took advantage of that. And you know, that's just valuable truths and insights. You know, the subject we really wanted to get into today was something that's really near and dear to you. And again, as I mentioned earlier, the focus of the recent work you've done is a study around electrification in the automotive industry. Let's start with a level set on what electrification means. There are a few things that sort of sweep the business and sort of cultural realms, like EV or generative AI.

Jim (04:26):

We use these big business and technology topics that sort of get in everyone's mind, and this is one of them. But I think a lot of things that require a little bit of a level setting, right? So, I think for the average person on the street, you know, oh, it's a battery-powered car, right? Okay, I guess, you know, I'm gonna have free energy, right? And I never have to pay for gas again. And I get in, and I drive away. So, once you maybe just level-set really quickly what electrification really entails in the industry, I'd love to hear about it from all facets. You have the OEM, which is the manufacturer, the Ford, the Toyotas, and the Hondas. You have the suppliers, right, who is kind of behind the scenes, bringing the parts, you know, the batteries themselves together perhaps. You have the dealers, right? As you mentioned, a big big part, right that's how most of our contact in the industry is with the dealer and will be for some time. And then of course, what's the impact on owners and drivers and, and even passengers. And I say that because in the world of, you know, we won't get into autonomous vehicles, but at some point, are we really drivers anymore? But anyway, give us a kind of a level set on what is electrification in the industry right now in 2024?

Keith (05:35):

That's a great question, Jim. And it's one of those questions that is multidimensional. So, let me start with what's driving electrification. I'll talk a little bit about the state of electrification, and then I'll talk about those individual components of the automotive ecosystem that is impacted by it. First off, what's driving electrification is really sustainability and innovation, right? Those two things. And one of that is the legislative requirements. So, governments, you know, certainly the United States has put out all kinds of emission requirements. There's 17 states right now that follow the very strict California emission requirements. So that's driving a lot of the OEMs turn transformation, if you will, to EV. The other thing that's driving it is the manufacturing process, right? So, like, when you look at, and I call it disruption in manufacturing, when there's an internal combustion engine, ice vehicles that are produced are produced in a manufacturing process that's sequential.

Keith (06:34):

And EVs are very different than that. They are not produced sequential because of the electrification and the software components. They are built more in a component based system. So, it's very, very different. And that is happening right now. The other thing, Jim, is the competition, right? It's a free market. There's EV-only manufacturers there's 65 of them actually that operate in the United States today. Some of them are very small; some started as cell phone battery makers, but nonetheless, they're now producing vehicles and producing them to market. And so, the heritage OEMs, the Fords, the GMs, and all those had to pivot to be part of that. And then the last piece of it, Jim, that's so important is connected vehicles are really changing from a luxury to a necessity. And in order to have connected vehicles, it is much, much easier in a vehicle with an EV battery engine than an ice engine.

Keith (07:30):

So those are the that, that's kind of the components as to why suddenly EVs are so important in terms of the overall industry. Even when we started this research a year ago, there was a lot of demand. There wasn't a lot of supply. You could wait a year or even more to get your EV. Today, it's very different, right? The price of an EV in 2022 was $65,000, that's the average price. Of a new EV today, that's $51,000. So the demand has slowed down. We have about 7.5% penetration on EVs today in the United States. I know Europe's much, much higher. But in the United States it's only at 7.5%. I think we've gotten past all the new adopters, the early adopters,  with the technology. And so we're entering into a little bit of a different phase where now OEMs are starting to discount EV products, and so it's just a little bit different in that regard.

Jim (08:23):

That's sort of a natural life cycle for a lot of products. Right? So, you have your early adopters. Do people wait in line for EV launches? Like they do an iPhone?

Keith (08:31):

Not today, but when they first came out, Jim, it was an amazing thing because, you know, they were just new people, they, yeah. And if you've ever driven an EV, they start up very fast. They take off from the start. Yeah. The stop to start is amazing on those things. And so people wanted to know what it was like. So yeah, initially that was the case, but we've been at 7.5% for a bit. To give you some perspective, hybrid vehicles are also at 7.5%. Okay. And so it, it's, it's very interesting what's happening. Yeah. So then you asked me, you know, how does that impact OEMs and the components within the auto system? Well, with OEMs, they have a goal, right? And, and it's a good goal and it's kind of how we started our conversation. It's getting a closer relationship with their consumers.

Keith (09:18):

'Cause here at its OEMs have traditionally said, okay, we'll manufacture the vehicles and dealers, you sell the vehicles and you deal with the consumers. And what was happening was the OEMs were getting further and further away from their consumer, which is a big problem. And so they wanted to use the EV as a way to kind of reset that and say, okay, this is a chance for us to set the price. 'Cause We know that consumers do not like haggling with dealers. So, we can set the price, we can do more of the, you know, build in price order reserve online. We can give them a little bit of a different experience. And so that's what they've been doing. They've been working on these different customer experiences for EVs. Now, I personally would say that the experiences should traverse way beyond EVs, right? It should just be that experience.

Keith (10:08):

But that is what OEMs have used as a stepping stone at this point, right? For dealers, they have to change everything, right? I mean, to be able to sell EVs, you need to have charging stations on your lot. You need to have a forklift in your service bay, and you need to have electricians back there in the service bay. There's a lot of training from the OEM and a lot of training from the industry on it. And so, they almost had to become certified to be able to sell EVs. And so there's a big makeover on that. And then the other thing is, remember, most OEMs are saying, Hey, on EVs, we wanna set the price. And so, the price is what the price is, which is not what the traditional dealership works on. So big change for that, for suppliers, I think the biggest thing is EVs are very different than ice vehicles.

Keith (10:55):

ICE vehicles have over 3000 parts per vehicle. EVs have 1200, and Tesla is working on vehicles right now that are gonna have six to 900 parts. So what does that mean? Wow. That means they have to become more efficient. Their order management, their order inventory, and all of that have to become more efficient, or they risk going out of business. Right? And some suppliers will go out of business just because there are fewer parts. And then from a consumer, you know, I think this is the interesting thing - consumers just have to get smart on it. They have to understand their lifestyle. And I feel like are EVs for everyone? No, I don't think so. Depending on where you live, what your daily activities are, and what your drive times are, all that impacts whether or not you should have an EV. But my feeling is consumers have to get smart, they have to be educated, they have to, you know, read up on it. And the good news is the OEMs are sending out a lot of materials to help them, but there's a lot of places where they can go and actually get smart on it. And that, that would be my, my sense. But I think it's quite disruptive in the industry overall.

Jim (11:57):

It's interesting you've mentioned that you know, we're kind of early, right? And we kind of talked about this research that you've done for a while. Like anything, you kind of have to wait till, you know, when's the right time to sort of dig in, get the reasons behind what's happening, and get a little smarter. Tell us about this study. What were kinda the big things you found? Like, give us an overview of what you did and then the top things you found. What were some of the big discoveries? What were the big takeaways?

Keith (12:24):

So, what we did, I'll talk for a minute just to set it up so everybody knows what the heck we did with this study. Yeah. The reason why we thought of doing an EV customer journey study was that in many conversations with OEMs and folks who were in charge of the EV areas of heritage OEMs, they told me that they didn't really understand what the customer journey is. They said there's a lot of false information out there. There's a lot of head trash around charging. There are, you know, it's too expensive, it's gonna blow up your house. And I said, but you know what the journey is. And they said, honestly, KT, we don't. So, I took it back to our research team and asked if we could do something about this to help solve an industry problem.

Keith (13:06):

And the answer was, yeah, let's do it. And so what we did was we talked to dealers all over the country. We talked to two sets of consumers. We basically divided the consumers into those who have bought EVs and then consumers who are in the market within the next two years but have not yet purchased an EV. We talked to OEMs, and we put together our research. So, we try to make it so that we were sensitive to different regions in the United States. It was only focused on the United States, and it was really focused on, you know, what that customer journey is and how we can impact it. So that's what we set out to do, and that's what we did. Now, what the backdrop changed a little bit, Jim, in that when we started this journey, EVs were, you know, hey, if you wanna buy an EV, that's great. It's a six-month or year-long wait. And you sign up, and you get 'em. And then when we concluded the journey, it was sort of like we had a stockpile of EVs, and prices were being reduced a little bit. So that was just a backdrop of what was happening with supply.

Jim (14:06):

Yeah. World changes. Yeah.

Keith (14:06):

World changes. Yeah.

Jim (14:07):

Yeah. So what was, give us maybe the three biggest takeaways from your mind and what surprised you the most?

Keith (14:15):

Okay, so the three biggest takeaways are easy. One of them is that the differences in geography was startling Jim. Mm-Hmm. I mean, if you talk, I talked to a dealer in San Francisco, and EVs are 45% of his business, and he's expecting that to go up. And they were just so much a part of the culture there that it was just, you know, people were even, you know, I talked to a co a couple consumers. They were like, well, I drive to work, you know, using the hands-free in my Tesla, and I don't really even drive. I just program in my office and I'm going back and forth. So that was interesting. Mm. Then, talk to a dealer in the Midwest, and it's zero percent of their business. Yeah. In fact, they spend no time thinking about it. So the geographic differences, you know, I had always known that they would be there, but they are even more severe than I had thought.

Jim (15:08):

And how much do you think that is sort of demographic versus just the physics of, you know, like the Bay area. First of all, the demographic in the Bay Area is a little more eco-conscious certainly more tech-oriented. But geographically concentrated in the Midwest, you know, you're spread out, but is that, like, what do you attribute those differences to?

Keith (15:29):

I think a couple of things, Jim. I think one thing is that the EV batteries today do not perform well in cold weather state. So you have less range there. So that's gonna be one factor. The other factor is there's a political aspect to it, right? I mean, there's no doubt that came up during the study a lot. Yeah. And so in some areas, they were completely bought in, into this, you know, new green deal and in other areas. No way. The other thing that resonated with me was that it happened in a couple areas like I was in Europe, and they were completely embracing sustainability. I thought it was probably priority number one. And when I would talk to the OEM executives in the United States, they felt a little differently. It was a little bit of a resentment that this top-down government push was causing them to make shifts in their business that may not be the best for their ROI and stuff.

Keith (16:23):

So, there were a lot of things like that that resonated throughout. And then the dealers, of course, had their own thoughts. There were certain dealers, you know if you were in a California emission state and got more supply of EVs when the demands were light, you know, you had a better outlook if you didn't. If you were in a state that didn't have those emission requirements, EVs weren't really a factor. During the study, some dealers said I'm not gonna sell EVs. I might at some point, but right now, I just can't have the distraction because there's not enough of them to impact sales, and I'm doing what my consumers want, which they don't want.

Jim (17:01):

Be the inventory, right? Yep.

Keith (17:03):

Absolutely. And I do think it just depends on where you are. If you're a rural dealer, EVs might not make as much sense as if you are living in a city like San Francisco or Sacramento, where EVs make more sense.

Jim (17:14):

Do you see big differences between the retail buyer and the commercial buyer? Right? Do you see, let's say, in a rural area, and maybe it's very agricultural, are you seeing anything around adoption of EVs for commercial reasons like, you know, tractors and combines.

Keith (17:34):

I think fleet is one area that pops more so than farming. Although it will, I mean, I think that fleet makes a lot of sense from an EV standpoint because of the control that they can embark on the vehicles. You know, they can control everything through software updates and manage routes and manage all that. So, I think that's an important aspect of it and just cost too. So I think that that's one area that we're seeing a lot. Agriculture is a little different in that sense that they're looking for different fuel types. I mean, they want to save money and be more productive. Mm-Hmm. <Affirmative>. And of course, the environment's important to them 'cause that's what they do. But I don't think they're sold completely on EVs yet, that we're seeing. One of the things that's very different is the way an EV shopper shops. So, if you look at the shopping experience today of an automotive shopper, well there's couple of things.

Keith (18:27):

First off, this is the first time in history that the majority of automotive shoppers are millennials. So, that's a very big difference. Oh, interesting. And the second thing with that, Jim, is if you look at an automotive buyer, it's usually a three month process, right? And during those three months, there's 900 interactions from the consumer, and 71% of these interactions are on the mobile. And so when you think about that, I mean, an average consumer today will explore 12 brands. They will consider six, and they'll make a decision on two. When you think about that and the EVs, you can buy a Tesla with 10 clicks and have it delivered to the showroom or, in certain states, to your home. And that is what younger consumers want, right? So what we found was there are two things.

Keith (19:16):

Younger consumers don't really have an aversion to dealers; they just don't use them. So they don't have any problem with them; they really don't use them because they want to do more online, right? They want to do it all themselves online. Then, we look at the dealer experience, which is another part that might be ripe for AI for better experiences. People do not want to spend four or five hours today sitting in a dealership doing paperwork or just being upsell. That's unattractive to them. Now, spending time at a dealership, that's a showroom. So, EV buyers were very pleased with their showroom experience because they understood more about the vehicle. No one was selling them anything. It was all about the product; it was learning, informational, and good. So, those are some of the takeaways that we had.

Jim (20:06):

What can we learn from this? I mean, how can we make it actionable? You know, what are you telling OEMs and suppliers and dealers? How can they capitalize on this research? Because I, you know, I think we all agree this is gonna grow, right? We're at 7%. So it's not going away. Nope. It's gonna continue to grow. It's going to mature. So, given that high likelihood, what can these stakeholders do about it?

Keith (20:30):

Well, I think the first thing, Jim, is exactly what you said, embrace it, right? It's not going away. Sustainability's gonna be, be a thing. And that's gonna be more than just the vehicles. They're gonna be the products like, you know, tires and, and other components of the vehicle are also gonna be sustainable. So, it's not going away. So, I think they could do two things from an OEM standpoint. And so, as we're meeting with OEMs all over the globe, we're really telling them that the customer experience has to be better, right? Like, we have great tools today. We're doing things like virtual showrooms and virtual test drives, creating that experience for the consumer so they can do, you know what I just said, 900 interactions in three months. They wanna do that on their own, online, on their own terms, and create those experiences, right?

Keith (21:15):

On their own terms, inconvenience, everybody's super busy, and that's how they wanna shop. And Perficient can certainly help them with this. But leveraging their emerging technologies and giving them great customer experiences, I think that's one thing that every OEM should be doing right now. And if they're not, they're gonna start falling behind because the Teslas, the pole stars, and those EV-only manufacturers are getting that, right? I mean, they're making sure that they're going directly to consumers, and most consumers want more of that. From a dealer perspective, I don't think dealers are going away anytime soon. And I think they could be tremendously important to OEMs. I think they have to change Mm-Hmm, <affirmative>. And they have to also give a good experience, right? And the experience has to be less about selling. We talk about in a consulting world, like it's not about us, it's not about Perficient, it's about what our clients want and need, and we adapt to what those needs are.

Keith (22:10):

And I think that's what dealers have to do. I think they have to create a great experience. So when you go to a dealership, it's comfortable. And a lot of dealers, to their credit, are starting to change over this. There are rooms for children to play in. There's, you know, there's workstations. So you can, you can work. There are software updates now happening, so you don't have to come in every time they pick up and drop off your vehicles; they give you an experience. So that way when you're talking to somebody who's an expert about that particular vehicle and, and you're learning more about the vehicle, you're gonna drive yourself or put your family's lives in and drive them. So that's where the dealerships have a great opportunity. I think I would advise my supplier clients to do, and a lot of this will be about supply chain.

Keith (22:54):

A lot of it's gonna be about inventory management, order management, and really becoming more efficient to take a step back and look at their entire process and then think about ways to become much more efficient. It's because it's not gonna stop at EVs. It's going, you know, we got connected, we've got subscriptions, direct to consumers happening, B2B, all that's happening online and stuff. And I think they have to get out of these legacy systems that just don't work today. So, they have a big opportunity to do that, and the most fit companies will survive. And then from a consumer standpoint, right, I think, you know, it's about choice. To me, it's about choice. So, if you want a hybrid, you should be buying a hybrid. If you want an EV, there are some great products for that. There are plugin hybrid EVs; they're about one and a half percent of the industry today, but that's happening. The OEMs are looking at things like fuel cells, hydrogen, and all sorts of other alternatives. So, these things are gonna continue to evolve. They're working on batteries that are half the weight and double the range. We'll see what happens with them, but they could be game-changers, too.

Jim (24:02):

Yeah, that's awesome. I mean, what I think about when I think about these when you mentioned 65 EV OEMs is that I could think about the automotive industry a hundred years ago, you know, how many brands there were. It's if you did the homework and you looked at Packard and Willie's and, you know, all these brands that no one's Oldsmobile, right? There's been consolidation, even within a company like GM. But it's great competition. It generates innovation, you know, and I think you're right, the ones that respond to how the customers, drivers, owners, and passengers wanna shop will win. So they have to sort of be the Swiss Army knife, you know, of their category. I just had to pull that back in KT.

Keith (24:41):

I love that you did that. And you know the, the thing I love the most is the, you're exactly right. Do I think all these companies will be here in 10 years? Probably not. But I think they serve a valuable purpose of pushing the industry forward. So, one of my favorite things to do is go to the Henry Ford Museum and see their car exhibit. And you see, many of those nameplates you're talking about are not there anymore. But each nameplate has played a huge role in pushing the industry forward. And that's what's happening now. Because when I talk to Heritage OEMs, they're all about, we need to get more efficient, we need to get more nimble. We need to transform between hardware and software. They may be pushed a little bit out of their comfort zones, but I think that's when true greatness happens when people are pushed out of their comfort zones.

Jim (25:30):

Totally agree. Gotta be comfortable being uncomfortable. Well, KT, thanks for being on and thanks for doing this research and pushing the envelope, and we'll share in the show notes and beyond where they can give their hands on it and how they can get ahold of you. And thanks again for being here, and have a great day.

Keith (25:47):

Thank you for having me, Jim. It was a pleasure. And, I look forward to talking more about this.

Joe (25:55):

You've been listening to What If? So What? A digital strategy podcast from Perficient with Jim Hertzfeld. We want to thank our Perficient colleagues, JD Norman and Rick Bauer for our music. Subscribe to the podcast and don't miss a single episode. You can find this season along with show notes at www.perficient.com. Thanks for listening.