IR blog: The electrification of cars will affect the whole car trade business, says Matti Virtanen, President of Kesko’s car trade division
The whole automotive sector has been undergoing a major transformation in recent years, with the introduction of new technologies and the electrification of cars. Kesko’s car trade division does not want to be left behind, and is therefore also carrying out large-scale transformation in order to be more efficient, accelerate digitalisation and offer a better customer experience.
As of April 2021, this transformation process has been steered by Matti Virtanen, who has had a long career in leadership positions in the technology sector with companies such as Nokia, Compaq and Hewlett-Packard in Finland, Europe and the US. He was also Chairman of the Board of Kamux, a Finnish listed company specialising in used car sales, for four years. Here, Matti and Kesko’s Vice President of Investor Relations Hanna Jaakkola discuss the measures taken by Kesko’s car trade to meet the challenges posed by the changing car sector landscape and ways to raise market share further and bring the customer experience in car sales to a whole new level.
(The discussion is available in Finnish as a podcast here).
Car trade at Kesko – market leader with a strong focus on the future
Car trade has been part of Kesko since 1978. A key element for the division is the collaboration with Volkswagen Group, one of the biggest car manufacturers in the world. Kesko’s K-Auto imports and sells Volkswagen Group brands, namely Volkswagen, Audi, SEAT, CUPRA, Porsche and Bentley passenger cars and Volkswagen Commercial Vehicles and MAN trucks in Finland. K-Auto and independent dealers sell new and used vehicles and offer servicing and after-sales services at some 70 outlets across Finland as well as online.
Kesko’s K-Auto imports and sells Volkswagen Group car brands, sells used vehicles and offers servicing and after-sales services at some 70 outlets across Finland as well as online.
In new car sales, Kesko is the market leader in Finland. In Q2/2021, the market share of the models represented by Kesko was 19.3%, while our market share in all-electric cars was close to 50%. Strategically, the division aims to strengthen its market share further above 20%.
The division also wants to increase its sales of used cars and services. Matti Virtanen notes that over the past decade, used car sales have become a proper business in Finland, with a very different dynamic. This is why earlier this year the two businesses were separated from each other at Kesko. New web pages for used car sales, meeting modern requirements, will also be launched this autumn.
In the service business, the electrification of cars will impact the need for servicing and car accessories going forward, which is why Kesko is currently updating its logistics. Investments are also made to better meet customer expectations in the repair business, which is seen as a growing business area.
Transforming operations to ensure the best customer experience in the business
Kesko’s strategy focuses on profitable growth in the company’s three divisions. To better enable profitable growth in the car trade division, the division has launched a significant wide-scale transformation scheme, aiming for better competitiveness and cost structure while improving margins and profit levels and consequently the division’s profitability.
According to Virtanen, the transformation programme is motivated by two main underlying changes impacting the car trade business: 1) a marked shift in customer behaviour, with customers increasingly using digital channels to examine the offering and even to purchase cars; and 2) the growing importance of customer experience in car sales, car servicing and car deliveries.
So how does Kesko’s car trade intend to create and offer the “best customer experience in Finland”? For one thing, digitalisation will be utilised more extensively to shift resources from administrative tasks to customer service. Virtanen also notes that better customer service requires a new kind of attitude and business culture. “We are currently recruiting 160 new people for car sales, and will train them to master good customer service and positive customer experiences – this will enable a better response to customer needs and wishes,” says Virtanen.
To ensure the best customer experience in the business, Kesko’s car trade division is utilising digitalisation to free up more time for customer service, while also ensuring effective digital services.
Strong collaboration with Volkswagen Group lends Kesko a considerable advantage
Kesko’s strong, long-standing collaboration with Volkswagen Group is one central element of the car trade division's strategy. Matti Virtanen sees many advantages for Kesko in this: “Thanks to the collaboration, we have a good vision of where the car sector is going, also with a long-term perspective. In this current situation, where e-mobility is surging ahead at a great pace, this lends us a considerable advantage.”
The collaboration also means Kesko has been able to develop world-class expertise in sales, servicing, marketing and other support functions.
Kesko’s long-standing collaboration with one the world’s leading car manufacturers Volkswagen Group enables insight into the future of the car industry and ensures K-Auto can offer products that are excellently suited for the rapidly changing market.
The future is electric – and here sooner than we think
Speaking of Volkswagen Group, the company announced in its new strategy this summer that it intends to invest 16 billion euros in e-mobility, hybridisation and digitalisation by 2025. How does this fit the business and strategy of Kesko’s car trade division?
“Our strategic decisions and investments are very much aligned with those of Volkswagen Group and we share their vision of the future direction of cars. K-Auto is the undisputed market leader in electric cars in Finland, and we can already see that the electrification of cars in Finland is moving ahead even faster than fairly recent predictions would suggest. For us, the massive investments by Volkswagen Group mean that we will be able to offer products that are excellently suited for this rapidly changing market. Volkswagen Group is able to offer competitive electric cars irrespective of brand,” says Matti Virtanen.
Virtanen also mentions Kesko’s own significant investments in building an extensive EV charging network in Finland to prevent charging capacity from becoming a bottleneck for progress. Investments in the K Charge network will continue next year, with emphasis in particular on fast and high-power charging (HPC).
The K Charge network currently consists of over 80 charging stations for electric vehicles, found at K Group store locations across the country. In July 2021 alone, charging at these stations was up by 137% year-on-year, reflecting the growing popularity of EVs.
The downside of modern hi-tech cars is how the current global component shortage is causing issues with car availability, as the car industry is not first in line when it comes to access to scarce components. Virtanen says that it is likely that the impact of the component shortage will be felt for the remainder of the year and may pose some challenges also at the start of next year. There is also some uncertainty related to the development of new technologies and how they will impact the car sector going forward.
Overall, Virtanen trusts that Kesko’s strong position and track-record form a good basis for the further growth of its car trade division.