Innovative go-to-market strategies are beginning to transform the commercial vehicle (CV) industry. One early example involves light commercial vehicle (LCV) players moving toward direct-sales models, rather than relying on dealers for their go-to-market approach, as they have traditionally done. Many more changes are on the horizon across CV segments, driven by five core trends (Exhibit 1):
- the growth of omnichannel sales
- new value pools and business models
- increasing cost pressures
- stringent regulations and the shift to zero-emissions vehicles (ZEVs)
- the emergence of new entrants
These trends raise two questions: Why do OEMs in the CV segment need to change? And why does this change need to happen now? After exploring these issues, this article describes emerging go-to-market models and guiding principles that can help CV OEMs select the best approach.
Of all the factors promoting change within commercial vehicle go-to-market, three stand out.
Omnichannel sales are becoming standard
As in the B2C sphere, B2B customers increasingly demand an omnichannel experience that seamlessly integrates offline and online channels. McKinsey’s Global B2B Pulse Survey shows that B2B customers use an evenly divided mix of traditional, digital self-service, and remote human interaction channels,1 with 35 percent of respondents rating e-commerce as most effective. B2B customers also are increasingly willing to engage in large e-commerce transactions, with roughly 70 percent of respondents prepared to spend up to $500,000 on a single purchase.
Based on experience in other industries, B2B customers also demand greater individualization during their interactions with companies. More than half of the respondent companies in McKinsey’s Global B2B Pulse Survey stated that they increased their market share by investing in individualization via sophisticated marketing tactics, technology stacks, analytics, and prescriptive insights.2
The need for individualization extends to products and services as well. Companies must know their customers and engage with them along the entire life cycle. With 85 percent of customers expecting to see the same or a higher degree of vehicle customization in the future, the need for product individualization will become even more important (Exhibit 2).
New value pools and new business models are about to scale up
In the future, trucks will no longer be sold solely as base vehicles. Instead, extending offerings to include adjacent and new value pools, such as fleet management, uptime management, and charging infrastructure, will become imperative for OEMs. The new offerings will be more complex, integrated, and expensive.
In another shift, innovative business models, termed XaaS, or Anything-as-a-Service, are about to scale up. These models range from Transport/Mobility-as-a-Service to Charging-as-a-Service and Logistics-as-a-Service (Exhibit 3). Based on our data analysis, we expect almost 66 percent of the global OEM medium-duty truck (MDT) and heavy-duty truck (HDT) profits to come from recurring life cycle services by 2030 (Exhibit 4). From a customer perspective, these innovative business models represent a shift from a one-time capital expenditure investment to recurring operating expenditures.
The rise of new value pools and business models will transform OEM sales. For instance, OEMs will need new governance models, steering mechanisms, and different capabilities for calculating risks. If they successfully create sales models that enable full control over the customer journey, they can tap into new profit pools and capture a larger share of customer lifetime value.
Increasing cost pressure from technological change and new entrants
Cost pressure is increasing because of technological advances (particularly in powertrain), stringent regulations, new offerings, and the entry of new players into the CV industry. Switching to new go-to-market models can unlock return on sales (ROS) improvements, including the following:
- Reduced distribution costs. Direct-sales models help reduce distribution costs by building a scalable platform across markets with fixed cost degression, bundling and automating activities historically performed at the individual dealer or market level, and further consolidating networks. Cost effects are expected to be higher within the LCV segment compared with the MDT and HDT segments because of structural differences. For instance, the MDT and HDT segments have less intrabrand competition because the density of the dealer network is lower.
- Professional revenue management. Transitioning to new go-to-market models will enable more professional revenue management via new offerings, such as XaaS. It will also increase cross- and upselling opportunities throughout the entire customer life cycle. Other benefits include central price steering and greater volume effects resulting from improved conversion rates and higher loyalty.
It is too early to predict the level of ROS improvements these new go-to-market models will deliver to the CV industry, but the first pilots in the passenger vehicle industry suggest they could be significant.
The CV industry continues to lag behind the passenger car industry when it comes to making decisions about future go-to-market plans. Over the next 12 to 18 months, however, we expect the number of public announcements on go-to-market transformations in the CV industry to accelerate significantly because of the following two trends.
The probable shift to alternative powertrains
The expected shift to ZEVs opens a unique window of opportunity for OEMs to introduce new go-to-market models because they can gradually ramp them up, allowing them to learn and adapt as they go along.
It is imperative for OEMs to shift to alternative powertrains now because they must comply with more stringent regulations on CO2 emissions. For instance, the European Union’s Fit for 55 package aims to increase the ZEV share in the LCV market to 50 percent by 2030. Similarly, OEMs have an incentive to move to alternative powertrains because of new subsidies, such as the commercial clean vehicle credit of the Inflation Reduction Act in the United States. Capital expenditure subsidies in China will also encourage a rapid shift to alternative powertrains. A McKinsey analysis projects that global penetration of ZEVs will be highest in the LCV segment, where they will account for about 40 percent of sales volume in 2030. The MDT and HDT segments are expected to reach a ZEV share of approximately 25 percent and 15 percent, respectively, that year. (Note that similar shifts are occurring with off-highway vehicles, with the construction and agriculture segments expected to see ZEV shares of 20 to 30 percent and 10 to 20 percent, respectively).
New entrants will join the CV industry with alternative powertrains and new go-to-market models
Over the past 24 months, more than a dozen new players have entered the CV industry across segments, including Arrival, BrightDrop, and Rivian. New entrants do not have to deal with legacy systems and are leading the way when it comes to new sales models, value pools, and business models. In addition to the financial benefits, which include reduced distribution costs and professional revenue management, innovative go-to-market models allow new entrants to provide a seamless, omnichannel journey for customers. These benefits may give new entrants a competitive advantage, which will put more pressure on incumbents to rethink their own go-to-market approaches.
The go-to-market shift in the CV industry
Some underlying trends are similar within the CV industry and the passenger car industry. But OEMs in the CV industry have been slower to make decisions about their future go-to-market models. Recently, however, the shift toward ZEVs and increased competition from new entrants has led incumbents to publicly announce an increasing number of go-to-market transformations.
There is no one-size-fits-all solution for go-to-market models because one company’s selected approach may not always be the best fit for other players, or it may not work if market conditions shift. We have evaluated the emerging go-to-market models of incumbents and new entrants across segments within the CV industry. Our analysis focused on on-highway CVs, but the hypotheses and established recommendations can be applied to off-highway CVs because both segments share many common retail characteristics, albeit to varying degrees. We found that the go-to-market models may differ in terms of sales approach, with the following being most common:
- wholesale only, which involves the traditional model of employing dealers for sales- and service-related activities
- hybrid wholesale, which combines the wholesale and direct-sales models (for instance, via key accounts, their own retail facilities, or online)
- agency, which focuses on direct sales via agents (potentially combined with direct sales)
- own direct sales, which involves direct sales by an OEM’s own sales force
The go-to-market models also differ in terms of the scope of the offerings. Some OEMs opt for “vehicle plus” offerings that include adjacent products and services, such as telematics, and digital services. Others prefer XaaS models that rely on recurring revenues from various bundled products and services along the value chain.
New entrants often prefer vehicle-plus offerings. They also tend to choose sales models that offer more direct customer access than traditional wholesale models. For example, Quantron offers direct sales through its own sales force, online sales channels, and retail facilities. BrightDrop and Xos have announced that they will offer a hybrid sales model combining dealer sales and direct sales via key account managers, online sales, or their own retail facilities.
Our evaluation of public announcements of new entrants and incumbents shows that a great variety of sales models have emerged or been announced. This section describes the general characteristics of these models. Since new entrants can define their go-to-market strategy without considering the impact on legacy systems, they tend to adopt more innovative models (see sidebar, “New entrants are revolutionizing go-to-market approaches”).
Wholesale and vehicle-plus offerings
This go-to-market model is characterized by a strong reliance on a local dealer network for sales and service—that means dealers have full control over the customer journey, rather than OEMs. The model usually involves off-highway OEMs, given the strong local dealer/customer relationships that tend to exist, the importance of service offerings for off-highway equipment sales, and the lower degree of intrabrand competition compared with other CV segments. Off-highway OEMs typically collaborate with a smaller number of dealers, focusing on those with a strong presence in the local market.
Some OEMs have introduced customer-centered initiatives to get closer to the end customer (for instance, connected services and online lead channels). All customer-centered activities are handled in collaboration with dealers, however, including order fulfillment and sales lead follow-ups.
Hybrid sales and vehicle-plus offerings
As noted earlier, this archetype includes a combination of dealer sales and an OEM’s direct sales via key accounts, its retail facilities, or online sales. These approaches are complementary, allowing OEMs and dealers to shape the go-to-market and customer journey together.
Many incumbents and some new entrants are using the hybrid sales/vehicle-plus model for CVs. Within the MDT and HDT segments, the sales volume is usually evenly split between dealers and the OEM’s direct sales. Key accounts usually represent roughly two-thirds of the OEM’s direct sales volume, compared with about 20 percent from its retail facilities and less than 10 percent from online sales. This split can vary significantly for MDT and HDT players, however.
Many OEMs are attempting to optimize cost efficiency and the customer experience for the hybrid sales/vehicle-plus model. They are also trying to gain more clarity about the dealer’s role within this model. No strong industry trends are yet apparent, however, since most efforts are still at the pilot stage.
Hybrid sales and XaaS offerings
This archetype is a variation of the traditional hybrid wholesale model, with the main difference being that it involves an extended scope of offerings, including new XaaS business models. One company, Iveco, is currently establishing an XaaS offering that leverages its established network of dealers and service providers while simultaneously building a new organizational unit, complete with an independent business structure and dedicated employees, for a subscription service offering. Iveco’s Green & Advanced Transport Ecosystem (GATE) service offers an all-inclusive rental model for electric trucks and vans that includes maintenance and repair, connectivity and telematics, financing, insurance, energy, and additional ancillary services.
Agency sales and vehicle-plus offerings
Unlike the traditional hybrid model, which combines wholesale and direct sales, this archetype involves collaborating with retailers that act as agents for the OEM. While OEMs form direct contractual relationships with end customers under this model, the agents conduct the transactions.
Many incumbents in the LCV segment are considering a transition to an agency model, and the first pilots are under way for certain markets and offerings. As with OEMs in the passenger car segment, these incumbents find this model appealing because it allows full control over the entire customer journey, price steering, and cost efficiency via the dealer network. It also lets OEMs bundle and automate many activities previously performed at the individual-dealer level. For example, Mercedes-Benz has begun transitioning to an agency model for both passenger vehicles and LCVs (Mercedes-Benz Vans). These first pilots started in Austria and Sweden in 2021, followed by more in Germany and the United Kingdom in 2023.
Direct sales and vehicle-plus offerings
Unlike hybrid models, this archetype relies fully on an OEM’s direct sales via its own key accounts, its retail facilities, or online channels. No third party or partner is involved in vehicle sales, and the OEM controls the entire customer journey.
New entrants with no legacy networks often opt for this direct-sales model. These players typically have a higher share of online sales and strong remote inside sales teams; they tend to have a limited number of physical retail facilities reserved for special circumstances, such as dealing with B2C customers. Some players also have their own service and maintenance offerings.
Direct sales and XaaS offerings
This go-to-market model extends the scope of the offering by creating new value pools and new business models through XaaS. Companies that follow it typically bundle the vehicle, customization, parts and services, uptime management, fleet management, driver training, capacity management, charging access, battery management, and insurance on a pay-per-use basis.
Guiding principles for selecting the best go-to-market model
With so many emerging go-to-market model offering combinations, OEMs may find it challenging to select the model that best suits their business needs and industry segment. As they evaluate their choices, every company must assess its starting position and aspirations for a future go-to-market strategy.
The following three principles can serve as touchstones for incumbents and new entrants as they (re)design their go-to-market approaches and offerings.
Go all in for a seamless, omnichannel customer journey and personalized approach
As noted earlier, the expectations of B2B and B2C buyers are converging. This trend may partly explain why companies can improve their market share by up to 10 percent annually if they provide B2B customers with a strong omnichannel experience. McKinsey’s Global B2B Pulse Survey showed that B2B buyers expect an omnichannel experience with an evenly divided mix of traditional, remote, and digital self-service channels. What’s more, half of the companies that invested in personalization experienced market share growth, showing that companies can also gain a competitive edge by investing in technology and analytics to hyperpersonalize marketing communications and customer interactions.
When trying to create a seamless omnichannel experience, OEMs may benefit from the knowledge gained by passenger car players that made the same journey. These insights, which are particularly relevant to incumbent OEMs that depend on legacy systems when redefining their go-to-market approach, involve the following strategies:
- Use direct customer access as an enabler. If OEMs want to build a strong omnichannel experience and personalize interactions, they must know and understand their customers throughout the entire life cycle. Most new entrants and some incumbents are therefore introducing direct-sales models, either through agents or their own channels, to gain access to customers. Through this direct contact, OEMs will have full control of the entire customer journey and can gather relevant customer information across channels for use in personalization. If OEMs do not want to engage in direct sales, some other models also allow for direct customer access, such as traditional wholesale only or hybrid wholesale models that allow OEMs to adjust dealer contracts so they can co-own the customer relationship and/or double down on integrating information.
- Avoid the IT trap. If companies want a complete view of their customers, they must merge existing customer and vehicle data from different sources—including OEM and dealer systems—and this process can be extremely challenging. Experience within the passenger vehicle industry suggests that OEMs should not attempt to integrate legacy systems fully, which can lead to lengthy and costly IT efforts. Instead, they should introduce new IT modules and create interfaces to legacy systems where required.
- Get buy-in from partners. OEMs should obtain buy-in from dealers, agents, and other stakeholders on any changes to the go-to-market model. Ideally, they will communicate information on shifts as early as possible. In addition to providing clarity about future roles and responsibilities of the partner, OEMs should highlight the benefits of a more seamlessly integrated omnichannel journey and align with partners on best practices for collecting, using, and analyzing customer and vehicle data, including consent management.
Unlock new value pools with broader product offerings and strong customer life cycle value
Extending the scope of offerings is imperative for OEMs because trucks will not be sold on their own in the future. Already, offerings are becoming more complex, integrated, and expensive. By 2030, adjacent and new value pools are expected to contribute to a third of the global MDT and HDT profits.
Recurring-revenue business models involving XaaS allow customers to transition from one-time capital expenditure investments to recurring operating expenditures. They also reduce investment risks, including those related to technology, since OEMs will carry that in return for a risk premium.
The expected scaling of new value pools and new business models has created openings for many new entrants, and some have started to introduce XaaS business models.
As OEMs expand offerings and attempt to improve customers value, three actions will help:
- Selecting the best future offerings along the value chain and scaling them. This should be a priority for OEMs because customer expectations and requirements are changing significantly. OEMs must also decide what products and services they will offer and which ones will be sourced from third parties or partners. When selecting a future go-to-market model, OEMs should consider whether it will allow them to scale their selected offerings effectively and efficiently.
- Building up required capabilities. OEMs will need additional skills, including better risk calculation capabilities, to scale their new value pools and business models. They must also revisit their governance models and steering mechanisms because former profit centers will transition to cost centers for recurring life cycle service offerings. For example, parts and services will become a cost factor in the recurring life cycle service offerings bundle, rather than a source of revenue. Financial-services departments can help ease the transition because of their experience with recurring-revenue business models and their existing capabilities in both business and IT (for instance, IT systems mapping and billing current customer contracts). To ensure adequate staffing, OEMs may need to introduce some new roles.
- Understanding the customer. As with the development of a seamless omnichannel approach, incumbents and new entrants must thoroughly understand their customers along the entire life cycle (potentially enabled by direct customer access). This knowledge allows companies to cater to specific customer requirements and preferences when designing their offerings and new business models. If successful, they will capture a higher share of the customer lifetime value.
Reduce distribution costs and professionalize revenue management
When switching to a new go-to-market model, OEMs should consider its cost efficiency and its ability to enable additional top-line effects.
New go-to-market models allow OEMs to reduce distribution costs in several ways. For instance, OEMs can optimize their existing dealer networks by including facilities that provide different services, rather than having every location follow the same script. Some may serve as sales centers while others offer workshops or test drives. OEMs can also drive improvement by streamlining the existing legacy network, decreasing the share of offline versus online touchpoints along the customer journey, or doubling down on remote or inside sales teams to reduce physical network costs. The new go-to-market models also allow companies to centralize activities previously performed by individual dealers, potentially allowing them to bundle services and reduce costs in areas such as stock management or marketing.
Companies can also improve revenue management if they adopt a new go-to-market approach. The new business models may enable new value pools and solutions (for instance, Truck-as-a-Service, or TaaS), or they may strengthen cross- or upselling opportunities throughout the customer life cycle. If the new model allows for central price steering and reduces intrabrand competition, revenues may rise. Similarly, it may improve sales conversion rates and ensure higher loyalty by giving companies a thorough understanding of the customer throughout the life cycle.
With any new model, there may be one-time costs, such as those for integrating legacy IT systems. These expenses may reduce or eliminate any short-term financial benefits, making it essential for companies to closely monitor the transition to any new models. The LCV segment, which is similar to the passenger vehicle segment, may see the greatest cost benefits. The MDT and HDT segments are expected to achieve smaller gains because OEMs already sell many of these vehicles directly.
The changes taking place in the on-highway and off-highway markets are transforming OEM go-to-market strategies. As new entrants continue to disrupt the CV market with new offerings and sales models, the pressure for change will continue to increase. And that means established players should reconsider their go-to-market models now, rather than later, to remain relevant.