Q&A: Inchcape’s CFO on becoming the sustainable automotive distributor - The CFO (2024)

Inchcape, a global leader in automotive distribution, has not only embraced the changes going on within the automotive industry but has also strategically positioned itself at the forefront of innovation and sustainability.

A key part of the team at the helm of this transformation is Adrian Lewis, Inchcape’s CFO. Under CEO Duncan Tait’s stewardship, Inchcape has transitioned from a hybrid retail distribution model to a pureplay distribution powerhouse.

This shift, coupled with a robust embrace of sustainability and cutting-edge technology, has enabled Inchcape to expand its geographic footprint and diversify its brand portfolio.

The CFO sat down with Lewis to understand the multifaceted strategies that have driven Inchcape’s success, the evolving role of the CFO in this journey, and how the company is leveraging digital transformation and sustainability to navigate the future.

The Strategic Shift to Pureplay Distribution

Inchcape’s journey from a hybrid retail-distribution model to a pureplay distribution company represents a significant strategic shift designed to keep pace with the evolving automotive landscape. This transformation, which has been a focal point for several years, is integral to the company’s “Accelerate” strategy, a vision that has driven its recent successes.

“Transformation is at the heart of why our Accelerate strategy is crucial,” says Lewis. “We foresaw some of the changes in the automotive industry and have been working to stay ahead.”

One of the most notable aspects of this transformation is the geographic expansion of Inchcape’s operations. The company now boasts a presence in over 40 markets, reflecting a strategic decision to broaden its reach and diversify its market base. This expansion is not just about increasing market presence but also about representing a wider array of brands, including several emerging Chinese automotive manufacturers.

“We have grown the number of brands we represent because we see the number of brands participating in the global automotive marketplace expanding,” Lewis explains.

This strategic move aligns with the company’s goal to act as a global distributor, helping original equipment manufacturers (OEMs) penetrate new markets with a robust distribution platform that combines both digital and physical presence.

Lewis points out that this transformation has allowed Inchcape to facilitate market entry for various brands in diverse regions, including Chile, Colombia, Peru, Indonesia, and the Philippines. “Our role is to help traditional Japanese and Western brands, as well as emerging players, navigate new markets by providing them with the necessary distribution infrastructure,” he says.

This expansion is particularly crucial as more Chinese manufacturers seek international markets. Lewis highlights, “Chinese automotive manufacturers are expanding and looking for international markets. It’s a story not just in Europe, but in Latin America and Asia too.”

The strategic shift also emphasises the importance of local market knowledge. Inchcape’s role involves understanding local consumer preferences and regulatory environments, which is vital for successful market entry and sustained growth. This insight-driven approach ensures that the company can offer tailored solutions to its brand partners, maximizing their market potential.

The Evolving Role of the CFO

Lewis is involved in both the financial and operational aspects of the business. His role extends beyond traditional financial oversight, encompassing strategic decision-making, regulatory adaptability, and digital transformation.

“The CFO’s role at Inchcape is really as part of the leadership team,” says Lewis. “It’s about setting guard rails and a framework for operating businesses to deliver brilliantly.”

This framework includes everything from investment approval structures to automated control environments and strategic brand profiling.

One of the key aspects of Lewis’s role is navigating the complex regulatory environments across different markets. Inchcape operates in diverse regions, each with its own set of regulatory challenges. Lewis emphasizes the importance of being well-connected with local regulatory environments to help brand partners succeed.

“Our job is to understand government agendas and make sure our brands are aligned with the direction of travel in each market,” he explains.

For example, as government incentives around the use of hybrids and other New Energy Vehicles evolve in the Americas, Inchcape’s insights allow it to recommend specific product ranges to its OEM partners, enhancing their competitive edge in these markets.

In addition to regulatory adaptability, Lewis highlights the importance of empowering teams across the globe. Inchcape’s decentralised model requires a balance between providing autonomy to local teams and maintaining a cohesive strategic direction.

“We have to provide lots of levels of empowerment across the organization but operate within a framework,” he notes. This balance ensures that the company can leverage local expertise while aligning with broader strategic goals.

Lewis also underscores the collaborative nature of his role, working closely with departments throughout Inchcape, to drive the company’s strategic initiatives. “Whether it’s me or other leaders across our Finance team, our role is really to help and enable our teams around the world,” he says.

This involves setting up investment approval structures, creating automated control environments, and establishing strategic brand profiles.

Sustainability at the Core

Sustainability has become a cornerstone of Inchcape’s business strategy, reflecting the growing importance of environmental responsibility in the automotive industry. Inchcape has made significant strides in integrating sustainability into its operations, setting ambitious targets and embedding environmental considerations into every aspect of the business.

“In the last month or so, we published our first sustainability report,” Lewis notes proudly. This report outlines Inchcape’s commitment to reducing its emissions by 50% by the end of the decade, a goal that the company is well on its way to achieving. Key initiatives include substantial investments in solar panels and other renewable energy sources to make operations more efficient and sustainable.

A concrete example of Inchcape’s sustainability efforts is its solar success in Singapore and around the world. The company has installed solar panels at several of its facilities in Singapore and elsewhere, significantly reducing its carbon footprint. This initiative not only supports Inchcape’s sustainability goals but also delivers financial benefits.

“We have a very clear view on solar panel investments and the payback period,” Lewis explains.

In Hong Kong, the company helped the largest public transport operator retro-fit 1,000 of their buses with solar panels, reducing the cost of keeping public transport cool in Hong Kong’s hot weather and reducing consumption of fossil fuels.

Sustainability metrics have been integrated into the company’s investment decisions, ensuring that environmental considerations are factored into every project. “We changed the pro forma templates to include ESG metrics, such as the CO2 footprint improvement,” says Lewis.

This approach has led to a noticeable increase in business proposals that incorporate sustainability measures. For instance, when combining two warehouses, the company now evaluates not only the financial KPIs but also the environmental impact.

Lewis provides a compelling example of this integration in action. In Australia, Inchcape has invested in water treatment plants at its vehicle processing facilities to recycle water used in car washing. “We want to recycle the water we use when we wash cars,” he says. This initiative is part of the broader effort to make sustainability an integral part of Inchcape’s day-to-day operations.

Moreover, Inchcape’s Investment Committee, which meets monthly, now requires all business proposals to address both financial and environmental KPIs. This dual focus ensures that sustainability is a key consideration in the company’s growth strategy.

“We’re asking people to not just tell us about the financial return but also about the CO2 footprint improvement,” Lewis explains. This has led to innovative projects that blend financial prudence with environmental responsibility.

By embedding sustainability into its strategic framework, Inchcape is not only meeting regulatory requirements and consumer expectations but also positioning itself as a leader in sustainable business practices.

Embracing Digital Transformation

Leveraging advanced technologies such as artificial intelligence (AI) and data analytics, Inchcape is enhancing both its operational efficiency and customer engagement.

“Digital transformation is enabling us to be a better business,” says Adrian Lewis. Inchcape has been proactive in integrating AI into various aspects of its operations. One standout example is the use of AI in Hong Kong to provide body shop quotes.

Customers can upload photos of their damaged vehicles to a chatbot, which uses AI to analyze the images and generate a repair estimate within minutes. “It’s an amazing example of how AI can enhance customer experience,” Lewis remarks.

Inchcape is also using AI to optimize its supply chain management. In markets like Chile, where the company represents around 16 brands and holds a significant market share, managing spare parts inventory is a complex task.

“We deploy AI to understand supply and demand for spare parts,” explains Lewis. By analyzing historical data and predicting future needs, AI helps Inchcape maintain optimal inventory levels, ensuring that parts are available when needed without overstocking.

These technological advancements are not just about efficiency but also about making informed business decisions. Inchcape’s Digital Delivery Centres play a crucial role in this process. Staffed with experts in data analytics, these centres support the company’s global operations by providing insights that drive strategic decisions. “The data capability and investments we’ve made in building our digital delivery centres are huge enablers,” says Lewis.

Digital transformation extends beyond operational efficiency to include enhanced customer engagement. Inchcape’s Chief Digital Officer, Mark Dearnley, highlighted in a recent webinar how digital tools are being used to create a seamless customer experience. From online research to physical showroom visits, customers now interact with Inchcape through a unified digital platform that enhances their buying journey.

Lewis emphasises the importance of this integrated approach, noting that customers today are better informed and expect a seamless transition from online research to in-person interactions. “Customers are doing more research online and arriving at showrooms ready to make decisions,” he says.

This shift has prompted Inchcape to invest in digital tools that bridge the gap between online and offline experiences.

In addition to improving customer engagement, digital transformation has significant implications for risk management. By leveraging AI and data analytics, Inchcape can better anticipate and mitigate supply chain disruptions. “Our digital capabilities help us spot trends and make informed decisions, which is crucial for managing risk,” Lewis explains.

Strengthening Supply Chain Management

The COVID-19 pandemic exposed vulnerabilities in global supply chains, prompting many companies to reassess and strengthen their supply chain management strategies. For Inchcape, the pandemic underscored the importance of resilience and flexibility in its operations.

“The pandemic taught the world a lot,” Lewis reflects. “It taught us that we can work remotely and deliver services effectively.” During the pandemic, Inchcape implemented various strategies to ensure continuity of operations, such as leveraging digital tools to facilitate remote work and virtual customer interactions.

One of the key lessons from the pandemic was the need for robust data capabilities to understand and respond to market trends. Inchcape invested in its digital delivery centres, which play a pivotal role in analysing data and providing insights that inform strategic decisions. “Our investment in data capabilities and communication flows with OEM partners is crucial for building resilience,” says Lewis.

These efforts have enabled Inchcape to navigate the challenges posed by the pandemic successfully. The company’s ability to maintain operations, even in the face of unprecedented disruptions, is a testament to its robust supply chain management strategies.

“We traded well through the pandemic, providing customers with ways to purchase and experience our services safely,” Lewis notes.

Looking forward, Inchcape is focused on ensuring that its supply chain is resilient against future disruptions. This involves not only leveraging data and technology but also fostering strong relationships with OEM partners. By staying ahead of consumer trends and maintaining open lines of communication with suppliers, Inchcape can anticipate potential issues and respond proactively.

“Our role is to get ahead of consumer trends and build resilience into our business,” says Lewis. This proactive approach ensures that Inchcape is well-prepared to handle any future disruptions, safeguarding its operations and ensuring a seamless experience for its customers.

Growth and Market Focus

Inchcape’s growth strategy is underpinned by a clear understanding of its role in the automotive distribution chain and a strategic focus on market diversification. With a physical presence in markets that account for around 10 million cars globally, Inchcape aims to significantly increase its market share by expanding both geographically and in terms of brand representation.

“Our opportunity is to grow scale through diversification, both geographically and through representing more brands in our existing markets,” says Lewis. Currently, Inchcape has a market share of about 3-4% in the 10 million car market where it operates physically. This leaves substantial room for growth.

“The opportunity is enormous in many of our markets,” Lewis adds.

While Lewis is strategic about discussing specific markets, he emphasises that Inchcape’s role is tailored for markets outside the top 20 global economies. These markets, which account for 80% of global car production, are typically managed by OEMs when it comes to distribution.

“Our belief is the OEM should own the entire value chain in those top markets,” Lewis explains. Instead, Inchcape focuses on markets where its distribution expertise and local knowledge can add significant value, often in more complex or lower-scale markets.

Fostering Talent and Culture

Attracting and retaining top talent is crucial for sustaining growth and driving innovation. Inchcape recognises this and has implemented strategies to foster a supportive and flexible work environment that meets the evolving needs of its employees.

“The war for talent is very real,” acknowledges Lewis. To attract and retain high-quality professionals, Inchcape offers flexibility in work arrangements, allowing employees to balance their personal and professional lives effectively. This approach not only enhances employee satisfaction but also attracts talent that might otherwise be unavailable.

A case in point is a highly skilled manager who chooses to live in a remote part of the UK. “In another world, that person would have to be in the office five days a week,” says Lewis. “Today, we can attract high calibre talent, that is able to work productively from where they’re based, contributing significantly to our operations around the globe.”

This flexibility extends to Inchcape’s headquarters in London, where employees can choose their work environment based on their needs. “We value contribution, not presenteeism,” Lewis emphasizes. This philosophy is a key differentiator in the competitive landscape of talent acquisition.

In addition to flexibility, Inchcape provides a conducive learning environment. “We offer a great place where people can come and learn, often physically with others,” Lewis notes. This blend of flexibility and opportunities for professional development makes Inchcape an attractive employer.

The company’s approach to talent management also reflects its commitment to inclusivity and diversity. By fostering a culture that values different perspectives and experiences, Inchcape ensures a dynamic and innovative workplace that can adapt to changing market conditions and drive sustained growth.

Comments are closed.