Article Type: Insights

Will the automotive industry surf the renovation wave?

The European Commission published a new clean-energy strategy in October, aimed specifically at upgrading buildings. But the automotive industry has its part to play in the strategy. Will it surf this renovation wave, or will it be left adrift? To find out, Autovista Group Daily Brief journalist Tom Geggus, spoke with electricity industry association, Eurelectric.

‘The renovation wave is a very necessary and a very timely initiative from the European Commission to tackle what is basically one of the largest remaining challenges in decarbonising the European economy, and that is buildings,’ explained Henning Hader, policy director at Eurelectric.

However, the wave is not focused solely on how efficiently a building uses energy, during heating or cooling for example. This process is just as much about future-proofing buildings for developments in smart technology, integration into digital infrastructure, and most importantly for the automotive industry, connection to advanced charging points.

Automotive application

‘The automotive sector is impacted across the entire value chain with this transformation,’ Hader emphasised. ‘They are being put under pressure, and rightly so, to come with products that are decarbonised, that enable people to switch to clean-energy carriers, using cars.’ This includes zero- and low-emission vehicles with electrified powertrains, i.e. battery-electric vehicles (BEVs) and plug-in hybrids (PHEVs).

In order to fully commit to decarbonisation, there must be enough demand for electrically-rechargeable vehicles (EVs). In the wake of coronavirus (COVID-19), governments are pushing incentive schemes to help the automotive industry make a green recovery, but these vehicles require charging and cannot exist in an infrastructure vacuum.

‘We know that cars are parked for 90 to 95% of their life, and 90% of that time they are parked at home or at work, in buildings, around buildings, under buildings, on top of buildings,’ said Hader. ‘So, what is important, is that chargers on private property, do not just appear out of nowhere. They have to be purchased and installed by the people who operate these buildings.’

This is where the renovation wave sweeps in, helping develop regulations, shaping what an updated structure should look like. Therefore, owners and operators of buildings need to be familiar with the opportunities this presents and even, ideally, be incentivised to anticipate this, allowing them to equip essential infrastructure.

The issue of availability

‘One of the biggest issues is the availability of charging points. We have lots of promising announcements about how the number of charging points is increasing, but most of those are public charging points,’ Hader stressed. The opportunity to install EV infrastructure has to be taken during a building’s renovation, even if the actual recharging system is not installed straight away. If the policy exists, all private and public properties would all be equipped for an upgrade, removing the potential for expensive retroactive installations.

‘These chargers enable us and our system operators, specifically distribution system operators, to take on all these cars that are charging in different areas, and when they are on smart chargers, they can become a flexibility source of the future,’ Hader explained.

This will be vital as cars adapt charging schedules, and even, under the right circumstances, feed into the grid. ‘There is an entire world of flexibility and efficiency that opens up if we make sure that renovating a building is about more than just insulation,’ he said. ‘It really is about getting the buildings to become a building block in the future energy system, where the buildings, the cars on those buildings and the people in these buildings, become very important flexibility providers.’ But, in order for this to happen, some current policies will require renovation.

Renewable energy directive

At its core, the EU’s renewable energy directive (RED) acts as a foundational policy for the production and promotion of energy from renewable sources. ‘There are elements in the renewable energy directive that are very relevant for electrification, and for electricity being used in transport, for example,’ Hader said. But, as part of the European Green Deal, this legislation, alongside the energy efficiency directive, is under review. Renewable-energy targets will be assessed, as well as other parts of the directive to fall in line with the Climate Target Plan for 2030. The results of the review and any accompanying proposals are expected in June 2021.

‘In order for the power sector to supply enough clean electricity to electrify the sectors that should be electrified, so, economically speaking, large parts of personalised passenger transport, heating to a large extent, some industrial processes, we will need to have a lot more capacity, specifically, of course, renewable capacity, because we want to fully decarbonise our sector’ he explained.

Therefore, RED will need to accelerate capacity rollout, particularly as it plays a fundamental role in helping build investor confidence in renewables. ‘In order to meet the new ambitious targets for 2030, and to decarbonise the power sector and to electrify large parts of society at the same time, we need more, we simply need more’ Hader said. Eurelectric’s Power Barometer reflects the developments the power sector is undergoing, as well as the challenges which lie ahead.

https://infogram.com/power-barometer-2020-1hmr6gq78p1o2nl

Source: Eurelectric

Knowledge is key

So, what barriers stand in the way of an automotive renovation wave? A chief issue to overcome is making sure both building owners and industry experts are aware of the new technological possibilities. This means supplying information across the renovation chain.

Proprietors need to be aware of the infrastructure potential, the experts offering advice to them must understand what technological and funding opportunities exist, and those carrying out the renovation work must have the practical skills to set up the technology. In this way, all necessary regulations can be adhered to, incentives taken advantage of, and infrastructure either installed or the framework set up for it.

This approach could help combat the rollout of soon-to-be-obsolete charging systems, only installed to meet immediate demand, but without any foresight of future smart-charging systems that are capable of cross-grid communication. But why is this type of connection important when it comes to EV infrastructure?

‘Let’s say you’re in a suburb of Brussels, and there is a system constraint because a lot of demand is coming online at the same time, and there is a need for flexibility so the operator can interact and communicate with these chargers,’ Hader explained. This could allow the grid operator to switch the role of the chargers and instead feed into the grid for a few minutes, with the consent of the EV owner.

But, the future of these systems depends upon the renovations that are carried out now. Even if they only consist of some basic piping, which could one day support smart, flexible and advanced EV charging technology.

November – Latest whitepaper update: How will COVID-19 shape used-car markets?

The latest edition of Autovista Group’s whitepaper: How will COVID-19 shape used-car markets? considers the second wave of coronavirus (COVID-19) infections across Europe. Out of the 18 markets covered, 10 have adopted a more negative view of overall economic scenario outcomes.

The latest update to the Autovista Group whitepaper covers such topics as:

Three-speed RVs: Europe’s used-car prices recover to pre-crisis levels
A golden age for used-car markets?
The double-edged sword of EV government incentives?
Coronavirus scenarios – how swiftly will economies recover?

Residual-value (RV) outlooks have changed. 10 of the countries tracked have now changed to a more favourable position for RVs in 2020 as the landscape for the year becomes clearer. Eight countries have also confirmed their RV outlooks for 2021 and 2022.

However, RVs are also under threat from government-backed incentive schemes, designed to help the automotive industry following extensive lockdowns earlier this year. Such grants favour the purchase of new vehicles, and Autovista Group has analysed the impact on the used-car market in different regions, focusing on internal combustion engine (ICE) and electric-vehicle (EV) models. The latter looks to be under more pressure, especially in two markets.

The whitepaper shows that a ‘two-speed’ market recovery continues in Europe. This year has seen most used-car markets fare particularly well, even above pre-COVID levels. However, this is largely driven by a run for cheaper, older vehicles, as many come to rely less on public transport through fear of contracting COVID-19. Young used cars, including those coming off-lease or released by rental firms, do not see such a level of recovery and are under pressure in a number of markets.

Yet some markets, such as in Southern Europe, will not be at pre-crisis levels by the end of 2022. There are already signs of the need for some downward market correction before the end of this year.

You can find more information about how different markets are shaping up, and the various economic scenarios across the region, in the latest update of the Autovista Group whitepaper – ‘How will COVID-19 shape used car markets’ – which can be viewed here.

Three-speed RVs: Europe’s used-car prices return to pre-crisis levels

Following the emergence of Europe’s automotive sector from coronavirus (COVID-19) lockdowns, a ‘three-speed’ development of residual values (RVs) has prevailed across the region. Senior data journalist Neil King explores the latest developments.

Autovista Group’s COVID-19 tracker, which tracks 12 European markets, shows that the index of RVs, compared to early February, is back above pre-crisis levels in all countries except Portugal and Finland. The measurements began in February, with an index value of 100.

The UK has enjoyed the strongest rally in used-car prices, driven by the release of pent-up demand, both from the lockdown and the uncertainty running up to the country’s departure from the European Union on 31 January. The UK also faced a starker vehicle-supply challenge than any other market, which translated into higher RVs as used-car demand outstripped supply. Values rose from mid-May and peaked at 106.0 (a 6.0% rise) in the week to 11 October.

However, RVs have since fallen from this great height as pent-up demand is increasingly satisfied and supply improves. In the latest week for which data are available, to 8 November, the index has receded to 105.0 (a 5.0% rise) and a further downturn is expected as the year-end approaches, which also marks the end of the Brexit transition period. ‘With the new lockdown, it is likely that RVs will continue to fall from their high 2020 position back to where we forecast,’ added Anthony Machin, head of content and product at Glass’s.

French resistance

France benefitted from pent-up demand and a new incentive scheme that came into effect on 1 June. The €8 billion package includes a €7,000 grant for private buyers of new battery-electric vehicles (BEVs) costing less than €45,000 (€5,000 for fleet buyers), while buyers of new plug-in hybrids (PHEVs) can claim a €2,000 subsidy.

Additionally, France doubled its premiums for those looking to trade in older vehicles for a cleaner model, with a €3,000 grant for vehicles with internal combustion engines (ICE) and €5,000 for BEVs and PHEVs. Crucially, the enhanced trade-in bonus also applied to used cars and hence the notable rise in RVs. However, the scheme reached its 200,000-vehicle cap before the end of July and the Ministry of Ecological Transition announced the replacement of the recovery scheme with a conversion bonus, applicable from 3 August. This has translated into stagnation in the development of RVs in France since the end of August, with the index barely rising from 102 to 102.8 in the week to 8 November, falling to third place behind Poland in the process.

Autovista Group anticipates a slowdown in the RV development in France and our latest RV outlook expects prices of used cars to be 0.3% lower in France at the end of 2020 than when the COVID-19 crisis erupted in Europe, in March. ‘A lack of supply has created the RV jump, but OEM plants are now working at, or close to, 100% capacity in France. So, this should no longer be the case and hence this circumstantial jump should decrease by the end of the year. Considering the 2021 malus [tax penalty], people could advance purchases but we have not changed the outlook right now,’ commented Yoann Taitz, Autovista Group head of valuations and insights, France and Benelux.

Residual-value index of used cars in European markets, 2 February to 8 November 2020

three-speed RVs — *Source: Autovista Group, Residual Value Intelligence, COVID-19 tracker*

Rapid-reaction markets

Sweden, Finland and Portugal all had rapid negative reactions to COVID-19. Dramatic lockdown measures were not introduced in Sweden and Finland, but RVs fell from early February to mid-May in both markets.

RVs have climbed in Sweden since mid-May and recorded 102.3 on the index in the week to 8 November, i.e. 2.3% higher than in early February. In Finland, the index of RVs fell from early February to only 97 in mid-June but have recovered slowly and remain at the lowest level in Europe, registering 99.2 on the index in the week to 8 November (0.8% lower than in early February). ‘Finland is still running on low numbers, and we don’t see the same quick recovery as in Sweden. The import of young used Swedish cars has picked up again too, in combination with lower used-car values than normal, already before the crisis started,’ explained Johan Trus, Autovista Group head of data and valuations, Nordics.

Portugal also endured falling RVs since the tracker index started in February, but a more pronounced downturn commenced at the end of March. As in Finland, the price index has only increased modestly since, to 99.3 in the week to 8 November (0.7% lower than in early February). Portugal and Finland are the only European markets where RVs have not recovered to pre-coronavirus levels.

‘Used-car values have been increasing since the end of May 2020 and almost reached pre-pandemic values at the end of October. There has been similar behaviour across all ages, with the exception of vehicles up to six months old that reached and exceeded pre-pandemic values as early as June. Used-car transactions have decreased less than new-car registrations during 2020, but there are no new incentive schemes because of the pandemic and also no new incentives from the government for 2021,’ commented Joao Areal, editorial manager of Autovista Group in Portugal.

Late starters

The rest of Europe’s tracked markets remain ‘late starters’ with broad stability in values as several effects are balancing each other out.

On the downside, most European markets essentially remain ‘on hold’ as consumers wait for a better understanding of the full impact of the COVID-19 crisis, especially with a second wave of cases and new lockdowns across the region.

In Italy, for example, RVs recovered from late July to mid-October, partly because of the incentives to support the country’s automotive industry, which came into effect on 1 August. However, values have stabilised since.

Conversely, the disruption to new-car supply and demand continues to positively impact RVs.

In Germany, for example, used-car transactions were just 3.5% lower in the first 10 months of the year than in the same period in 2019, according to the KBA. They have even performed better than last year, for five consecutive months. New-car registrations have been far more affected, however, and are still 23.4% lower in the year-to-date than in 2019.

Switzerland has also seen large declines in new-car sales volumes and so ‘nearly-new cars aged zero to six months, and used cars in general, still seem to serve as a gap-filler or alternative for new cars and therefore show improved RVs,’ explained Robert Madas, Autovista Group valuations and insights manager for Austria and Switzerland.

Meanwhile, the strongest development of RVs in recent weeks has been in Poland, where the index has overtaken France. ‘We can still observe huge demand for used vehicles, especially the youngest, as demand for new vehicles is limited due to fast-growing list prices and availability,’ commented Marcin Kardas, head of the Autovista Group editorial team in Poland.

Year-end negativity

Despite the broad stability in the development of RVs, a mixed picture of used-car demand is emerging, Moreover, as Europe battles a second wave of COVID-19, new lockdowns, growing stock volumes, incentives for new cars, and rising unemployment, Autovista Group expects a slightly negative trend for the end of the year, especially for younger cars.

‘The stable or slightly rising price levels in Germany are from my perspective a result of new entrants selling relatively quickly whereas models that are not moving on remain at badly-managed, comparably high prices. Just to clarify, there is no dealership “rising” prices, but they are being more optimistic when listing new arrivals and are “forgetting” about the older ones,’ commented Andreas Geilenbrügge, head of valuations and insights at Schwacke.

‘It looks like as if there is a growing volume share of vehicles that are collecting stock days and are not being properly handled by the dealership. The overall volume on offer is rising and stock days are at a significantly higher average level than pre-crisis, at comparable asking prices and a worse list-price relationship. This is becoming a more and more unattractive proposition for dealers and may cause a problem at the end of the year,’ Geilenbrügge added.

This cautionary sentiment was echoed by Ana Azofra, valuations and insights manager at Autovista Group in Spain. ‘Although prices remain higher than before the crisis, the trend is shifting. The cumulative drop in used-car transactions in 2020 is 14% and now, on average, prices are tending to stabilise.’

‘However, the trend is completely different depending on the age group. Even for the youngest cars, prices are starting to drop and the stock volume, which was lower than in March only a few weeks ago, is now higher. This is mainly due to car-rental companies defleeting and as they are not renewing their fleets either, this could affect the volume of the youngest cars in 2021. Furthermore, the incentive scheme is already penalising RVs, as expected,’ Azofra explained.

‘In contrast, prices of very old cars are keeping the positive evolution, both in terms of sales and prices, which is supporting the positive market average to a great extent. Firstly, the crisis is diverting demand towards cheaper cars, which favours used examples – especially older used cars. Secondly, the search for safer and more hygienic mobility has attracted some former users of public transport. In fact, the sales of these age groups especially increased in the regions where the coronavirus had (and has) a higher incidence,’ Azofra added.

The situation is a bit more optimistic than before in Spain, but the country faces the same challenges as elsewhere. Similarly, in Austria, ‘new lockdown measures have come into effect as of November, and there is uncertainty regarding purchasing power and the general economic outlook. Therefore, our RV outlook for the end of 2020 is somewhat better than before, but we expect a shift of negative effects into 2021,’ said Madas.

In Switzerland, the number of active used-car adverts has been rising slightly since the second week of October and was higher than the number of deleted used-car adverts. ‘If this trend goes on, the increasing number of used cars – together with rising dealer and/or manufacturer incentives on new cars – could stop the uplift trend for RVs in the near future,’ Madas concluded.

Further details on the Autovista Group outlook for residual values will be published in the forthcoming update of the Autovista Group whitepaper; How will COVID-19 shape used-car markets?

Click here to join our online seminar broadcast, 16 November 15.30 CET, as we present our latest update on how residual values will develop in a post-pandemic world.

Explaining October’s registration figures

In October, none of the big five European markets achieved a positive increase in registrations. With markets entering various states of lockdown to ease a second wave of coronavirus (COVID-19) infections in November, the picture for the rest of 2020 could become murkier still. Autovista Group Daily Brief editor Phil Curry guides you through the figures in the latest registrations round up.

To get notifications for all the latest videos, you can subscribe for free to the Autovista Group Daily Brief YouTube channel. There you will find videos on a range of subjects including autonomous vehicles, new-car registrations, safety systems, and electrification.

Podcast: How COVID-19, electromobility and technology are changing fleets

The automotive industry has been dominated by certain significant topics in the last year; from coronavirus to electromobility, and new technologies. But how have developments impacted one of the most important automotive sectors? Daily Brief journalist Tom Geggus discusses the opportunities and challenges facing fleets with Autovista Group’s chief economist Christof Engelskirchen.

https://soundcloud.com/autovistagroup/how-covid-19-electromobility-and-technology-are-changing-fleets

Catch up with the first three instalments from this series on the Autovista Group website. Find out how COVID-19, electromobility, and technology are changing fleets. Also, check out Tom and Christof’s articles on autonomous vehicles as mentioned in the podcast: The long road to autonomy, and Facing autonomous disillusionment.

You can also listen and subscribe to receive podcasts direct to your mobile device, or browse through previous episodes, on Apple, Spotify, Google Podcasts and search for Autovista Group Podcast on Amazon Music.

How will technology shape the future of fleets?

The automotive industry has been dominated by a few specific topics in the last year; from coronavirus (COVID-19) to electromobility and the advance of new technologies. But how have these subjects impacted one of the most important automotive sectors? In a new series, Autovista Group’s Daily Brief journalist, Tom Geggus, speaks with industry insiders to discover how these themes are changing fleets. In this third instalment: technology.

COVID-19 has impacted fleets, electromobility is changing fleets, but how will technology shape the future of fleets? From long-awaited self-driving capabilities to the potential for data-driven vehicle management, there exists a smorgasbord of technological advancements for fleets. But if necessity truly is the mother of invention, then fresh approaches to electrically-chargeable vehicle (EV) infrastructure would satisfy an industry-wide appetite. As Chinese OEMs look to the European market, this may be a hunger they could satisfy.

Game-changing services

Even before COVID-19, Chinese OEMs were ready to join the European market. ‘They have the supply; they have the vehicles. So, they are really eager and ready to offer their product and meet the growing demand for EVs,’ explained Mathijs van der Goot, global lead on electric vehicles for LeasePlan. These new entrants look to Europe as a priority. So, it might not be long before alternative ownership concepts, different distribution systems and new technologies create new dynamics in the market.

Mathijs van der Goot

For example, Chinese OEMs could bring with them a new approach to vehicle supply and distribution. ‘They want to move faster. Asking questions like; do we really need that, can we do it differently, can we do it smarter? And each of them does it a little differently. But you see extremely interesting supply chains being created by how they look at their business – it is exciting for the whole market.’

One Chinese OEM is approaching the issue of EV charging differently. Nio recently launched Battery-as-a-Service, where subscribers can swap out and even upgrade their batteries as needed. ‘So, you drive into a garage, and they swap the battery at once, and you can continue. There is no need to plug it in,’ said Van der Goot. With no wall-box installation necessary and no electricity bills to be submitted, a service like this could transform the way fleets manage EVs and their infrastructure.

However, this does not look to be the only service with the potential to disrupt the world of fleets. Alain Duez, co-founder of management consulting company, let it fleet, highlighted the market absence of a multi-model mobility management application. This would serve as a universally applicable system, capable of managing a range of different services, from a car to an electric scooter and even public transport.

‘A real application that could help to integrate all these aspects in an e-system will be key, and it does not exist on the market yet,’ he explained. Duez went also outlined the potential for an app like this to exist within the next five to 10 years. The concept of Mobility as a Service (Maas) has been around for a while. Still, a system capable of supporting the continued demand for the company car, while also equipping fleets with every other transport option would be a game-changer.

The new oil

So, service-based innovations like these could alter how fleets operate, not to mention help end the drought of EV infrastructure. But the automotive industry has yet to plumb the depths of another one of its major technological resources. When explaining what could drive the future of fleets, Paul Hollick, chairman of the Association of Fleet Professionals (AFP), took a deep dive into data.

‘Data. Insight, through data. Not data for data’s sake. Data is the new oil,’ he said. ‘Data and the production of data into indices and metrics to be able to drive down efficiencies. Work out what the best powertrain is per-employee, based on where they live, where they work, their driving styles, their trips, and how many accidents they have,’ Paul said.

But he explained that this information must be utilised properly to provide insights to that can drive change, rather than just generating lists which serve no true purpose. ‘A fleet manager has never had so much opportunity to be able to get the data to be able to shape their strategies.’ This can then be used to reduce carbon, cost, and accident rates.

While telematics technology has continued to take leaps and bounds within the world of heavy goods vehicles (HGVs), there has been little news on the topic for passenger cars. Wim Buzzi, co-founder of let it fleet, highlighted how strange this is given the amount of data a car is now capable of generating, processing and potentially utilising. Successful deployment of data could fundamentally change how a car is managed.

‘Your car could schedule an appointment for maintenance, by first checking your calendar, if it fits with work, then sending a message to the dealership that they need to order parts A, B and C because that is what will need to be replaced,’ Buzzi said. ‘This means dealerships are not sitting with a whole warehouse full of parts, which is dead money.’

Technology like this does already exist Buzzi explained. By connecting smartphones with cars, events are scheduled, with information about routes and traffic jams made available and emails automatically sent to cover late arrivals.

The manufacturer can also benefit from the proper utilisation of data. Getting a better understanding of the life expectancy of a part, when it will need to be changed and how it could be upgraded. ‘So, we will avoid more damage, manufacturers will know how to upgrade their parts and improve their service,’ he said. ‘But for that we will need 5G, because we need the data to send all of this information. It is coming, and it will definitely affect how we approach mobility and fleet management.’ But all of this progress is dependent upon the foundation of fleets, which is the car, and this foundation has to be well managed first and foremost.

Putting safety first

Buzzi also sees the rollout of advanced driving assistance systems (ADAS) as playing a major role in the development of fleets. The advance of lower-level autonomous capabilities is making its way down the vehicle food chain. Buzzi pointed out that it is only a matter of time until these systems are seen in more affordable fleet cars.

The technology holds a huge potential to advance road safety. For example, Automated Lane-Keeping System (ALKS), takes over control of a vehicle at low speeds, keeping it in a lane, especially on dual-carriageways and motorways. This technology could help reduce fatigue for drivers on long stretches of roads, in theory reducing the rate of accidents.

‘[Autonomous technology] could make our roads safer,’ the UK’s secretary of state for transport Grant Shapps commented in August, as the UK began seeking evidence to shape autonomous legislation. ‘In 2018, 85% of road collisions in the UK that resulted in injury involved human error. Automated vehicles could reduce these errors as they will not get tired or distracted. Other countries around Europe are also committing to self-driving technology. The German government is reportedly consulting on a €2 billion automotive aid package, part of which looks to back the advancement of autonomous capabilities.

OEMs are investing heavily in these capabilities as well. Daimler Trucks has partnered with Waymo to develop SAE Level 4 trucks, as they both look to further road safety and efficiency for fleet customers. The autonomous Freightliner Cascadia truck will be available to customers in the US in the coming years, with the partnership investigating potential expansion to other markets and brands in the near future.

‘The combination of increased road freight volumes and the need and vision of fleet operators for highly automated trucks, is what fuels our relentless pursuit of innovation,’ said Roger Nielsen, member of the board of management of Daimler Truck AG. ‘We are pushing engineering solutions that strive above all to increase safety and help our customers improve business efficiencies. Based on our collaboration with Waymo, we will be in the unique position to be able to provide our fleet customers with a choice among the best solutions for their individual requirements.’

DHL’s trend radar shows that while self-driving vehicles are categorised as having a potentially high impact on logistics, this may not be a relevant influence for another five to 10 years because of legal, technical and social barriers.

DHL’s Logistics Trend Radar

Source: DHL

So, autonomous technologies contain the potential for safer roads, decreasing fleet costs and inefficiencies. But with legislation and technology still taking shape, it may be some time before fully self-driving cars are chauffeuring staff members to meetings, while autonomous commercial vehicles make deliveries. While lower-level autonomous support systems make fleets safer in the interim, other automotive technologies like data analysis and mobility services can help shape the future of fleets.

Want to know how COVID-19 has impacted fleets? Catch up with the first fleets ser i es instalment here. Interested in how electromobility is changing fleets? Read the second article here. Still hungry for more insights? Then stay tuned for a special fleet focused podcast coming next week, featuring Autovista Group’s chief economist Christof Engelskirchen.

UK sees registrations drop as it enters second lockdown

The UK has seen its weakest October registrations performance for nine years, as a ‘firebreak’ lockdown in Wales hindered sales of new vehicles and contributed to a 1.6% drop in the market.

The latest data, provided by the Society of Motor Manufacturers and Traders (SMMT), shows that 140,945 units were registered last month, making it the weakest October since 2011 and 10.1% lower than the average recorded over the last decade, according to the industry body.

The arrival of new models and ongoing financial incentives around battery-electric vehicles (BEVs) helped initially to sustain UK demand in the month, but the introduction of a lockdown in Wales on 23 October contributed to the nation recording 25.5% fewer registrations by the end of the month, which accounted for more than half of the overall UK decline.

Grafik: Neuwagen-Anmeldungen Oktober 2020 SMMT

Source: SMMT

Trouble ahead

Year-to-date, the market is down by 31%, according to the SMMT, with 620,921 fewer vehicles on the road. However, the UK is now in a month-long lockdown period that will see all but essential services closed – including car dealership showrooms. This means that only registrations made up until 5 November, when the lockdown started, will count in the November figures, and the SMMT’s expectation is in line with Autovista Group’s predictions that this month will see 100,000 fewer vehicles registered in the country as a result.

‘When showrooms shut, demand drops, so there is a real danger that with England today entering a second lockdown, both dealers and manufacturers could face temporary closure,’ comments SMMT chief executive Mike Hawes. ‘What is not in doubt, however, is that the entire industry now faces an even tougher end to the year as businesses desperately try to manage resources, stock, production and cashflow in the penultimate month before the inevitable upheaval of Brexit. Keeping showrooms open – some of the most COVID-secure retail environments around – would help cushion the blow but, more than ever, we need a tariff-free deal with the EU to provide some much-needed respite for an industry that is resilient but massively challenged.”

UK new-car registrations, January 2018 to December 2020 (forecast from November 2020)

Pkw-Neuzulassungen in Großbritannien, Januar 2018 bis Dezember 2020 (Prognose ab November 2020)

Source: SMMT and Autovista Group

‘While the continuation of click & collect and delivery services is welcome, and should help prevent a return to the sales wipe-out experienced in the spring, it cannot offset the loss of custom from the closure of showrooms themselves, given the unique nature of the car purchase process,’ the SMMT said.

Brexit uncertainty also continues to complicate matters. Tariffs of 10% could be added to imports and exports in the event of no free-trade agreement between the UK and European Union. Carmakers are already highlighting their inability to absorb this tariff, meaning they could tag it onto the price of new cars imported into the country.

With dealerships closed in November, this only leaves one month for consumers and businesses to update their vehicles before factoring in any potential cost increase. This may mean that pent-up demand will aid the market in December. However, as this is traditionally a poor-trading month for the automotive industry, with consumer spending concentrated elsewhere, and with an extension to the UK government’s furlough scheme meaning many consumers are economically worse off during lockdowns, pent-up demand is unlikely to drive the market back to pre-lockdown levels.

UK forecast to fall 32%

To this end, Autovista Group is forecasting a 32% drop in registrations in the UK for 2020. The Autovista Group forecast, first published in June, was a downgrade from the 23% decline forecast in May and 20% forecast in April. In March, before the coronavirus (COVID-19) pandemic took hold, the expectation was that the UK market would only experience a 3% fall in 2020.

The UK’s market continues to be driven by alternatively-fuelled vehicle sales, as petrol and diesel models register declines. In October, petrol fell 21.3%, while diesel dropped by 38.4%.

However, BEVs saw a 195.2% increase in registrations, albeit on smaller figures, with 9,335 units hitting the road in October. Year-to-date, BEVs are up 168.7% as new models and improving infrastructure helped 75,946 vehicles roll out of showrooms. Following a decline due to the abolishing of government grants, plug-in hybrids (PHEVs) are also making a comeback. In October, 7,775 units were registered, representing growth of 148.7%, while year-to-date, PHEVs are up 91.5%.

Video: Carmakers pooling to reduce emissions

As carmakers look to reduce their average CO2 emissions, many are collaborating in pools to spread their figures across a wider fleet. Autovista Group Daily Brief editor Phil Curry explains the benefits…

New-car registrations recede across Europe in October

Autovista Group senior data journalist Neil King considers the slump in registrations in France, Italy and Spain in October.

Despite the existence of government-backed incentives in France, Italy and Spain, new-car registrations in October have dropped over the month, according to the respective automotive trade associations.

Following the lifting of coronavirus (COVID-19) related lockdowns earlier in the year, the countries’ automotive markets had shown signs of recovery. However, all three contracted for the third consecutive month in October, with the exception of the incentive-induced growth in Italy during September.

New-car registrations, France, Italy and Spain, year-on-year percentage change, January to October 2020

Pkw-Neuzulassungen, Frankreich, Italien und Spanien, Veränderung gegenüber dem Vorjahr in Prozent, Januar bis Oktober 2020

Source: CCFA, ANFIA, ANFAC

New-car registrations were 9.5% lower in France in October 2020 than in the same month of 2019 (there was one less working day in the month than in October 2019), according to the latest data released by the CCFA, the French automotive industry association. This is a greater downturn than the 3.0% year-on-year contraction in new-car registrations in the country in September. However, factoring in the lower number of working days (22 in October 2020 versus 23 in October 2019), the CCFA has calculated that the market declined by 5.4% based on an equal comparison.

The incentives introduced on 1 June for new battery-electric vehicles (BEVs) and plug-in hybrids (PHEVs) remain, but the additional bonus for trading in older cars for cleaner new and used cars was exhausted before the end of July. The scrappage scheme reached its 200,000-vehicle cap after just two months, although the Ministry of Ecological Transition did announce the replacement of the recovery scheme with a conversion bonus, which has been in effect since 3 August.

‘Orders were quite good at the start of October, but they deteriorated sharply at the end of the month,’ explained François Roudier, spokesperson for the CCFA. Roudier added that sales revenues are ‘healthier’ than is usual for the end of the year, with more sales to private buyers and less discounted prices meaning ‘margins have held up well.’

In the first 10 months of 2020, new-car registrations in France were 26.9% lower than in the same period in 2019. However, the CCFA reports that demand is 39.1% lower on the basis of a comparable number of working days.

Roudier warned that ‘we must remain cautious about the management of the last months of 2020.’ Between the unpredictable behaviour of consumers in the face of bonuses and penalties, and the ongoing effects of COVID-19, ‘we have a difficult end of the year,’ he concluded.

Pain in Spain

In Spain, 74,228 new cars were registered during October, 21.0% fewer than in October 2019 according to ANFAC, the Spanish vehicle manufacturers’ association. ‘The negative evolution of the pandemic, together with the uncertainty regarding the related social and economic consequences, is causing a generalised fall in sales, which could be even worse without the support plans approved for the sector,’ ANFAC commented.

The MOVES II and RENOVE schemes were introduced in July and the new-car market saw a 1.1% increase in the month. Since then, however, there have been respective monthly declines of 10.1% and 13.5% in August and September, and now 21.0% in October. It is therefore clear that weak underlying consumer demand is the problem in the country. Measures to deal with the second wave of COVID-19 infections, and the calculation of the registration tax based on WLTP emissions figures from January 2021 are further complicating the recovery.

Noemi Navas, communications director of ANFAC, explained that ‘the purchase assistance plans are good tools to achieve stimulation of the market and prevent the falls from being even worse. The crisis situation is going to extend into 2021 and if we do not want the sector and its employment to fall even more, it will be necessary to maintain the support. At ANFAC, we are very concerned about the effect that an increase in the registration tax would have, due to the switch to WLTP, in a market that cannot overcome the COVID-19 crisis.’

‘It is important to make the buyer understand that if they intend to change cars, they should not postpone the decision. From January, there is a risk of a rise in prices as a consequence of the entry into force of the WLTP regulation, which will mean that vehicles that were previously exempt from registration tax will have to pay as the parameters for measuring CO2 emissions change,’ added Tania Puche, communications director of the Spanish dealer association GANVAM.

Italy back in negative territory

In Italy, the year-on-year downturn in October reported by the industry association ANFIA was just 0.2%, although the result would have been positive (up by about 4%) had there not been one less working day. Nevertheless, this does mark a return for the country to negative territory following the 9.5% growth in new-car registrations in September due to the new government incentives that came into effect at the beginning of August as part of the Decreto Rilancio (Relaunch Decree). While the market still contracted in that month, demand improved but delivery times delayed many registrations until September.

‘In this phase, we are engaged in ministerial meetings for the presentation of the proposals of the Italian automotive industry in relation to the recovery plan, an opportunity not to be missed to support the sector in this difficult industrial transition. We are working on the four pillars necessary to guarantee its strategic repositioning and competitive advantage: interventions to support investment in research and innovation; the promotion of smart and shared-mobility projects; interventions on human capital and financial interventions to support businesses. We hope that these lines of action are considered a priority and may have sufficient space in the final plan,’ commented Paolo Scudieri, president of ANFIA.

The key to recovery of new-car markets revolves around countries agreeing budgets for 2021, and improving economic certainty and consumer confidence to boost spending. However, with a second wave of COVID-19 cases washing across Europe, and accompanying lockdowns, the industry certainly does face a difficult end to 2020.

What is in store for Europe’s car dealers?

The dealer sector in Europe has undergone the most substantial changes over the past 10 years, with the number of dealer outlets falling by 16% to 52,000 across Europe. Autovista Group chief economist Dr Christof Engelskirchen explores the challenges facing the sector.

Consolidation started well before 2009, driven mostly by margin pressures, and looks set to continue: digitisation and OEMs wanting to take more control in the sales process will serve as catalysts to this trend. Is this bad news for the sector? No, it is not.

In search of economies of scale, we see a trend of strong investment activities in the dealer sector. For example, in the UK Anders Hedin Invest has bought an 11.6% stake in Pendragon, the country’s biggest dealer group and Europe’s fourth-largest. US company Penske is now Europe’s second-largest dealer group, primarily because of its UK investment. The top 50 dealer groups in the country captured 42% of new-car sales in 2018, compared with only 27% in 2008. On average, UK dealers sell around 600 cars per year. Europe’s average is 331. More consolidation is highly likely. The Swiss dealer group Emil Frey, which is Europe’s biggest dealer group, has dominated consolidation.

New-car sales: agency model and margin pressure

New-car sales operations were already the least profitable activity for dealers, far behind aftermarket and used-car sales. Margin pressure will continue in this area. The dealer role in new-car sales will change, and as a result of more units selling online, OEMs seeking more direct customer interaction and the continuing trend to more leasing or personal contract purchase (PCP). New players will enter the market with new business models like car subscriptions. Car sharing, while economically challenged, will likely see a recovery as well.

An agency model for dealers adopting a consultative approach to selling is a likely future activity in the new-car sector. It will also be required, because a friction-less online and offline experience (some call it omnichannel) is an attractive future for car seekers. The process of vehicle purchase will move between the online and offline worlds, as customers seek information, personal contact, and test drives. However, it should not matter where the final deal is done.

Megatrends bridge profitability gap

There are new opportunities for dealers linked to automotive megatrends, that can close a large portion of the profitability gap:

New business models, like maintaining and operating car-sharing fleets, or installing and running battery-charging stations;
Streamlining processes and services sales operations – consolidation and economies of scale play a role as well;
Strengthening the customer experience by employing big data analysis, addressing individual customer needs and offering new loyalty and incentive models;
OEMs understanding the importance of a strong and accessible network of car dealers. Staff at dealerships will become increasingly salaried, rather than on commission, to encourage consultative selling rather than hard-selling; and
The sale of a vehicle will happen in an ‘omnichannel’ environment, where dealers will help customers configure their vehicles, arrange test drives, deliver vehicles and provide services. For example, linking electric-vehicle (EV) ownership to car-sharing options, such as for holidays, will present revenue-generation opportunities.

Rising number of used-car transactions

Behind aftermarket, used-car operations are already the second biggest contributor to a dealer’s profitability. Used-car operations will continue to remain a most important pillar of dealer success. The good news is that while new-car sales might have peaked in Europe, the number of used-car transactions will rise. The main drivers are the growing trend of vehicle leasing and car subscriptions. These business models create more used cars than regular car buying, as holding periods are shorter. For alternative powertrains, leasing is particularly dominant as private buyers are less willing to take on the associated higher asset risks. Moreover, OEMs have started to encourage leasing as it keeps the customer close.

Autovista Group foresees that the number of young used cars will rise over the next decade, a much-needed boost for the dealer sector. These transactions will increase from 7.8 million transactions in Europe in 2019, to 12.1 million transactions in 2030, an increase of 55%.

Figure 1: Used-car transactions Europe + UK 2019-2030, by age group, incl. UK, in million units

Gebrauchtwagengeschäfte Europa + UK 2019-2030, nach Altersgruppen, inkl. UK, in Mio. Einheiten

(Source: IHS, ACEA, Autovista Group simulation)

Consolidation professionalises dealers

Dealer groups are aware of the growing number of used cars and have adopted a strategy that reflects this. For example, Penske Automotive Group Inc. is bullish on its standalone used-vehicle store strategy and sold almost twice as many retail used cars than retail new cars in Europe. The company announced that Q3 2020 was the most profitable quarter in its history. It has 16 standalone used-vehicle ‘supercenters’ in the US and the UK, which saw a rise in revenues of 8%. Expense reduction also contributed to the success.

In Germany, the number of franchised dealerships reduced from roughly 17,500 in 2013 to some 15,000 in 2018. At the same time, the used-car revenue per dealer rose from approximately €1,800,000 to €3,750,000 (Figure 2). The value generated therefore rose from €31.5 billion to €56.3 billion.

Figure 2: Number of franchised dealers vs. used-car revenue per dealer in €, 2013-2019

Anzahl der konzessionierten Händler vs. Gebrauchtwagenumsatz pro Händler in €, 2013-2019

(Source: Association of German Car Dealers, Schwacke Analysis)

New opportunities

New business opportunities around the automotive megatrends, a different role in new-car sales and professionalised used-car operations represent great opportunities for dealers and dealer groups. Economies of scale will be more important than ever before. It will also be important to make the right investment decisions during these challenging times. The smallest change will likely be a new name for the old-fashioned term ‘dealer,’ which many associated with the outdated concept of haggling. There are plenty of options to choose from, e.g. retail specialists, sales agents, sales consultants or service factory. It will be exciting to see how the sector will evolve over the coming years.

Video: Emissions anxiety for carmakers

Autovista Group Daily Brief editor Phil Curry explains why some carmakers are concerned about rising CO2 levels, and how the industry has got to this point with a strict European target in place…

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How is electromobility changing fleets?

The automotive industry has been dominated by a few specific topics in the last year; from coronavirus (COVID-19) to electromobility and the advance of new technologies. But how have these subjects impacted one of the industry’s most important sectors? In a new series, Autovista Group’s Daily Brief journalist, Tom Geggus, speaks with industry insiders to discover how these themes are changing fleets. In this second instalment: electromobility.

While COVID-19’s impact on the automotive industry has been sharp and sudden, the effect of environmental concerns can be considered tectonic. But now the two phenomena are driving change in tandem, with COVID-19 acting as a catalyst for a shift to greener mobility. Pandemic recovery plans and environmental regulations are leading automotive companies and consumers down the road of electrification. Leaders of the European Automobile Manufacturers’ Association (ACEA) recently called for pandemic recovery funds to be channelled into a green comeback.

Analysis conducted by Transport and Environment (T&E) revealed that electric cars will treble their market share in Europe in 2020, with most carmakers on track to meet their EU emissions targets. The environmental lobbying group also pointed to company cars as the ‘low-hanging fruit’ of electrification. T&E claim the segment could be utilised to achieve national climate goals, given that six out of 10 cars sold in Europe are company cars, and that last year 96% of new registrations belonging to the sector were petrol or diesel. So how are fleets adapting to electrification in the wake of COVID-19?

PHEVs meet policy

Management consulting company let it fleet sees the high life cycle cost of vehicles and increasing congestion in cities as cars are chosen over public transport, alongside the desire and need to be environmentally friendly, as leading people to alternative modes of transportation. This means a fundamental role change for fleet managers.

On top of looking after company vehicles, fleet managers will now oversee a wider variety of transport options, not to mention learning about new mobility technologies. As travel needs change with new working practices, combined with the influence of environmental consciousness, flexible approaches to mobility and policy will be essential. Plug-in hybrid electric vehicles (PHEVs) are one key example, as government incentives, OEM supply and emissions regulations drive adoption.

‘Maybe the leasing will be over five to six years into the future because you will be driving less,’ said Alain Duez, co-founder of let it fleet. ‘It could also be that you will have more hybrid cars because driving less means that it will be more in favour of the hybrids tomorrow.’

‘If we look at what the market is offering, you cannot do without the plug-in hybrid, because there is not enough offering yet,’ explained Wim Buzzi, co-founder of let it fleet. ‘It is a good technology. But if you’re going to allow your people to drive plug-in hybrids without recharging them, then you have a crucial error in your policy.’

This opens up the potential for the creation of specific strategies to deal with how these vehicles are used, in line with day-to-day operations. For example, over-reliance on the internal combustion engine (ICE) could render a PHEV’s electric capacities pointless if not properly utilised, making its green credentials effectively null and void. Companies could lay out comprehensive policies for when, where and how to recharge, all dictated by how the car is driven. Equally. the employee could simply submit their fuel bill, so long as it reflects responsible use.

This also lays the road for onboard technologies, like telematics and smartphone applications, all allowing fleet managers to determine employee travel patterns. Accompanied by open communication and transparency, this would help assess the potential options for reducing costs and emissions without affecting efficiency or productivity. However, while driver behaviour might change as well as powertrain technology, the basic need for mobility will not.

‘Maybe in 10 years’ time, people will not have a dedicated company car parked in their car park every day, and they will have a subscription model. But they will always need the car,’ said Buzzi. ‘So, in whatever form, that car will always be included.’

Online trends drive on-road vehicles

COVID-19 also resulted in a surge of online shopping, with 52% of consumers buying more online from domestic retailers and 49% stating they will do so more in the future. But as concerns over the environmental impact of these trends grow, logistics companies are having to double-down on green initiatives.

Deutsche Post DHL (DPDHL) recently announced it is further committing to reducing emissions, in line with its GoGreen programme. By 2050, DPDHL aims to reduce all logistics-related emissions to zero. EVs currently make up 15% of DPDHL’s fleets, an increase of 10% over the last three years. In its 2019 Sustainability Report, the logistics company revealed that it uses over 13,000 vehicles with alternative drive systems, including more than 11,600 EVs.

‘In terms of e-mobility, especially in terms of electrification of our delivery fleet, I believe that we are really one of the leaders in the global market, and we are very proud of that position,’ said Nancy Cui, vice president for global car and van procurement at DPDHL. ‘I think that the percentage of our electric van fleet is, in comparison to the rest of the market, very high, especially in the LCV segment.’ However, integrating EVs into a demanding delivery role did initially invoke some range anxiety.

‘With the introduction of these electric vans in domestic parcel and letter services, we saw at the very beginning some kind of range anxiety of the couriers,’ explained Lars Pappe, Vice President of eMobility design and development at DPDHL. ‘But pretty soon the drivers found out they have an average route length of only 25 to 40 kilometres a day, while the battery capacity of these vehicles exceeds this by far. So even in wintertime, there is enough battery capacity left to return to the depot.’ This realisation, coupled with proper route planning and staff training packages, helped reduce driver range anxiety to a minimum.

Alongside its delivery vehicle subsidiary, StreetScooter, DPDHL also has a strong focus on infrastructure. ‘DPDHL Group has installed more than 15,000 charging points throughout Germany in our depots and electrified roughly 13,000 of our delivery routes here,’ said Pappe.

Presently, the logistics company is tasking a dedicated team with assessing DPDHL sites around the world, working out the electrification needs in terms of infrastructure and energy supply.

Going carbon negative

Microsoft began a PHEV project in Germany roughly three years ago, before the implementation of green incentive schemes. The team discovered the powertrain could be a useful tool when tackling fleet emission targets. However, the PHEVs had to make optimum use of their electric capacities, which meant charging them as often as possible, and not over-using the ICE.

This push to make the most of different environmentally-friendly technologies will be essential for Microsoft as it looks to meet its own green targets. At the start of this year, the computing giant announced it will become carbon negat i ve by 2030, and, by 2050, will have removed all of the environmental carbon it has emitted, either directly or by electrical consumption, since it was founded in 1975.

To combat this, Microsoft is working on a number of measures. It is forming new strategic alliances with existing partners like Shell, to secure supplies of renewable energy. It is extending its internal carbon tax to tackle indirect emissions, as well as electrify its global campus operations vehicle fleet by 2030. How the company goes about acquiring vehicles like these for its fleets involves a rigorous procurement process.

‘We work with a selected number of OEMs,’ explained Michael Pohl, senior procurement engagement manager fleet at Microsoft. ‘We tender them every three to four years, which we just did last year, and now the result is a new setup. With those OEMs, we work closely on our strategy, on discounts, on bonuses, and on agreements.‘

‘Some OEMs do offer discounts for electric vehicles, but this is not common, and they are not in the same league as the discounts on standard drivetrains. Of course, every OEM is keen for us to purchase as many electrified cars as possible, because it will help them with their CO2 emissions and potential penalties they have to pay to the EU, but they cannot necessarily deliver the number of cars we would need in a given or required timeframe.’

Essential infrastructure

Zitat zu den Kosten von Elektrofahrzeugen

As EV demand builds momentum, OEMs must boost man u facturing processes to keep pace while suppliers incentivise sales. These measures will have to go into overdrive as consumers and fleet managers alike begin to see the long-term benefit of electromobility. One of these benefits is the overall cost of owning an EV.

At the end of September, LeasePlan released its annual Car Cost Index, which reveals the true cost of owning a car, including fuel, depreciation, taxes, insurance and maintenance. EVs in the compact and mid-size segment are fully cost-competitive compared to ICE-powered vehicles in countries including France, Germany, and the UK. Autovista Group analysis also reveals that B-segment and C-segment BEVs are competitive compared to petrol models, albeit only because of government incentives.

‘The good news is that the costs of EVs are coming down and we are seeing the development of a strong second-hand market for quality used EVs,’ said Tex Gunning, CEO of LeasePlan. ‘The bad news is that governments are failing to provide the charging infrastructure necessary to satisfy market demand.’

In a recent blog post, Mathijs van der Goot, global lead on EVs for LeasePlan said, ‘it is essential to ensure that the charging infrastructure is aligned with the flourishing e-mobility market.’ There are currently more than 195,000 public charging in Europe, a rise of over 300% since 2014. But this falls a long way short of how many the industry needs. Last year, LeasePlan called for one million charging stations by 2025 and the European Commission estimates 2.8 million will be required by 2030.

A report filed by Technology intelligence company IDTechEX in September outlines the unique demands fleets could have on EV infrastructure. ‘Although electric fleet charging represents roughly 3% of the total charging infrastructure in volume, it constitutes over 20% of the total market value due to the added cost associated with the high-power requirements,’ the report states.

So, the need for improved charging infrastructure to support fleet electrification is vital, even as EVs become more affordably priced. If fleet managers are going to adopt these vehicles on a wide scale, charging anxiety will need to be tackled alongside shrinking price tags. Subsidies and governmental schemes will help tackle this challenge, but the advancement of charging technology will also play its part. But will this be the only big tech change coming to fleets within the next few years?

Want to know how COVID-19 has impacted fleets? Catch up with the series by reading the first instalment here.

Podcast: Tracking automotive markets, recalls and emissions

In its latest podcast, the Autovista Group Daily Brief team discusses the new Monthly Market Dashboard, plug-in hybrid (PHEV) recalls and manufacturer emissions targets…

https://soundcloud.com/autovistagroup/mmd-recalls-and-emissions

You can also listen and subscribe to receive further episodes direct to your mobile device on Apple, Spotify, Google Podcasts and search for Autovista Group Podcast on Amazon Music.

Click here to access our Brexit survey, and tell us how the negotiation uncertainty and the UK leaving the EU is impacting your business and industry.

Monthly Market Dashboard: RVs rise across Europe, but for how long?

BMW is carrying out a global recall of some of its plug-in hybrids (PHEVs) produced this year, due to battery fire concerns. The carmaker is also suspending delivery of affected vehicles as part of a ‘preventative measure.’

In the first of a new monthly initiative, Autovista Group has created a dashboard showcasing the latest data on residual values, average selling days, the fastest-selling used cars and the residual value outlook in France, Germany, Italy, Spain and the UK. Senior data journalist Neil King discusses the findings.

Autovista Group’s new monthly market dashboard (MMD) reveals that the average residual value (RV) of cars aged 36 months and with 60,000km grew year on year in all the Big 5 European markets in October. Even RV retention, represented as RV%, grew year on year in all markets except Germany. The highest growth in RV% terms was in the UK, where the average RV% was 48%, equating to a 1.9% improvement on September and a healthy 14.9% change compared to October 2019.

As reported in our coverage of the ‘three-speed’ development of RVs across Europe, the UK is enjoying the release of pent-up demand, both from the coronavirus (COVID-19) lockdown and the uncertainty running up to the country’s departure from the European Union on 31 January. The country also faces a starker vehicle-supply challenge than any other market, which is filtering through to higher RVs as used-car demand outstrips supply.

Quicker rehoming

In addition to the growth in RVs in most markets during October, three-year-old cars are also selling quicker than a year ago in all the major European markets, except Spain. Three-year-old cars are selling the quickest in the UK, moving on after an average of just 33 days. However, the greatest reduction in the average number of days for 36-month-old cars to sell, compared to October 2019, was in France. These vehicles now have to wait on average only 37 days to find a new buyer in France, sitting idle for a significant 23% fewer days than in October 2019.

The fastest-selling model in France in October 2020 was the Peugeot 208, which took just 17 days to find a new home. After the Peugeot 208 in France, the fastest-selling models across the major European markets were in the UK. The Range Rover Evoque and the Mercedes-Benz GLC also took less than 20 days to be rehomed in October.

The future’s not so bright

The new MMD also features the latest Autovista Group RV outlook for the major European markets. The current trend for rising RVs is unfortunately not forecast to continue in 2021. Autovista Group predicts that at year-end 2021, compared to year-end 2020, RVs of cars in the 36 month/60,000km scenario will be lower in France, Italy, and the UK and merely stable in Spain. The weakest outlook is for Italy, where RVs are currently forecast to be 3.9% lower by the end of 2021 than at the beginning of the year. RVs are only expected to be higher in Germany, albeit with year-on-year growth of only 0.4% forecast for both 2021 and 2022.

Click here or on the screenshot above to view the monthly market dashboard for October 2020.

Brexit survey: have your say

There are only 70 days until the UK’s Brexit transition period with the European Union (EU) comes to an end. Currently, there is still no certainty on future trading relationships, or how the UK setting its own regulations will affect businesses and technology developments in the coming years.

Autovista Group wants your views on Brexit, from the impact a ‘no-deal’ would have on the automotive industry in both Europe and the UK, to your opinions on how the two parties have managed the process.

Click here to access our Brexit survey, and tell us how the negotiation uncertainty and the UK leaving the EU is impacting your business and industry.

BMW hybrid recall reignites PHEV fire concerns

The recall notice will come as a blow to the manufacturer, which recently revealed promising third-quarter free cash flow figures. Thanks to a fast recovery in several markets, BMW saw higher sales growth compared to the same period last year, on top of optimised working capital and a reduction of fixed costs. The manufacturer’s free cash flow from the automotive segment in Q3 2020 amounted to over €3 billion, compared with €714 million in Q3 2019.

But more widely, the recall could have a knock-on effect on vehicles equipped with alternative powertrains. With faults being reported by the likes of BMW and Ford, consumer confidence could take a real hit, alongside the residual values (RVs) of these electric vehicles (EVs).

Worldwide recall

In a statement to Autovista Group’s Daily Brief, the German carmaker confirmed the details of the recall. ‘BMW Group has launched a worldwide safety recall and stopped delivery of a small number of plug-in hybrid vehicles as a preventative measure to check the high-voltage battery,’ it said.

‘Internal analysis has shown that in very rare cases, particles may have entered the battery during the production process. When the battery is fully charged this could lead to a short circuit within the battery cells, which may lead to a fire.

‘A total of 26,700 vehicles are affected worldwide, of which only around 9,000 vehicles are already with customers and have been recalled. BMW apologises for the inconvenience caused to customers, but of course, safety must come first,’ the carmaker concluded.

In the US, National Highway Traffic Safety Administration (NHTSA) documents reveal that BMW became aware of an incident involving a 2021 BMW X5 on 4 August 2020, where the vehicle experienced a ‘thermal event’, whereupon it began analysis. Then, between early August and mid-September, the manufacturer became aware of three additional incidents.

‘A review of supplier production and process change records indicated that for the incident vehicles, battery-cell production at the supplier occurred during a specific and limited time period,’ the document states. The NHTSA document identifies Samsung as a component manufacturer. Autovista Group’s Daily Brief did approach the battery maker for comment, but it did not respond prior to publication.

On 23 September, BMW decided to conduct a voluntary safety recall. According to the NHTSA report, there are some 4,509 recalled PHEVs in the US, including 2,441 X3 xDrive30e (2020-2021), 1,228 X5 xDrive 45e (2021), and 33 Mini Cooper Countryman All4 SE (2020-2021). BMW is currently working on a solution to the fault. Until a remedy is available, drivers will be instructed to not charge their vehicle, not to drive in manual or sport mode, and to not use the shift paddles.

Wider EV impact

BMW is not alone when it comes to EV difficulties. Both Audi and Jaguar recalled their battery-electric vehicles (BEVs) in June 2019. Audi experienced issues with the e-Tron’s battery cells, while Jaguar recalled the I-Pace because of a software fault that could have resulted in the failure of the electric braking system.

In August, Ford issued a recall notice for Kuga PHEVs it built up until 26 June, after four vehicles reportedly caught fire. The problem was traced back to the potential for water to cause an electrical short, which could then lead to overheated battery cells. It was estimated that over 20,000 models could be affected.

Recently, Ford Werke GmbH posted a video to YouTube, with managing director Hans Jörg Klein, apologising for issues with the model and asking for customer patience as troubleshooting could take months rather than weeks.

With manufacturers pushing to make an electrified COVID-19 comeback, the success of their electrified models is of paramount importance. Carmakers are considering PHEVs as an essential stepping stone for some consumers on the road to full BEVs. If big brands like BMW and Ford produce problematic PHEVs, consumer confidence in electrified vehicles could take a hit.

This could then have a knock-on effect on RVs, as consumers shy away from vehicles linked to recalls, potentially in favour of models with internal combustion engines. As pointed out in the Autovista Group and Twaice Power of Signalling whitepaper, information on battery condition can be invaluable to help combat the asymmetry of information, and could significantly increase RVs.

UK to adopt EU emissions regulations following Brexit transition period

The UK government has confirmed it will adopt European Union (EU) emissions targets for 2021 and beyond at the end of its Brexit transition period on 31 December 2020.

Following a consultation, the government said that the existing target of 95g/km CO2 emissions averaged across a vehicle fleet would remain, meaning carmakers may continue with their current strategies to ensure they meet the strict regulations. Many are looking to achieve this by selling a greater number of battery-electric vehicles (BEVs) and plug-in hybrids (PHEVs). However, all must now be aware of their performance in two markets, rather than a single one.

Had the UK government decided to go its own way with regards emission targets, there were fears that the supply of BEVs and PHEVs in the country would become limited, as carmakers focused on supplying Europe to meet the needs of a bigger market.

The new UK rules will mirror those in the EU, including an £86 (€95) fine for each g/km above the carmakers’ respective targets multiplied by the number of vehicles registered in the year.

Changing figures

As the UK’s average fleet mass is heavier than that of the EU, the UK government has highlighted that the sum of individual manufacturer targets in the UK will be slightly higher than the sum of targets in the EU.

‘While this may therefore appear to be a slight relaxation of standards, by retaining the average EU mass value, it replicates the same level of effort required by manufacturers as under the current scheme in the EU,’ the government said. ‘This ensures that the regulation is as ambitious as existing arrangements.

‘If the UK average mass value was used to calculate manufacturer targets instead, it would make targets immediately more challenging.’

The UK average mass is updated every three years and will be used in calculations from the next due update onwards.

Future targets

The UK will also adopt EU targets set for 2025 and 2030 for a further reduction in vehicle CO2 emissions, meaning manufacturers will have to reduce output by 15% (based on 2021 levels) in 2025, with a 37.5% reduction in 2030.

European regulations (EU) 2017/1152 and (EU) 2017/1153 establish the correlation procedure to be used during the regulation’s conversion from New European Driving Cycle (NEDC)-derived targets and calculations to Worldwide Harmonised Light-Vehicle Test Procedure (WLTP)-derived targets and calculations.

While the corrections needed to ensure these regulations continue to function in the UK are minor, the EU dataset will be used as a basis for the correlation between NEDC and WLTP, providing further clarity for carmakers.

Super credits

One of the biggest changes in the government’s consultation announcement is the lowering of the CO2 g/km threshold for carmakers to apply for ‘super credits’. The credits can be used against emissions targets, and work as an incentive for manufacturers to sell more zero- and low-emission electric vehicles (ZLEVs) as they will multiply within a fleet. For 2020, one super credit counts as two vehicles, with this dropping to 1.67 in 2021, and 1.33 in 2022.

In the EU, the amount that manufacturers may benefit from the use of super credits is capped at 7.5g/km cumulatively over 2020-2022.

As the new regulations will only take effect from 2021, the UK government has decided to reduce the cap for two years to 3.75g/km. This received a mixed response in the consultation, some arguing that the figure was too high as carmakers may have already used their EU-mandated 7.5g cap, others suggesting it was too low, unfairly affecting those looking to bring more ZLEVs to the market in 2021 and 2022.

‘It is evident via the nature of the responses that this issue is complicated,’ the government said. ‘An increase in the super credits can act as an incentive for car manufacturers to put more ZLEVs on to the market, which is in line with the government’s net-zero and decarbonisation commitments.

‘Equally, the government recognises super credits can artificially lower manufacturer targets, thus providing the opportunity for higher emission vehicles to be sold. There is the possibility that manufacturers will use their EU-allocated 7.5g CO2/km cap in 2020 alone, meaning the 3.75g CO2/km cap available across 2021 and 2022 will be in addition to the super credits offered in the EU regime. Whilst this is possible, due to the timelines for enforcing the regulation, it will not be known until October 2021.’

Launch report: Volkswagen ID.3

The Volkswagen (VW) ID.3 is the carmaker’s first dedicated battery-electric vehicle (BEV) and features a futuristic look to appeal to both a new and existing customer base. The interior is ultramodern, and the powertrain is beaten only by the Nissan Leaf.

The BEV market is expanding rapidly, thanks mostly to the emissions targets set by the European Union and a collapse in diesel sales. As Europe’s market leader, and a company heavily reliant on internal combustion engine (ICE) sales, VW has to succeed with its BEV plans, and has therefore conceived a new sub-brand to carry the weight of this expectation. The ID.3 is the first offering, and the carmaker has promoted the vehicle extensively prior to it going on sale.

As an important car, it has received a lot of attention from VW, and this shows in its development with a competitive range and fast charging times.

As a rapidly expanding market, the ID.3 needs to compete with established models such as the Nissan Leaf, as well as newer options from Asian carmakers, like the Kia e-Niro and Hyundai e-Ioniq.

Click here or on the image below to read Autovista Group’s benchmarking of the VW ID.3 in France, Germany, Spain and the UK.

We present new prices, forecast residual values and SWOT (strengths, weaknesses, opportunities and threats) analysis.

Video: Laying the foundations for autonomous cars

In part two of our insight into autonomous vehicles, Phil Curry talks with Autovista Group’s chief economist Christof Engelskirchen and Daily Brief journalist Tom Geggus about the practical applications for self-driving technology and the infrastructure needed to support it…

Watch the first video in the series here. To get notifications for all the latest videos, you can subscribe for free to the Autovista Group Daily Brief YouTube channel. There you will also find videos on a range of subjects including incentive schemes, safety systems, electrification and event reviews.

How has COVID-19 impacted fleets?

The automotive industry has been dominated by a specific number of topics in the last year. From coronavirus (COVID-19) to electromobility and the advance of new technologies. But how have these topics impacted one of the industry’s most important sectors? In a new series, Autovista Group’s Daily Brief journalist, Tom Geggus, speaks with industry insiders to discover how these themes are changing fleets. Up first, COVID-19.

As countries went into lockdown to prevent the spread of coronavirus, the toll on the automotive industry was enormous. Between February and April registrations went into free fall, manufacturing ground to a halt and supply chains froze. Currently, incentive schemes are providing short-term stimulation, but the long-term consequences of the pandemic could be much further reaching, for fleets in particular.

In the beginning

Peter Golding, managing director of fleet management company FleetCheck, explained that early on in the pandemic there was a binary divide between essential service operators and those companies which had to put business on hold.

‘If we look at the impact to essential, they had a significant challenge because there was an expectation that they could increase capacity,’ he said. Some vehicles were seeing an exceptional jump in usage, which meant implementing increased sanitisation practices and policies to protect staff. Some companies even found themselves taking on board furloughed staff to meet demand, which meant training inexperienced drivers how to operate a vehicle that was completely new to them, all in non-ideal conditions.

Meanwhile, companies that found themselves operating out of their employees’ homes were without the integral systems that only functioned in an office environment due to safety restrictions. So the businesses with fleet-management software tied to localised intranets were at a distinct disadvantage to those with a cloud-based system. Meanwhile, those companies needing to pause operations and lay up a fleet were faced with a different conundrum.

‘If we are dealing with the issues of laying up fleet, the uncertainty of the duration of COVID-19 and how long the shutdown was going to last,’ said Golding. ‘Having a vehicle stand down for a month is quite different than having a vehicle stood down for five months.’

As time passes

Formed in March this year, the Association of Fleet Professionals (AFP) serves over 1,000 members in the UK, providing best-practice advice, training and representation. As the number of COVID-19 cases continues to fluctuate, fleets may find themselves facing fresh challenges as more time passes.

‘I think the reality for fleet operators, is that they’re likely to see impacts well into 2021,’ said Paul Hollick, chairman of the AFP. This could include vehicle safety, as cars sit unused and uninspected for long periods of time, particularly if they are not company assets. Both the driver’s physical and mental health also become a cause for concern, whether they are having to risk commuting into the office or if they are becoming more confined to their home.

‘The other big thing, of course, is cost-saving and cost-reduction as everybody starts to tighten their belts,’ Hollick said. Trying to deliver savings at a time of economic fallout has meant reviewing and re-reviewing budgets to reduce the impact on bottom lines.

But as with operation types, not all vehicle types have suffered the same effects at the hands of the pandemic. ‘The van market has just gone crazy because of course, the delivery sector in a COVID-19 world requires a lot more vans on the road to be able to lift goods and services to people’s address rather than to deliver to depots.’

Lars Pappe, vice president of e-mobility design and development at Deutsche Post DHL, considered that even after COVID-19 some trends may persist, particularly in relation to online shopping. ‘So I think the average amount of parcels we ship in B2C-related business, I think it will remain on the high volume level in comparison to before the COVID-19 situation.’

Since parcel volumes are expected to remain on the current high level, for some logistics providers this might mean increasing the number of light commercial vehicles (LCVs) in their fleet, to cope with a greater number of deliveries. Meanwhile, other operators might decide to increase the size of the LCVs they operate, to deal with larger loads. But whether operators are able to acquire additional vehicles, or even refresh their fleet from the currently distressed supply chain is another question.

Uncertain times

‘Many companies have pushed to extend their contracts for various reasons,’ Sjoerd Brenters, head of international consultancy services at LeasePlan explained. ‘Clients might be more careful with leasing new vehicles and instead extend existing contracts given the uncertain times we live in,’ he said.

Upon impact, COVID-19 caused OEM supply chains to come to a standstill as the delivery of vehicles became problematic. However, these issues could be rectified as manufacturing restarted. The longer-term changes look to involve order completion and getting the car to the customer. Considering the impact on used-car sales, for example, Brenters explained how the LeasePlan subsidiary CarNext.com was well-positioned to handle the pandemic. With vehicles being ordered online, delivered directly, and all with little to no human interaction, CarNext.com could easily deliver vehicles in a safe way.

There is even the potential for a short testing period, with the option to return the car after a trial period for a relatively low amount. If this were to be the case, the relationship between those who supply fleet vehicles and those who use them could become far more direct, without the need for human interaction.

However, how these vehicles might be used is another matter. While at the start of the pandemic, cars were parked up, the need for these vehicles was not drawn into doubt. ‘Employees and employers are starting to rethink the usage of the vehicle. This doesn’t mean less usage, it just means different usage.’ said Brenters. ‘A car may be used less for commuting to work, but used more for vacations, for example, especially with people wanting to avoid flying.’

Therefore, the need for higher-end vehicles in which a member of staff spends a lot of time travelling would not decrease, its use would just shift. This will surely also influence the size and type of car which employees choose going forward.

On top of the pile

Operating a benefit fleet for its employees, Microsoft leases roughly 9,200 cars across nearly 50 countries. Managing the company’s vehicles in 10 of these European countries including Germany, Austria and Switzerland is Michael Pohl, senior procurement engagement manager fleet at Microsoft.

In the early stages of the COVID-19 pandemic, Pohl’s team received advice that vehicle orders should go on hold, but this was not the path he chose. ‘I remember saying, if everything is piling up, I want to be on top of the pile. We agreed that we are not going to stop anything. We continue to order cars, as well as possible. Within the limitations of operations in spring of this year,’ he said.

‘The only thing we did was to give the employees more time, because it was not possible for them to do test drives, for example. They need more time to figure out what type of car they want to drive in the future,’ Pohl explained.

Looking back, it is not a decision Pohl regrets for a moment. As production lines became operational, Microsoft orders were fulfilled with a shorter lead time, compared to the companies who decided to go on hold.

Looking forward, Pohl explained that COVID-19 is not the death of the company car, it is in fact far from it. ‘Since COVID, people have realised that having a company car gives you an incredible freedom,’ he said. These vehicles open up the potential for commutes without public transport, holidays without aeroplanes, and freedom without compromise.’

Right strategy for tomorrow

The coronavirus crisis has taken so much. It has taken lives and it has taken livelihoods. But it did provide one thing; time. As automotive production paused, distribution dried up and sales stopped, Alain Duez and Wim Buzzi used their time in lockdown to found a new company; let it fleet.

Drawing on their combined 45 years’ worth of experience in the automotive industry, the pair built the company on the pillars of people, procurement and process. Driven by a desire to approach vehicle supply from a customer perspective, let it fleet aims to create customised support that addresses every element of fleet management. This covers a wide gambit from policy assessment, to contract management and recruitment support.

As Duez and Buzzi established their new venture amid the pandemic, others in the automotive and fleet industry also had time to reflect. ‘Coronavirus right now has meant that a lot of companies have time,’ explained Buzzi. ‘They had frozen their car orders or extended their contracts because nobody is driving. And it gave them time to look at things.’

COVID-19 has meant the restructuring of fleet strategies. At present, liquidity remains at the top of the agenda while leasing costs mount. New-car sales have plummeted while lead times increase and manufacturers wrestle with their supply chains. Looking down the road, the company car faces a new world with the likes of more home-based working and the tightening of purse strings.

‘So, the way we will use a car will be totally different in the next few months, maybe even in the next few years. There are a lot of things that will be changing around,’ Duez said. ‘So, I think that we need to anticipate as much as possible for clients, to put in place the right strategy for tomorrow,’ he added.

COVID-19 has acted as a sudden catalyst for change when it comes to fleets. How vehicles are sourced, managed and operated. But the immediacy of the pandemic’s impact has acted as a trojan horse for a change that looks to tectonic. The age of electromobility has arrived, and the automotive industry is plugging in.

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