Article Type: News

07 July 2020

In the July edition of Autovista Group’s whitepaper: How will COVID-19 shape used car markets?, we publish updated outlooks for Austria, France, Germany, Spain, Switzerland and the UK.

In an unrivalled pan-European overview, editors from Austria, Belgium, the Czech Republic, Finland, France, Germany, Hungary, Italy, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland and the UK give their views on how the coronavirus pandemic and resulting market shutdowns are affecting the automotive industry. This month, 12 countries confirm their residual value (RV) outlook, one country reports an improving outlook while five countries are more gloomy –particularly in terms of the length of the economic crisis.

Reporting an improving outlook, France has an incentive scheme to stimulate new and used-car demand for vehicles up to five years old. Less affluent and middle-class buyers are receiving the most financial support from government schemes.

In Germany, there is increased pressure on RVs and an incentive scheme has been announced that substantially lowers transaction prices for all new battery-electric vehicles and plug-in hybrid electric vehicles. There are smaller downward adjustments to the outlooks for Austria and Switzerland.

Spain confirms its outlook for 2020 and 2021 but expects no recovery before 2023 given the gloomy economic outlook and the expected long period of recovery.

The combination of Brexit and the COVID-19 economic crisis means that the UK now has a more negative outlook for used cars. The impact of these political and economic factors will overshadow the pent-up demand that is currently visible and the lack of supply of cars into the market.

The latest version of the whitepaper How will COVID-19 shape used car markets? can be downloaded here.

07 July 2020

In the wake of the coronavirus (COVID-19) pandemic and national lockdowns, the automotive industry is facing the very real prospect of further job cuts. Already, carmakers, suppliers and industry bodies are warning of difficult times ahead and, in what is already a challenging time, the situation has made things worse.

The problem the industry is facing is one of multiple impacts. Before the COVID-19 pandemic, carmakers were grappling with reducing CO2 emissions. Also, a dramatic decline in diesel sales following demonisation of the technology has not helped. As a result, manufacturers are having to focus on electrification. For some, this meant a need to decrease their workforce numbers as they looked to plough funds into new technologies.

For some carmakers with bases in the UK, the issue of Brexit was another key consideration, especially with uncertainty over the future trading relationships between the country and Europe. If tariffs are introduced, production in the UK may become unfeasible.

Finally, the COVID-19 lockdowns led to a collapse in sales and the subsequent global economic crisis, the like of which has not been seen in over a decade. This means that the automotive industry will likely suffer again as ‘big-ticket’ items will no longer be important to consumers unless they are heavily incentivised.

Call to action

It is anticipated that more jobs will be lost as the year progresses. In the UK, the Society of Motor Manufacturers and Traders (SMMT) revealed the results of a member survey that suggested up to one in six jobs are at risk of redundancy. With a third of automotive workers still furloughed, the end of the UK Government’s job retention lifeline at the end of October highlights the critical need for a dedicated support package to safeguard these jobs.

More than 6,000 UK automotive job cuts were announced in June, according to the organisation. Around 1,000 of these cuts came from Jaguar Land Rover, a carmaker which is already going through a ‘turnaround’ plan following a slump in sales in China during 2018.

The company announced a £422 million (€466 million) pre-tax loss in the financial year to March, with a £500 million pre-tax loss in the final quarter (January to March 2020) as the pandemic forced showrooms and factories to shut across the world. The group said it would lose up to 1,100 agency staff, or contractors, ‘in the coming months’ from a total UK workforce of 32,000. The move came as JLR lifted its cost-cutting target for March next year by £1 billion to £5 billion.

The SMMT is calling for a support package for the entire sector to help drive demand and ease cash flow. Measures including unfettered access to emergency funding, permanent short-time working, business rate holidays, VAT cuts, and policies that boost consumer confidence would accelerate a sustainable restart for the market and manufacturing.

Painful times

In Germany, Daimler CEO Ola Källenius has suggested the carmaker, together with the whole industry, faces painful cutbacks in the fallout of COVID-19, according to Bloomberg.

The virus outbreak will force manufacturers to do more significant restructuring than they had planned before the crisis erupted, Källenius commented. The ‘significantly harsher reality’ for the industry following the pandemic will necessitate ‘drastic’ salary cuts, with Daimler executives facing bigger reductions than other workers, he said. The adjustments are necessary to protect Daimler’s financial condition and safeguard investments in future technologies, he said.

Daimler had already announced a restructuring plan last year, with cuts to its workforce by more than 10,000 as it looked to focus on electrification. Källenius’ warning could perhaps be seen as a precursor to further cuts being made. The German carmaker has issued several warnings over its financial state in the last year, and COVID-19 could cause it to alter its already drastic plans further.

BMW too, is looking to cut jobs. The carmaker has agreed a large number of positions will go as part of a package of measures agreed with its works council. This will be achieved via a mixture of redundancies, early retirement, not renewing temporary contracts and not refilling vacancies. It is the first time BMW has had to downsize since the 2008 financial crisis.

Supplier issues

It is not just carmakers that are suffering. Parts supplier ZF is cutting up to 15,000 jobs, around 10% of its workforce, over the next five years. According to a report in the Financial Times, this is due to ‘a freeze in consumer demand’ following the COVID-19 pandemic.

The newspaper reports an internal email, in which chief executive Wolf-Henning Scheider and human resources boss Sabine Jaskula wrote: ‘Our company will make severe financial losses in 2020. These losses threaten our financial independence, and if we fail to meet certain cost targets, external lenders could demand influence on our business decisions. We want to avoid this and continue to pursue the ZF way independently.’

Half of these job cuts are expected to come from Germany. While demand for products has grown in China, this is not enough to offset losses in other parts of the world, according to the report.

Outlook

Other factors could play a part in a vastly restructured automotive industry. There is still the risk of a second wave of COVID-19 infections, while the US is experiencing an increasing number of cases across many states. This could lead to further lockdowns and may impact automotive sales in one of the world’s largest markets, further impacting carmaker and supplier finances.

The full impact of the pandemic may not be known until at least the end of the year. While it is likely that job cuts will continue, it is hoped that numbers will be low, as some companies had already put turnaround plans in place.

06 July 2020

Tom Geggus, Phil Curry and special guest Christof Engelskirchen, Autovista Group’s chief economist, discuss a surprise in recent European registrations, the impact of COVID-19 on the automotive market and how autonomous technology will benefit from collaboration…

You can also listen and subscribe to receive further episodes direct to your mobile device on Apple, Spotify and Google Podcasts

03 July 2020

German new-car registrations dropped by 32.2% in June, compared with the same month in 2019. Some 220,272 new cars were registered, according to the latest figures from the automotive authority Kraftfahrt-Bundesamt (KBA).

This marks another marginal improvement for the German market, up from the 49.5% declines recorded in May and 61.1% in April. These latest figures put Germany ahead of Spain, where registrations declined by 36.7%, but behind France which saw an increase of 1.2% and Italy which recorded a decline of 23.1%.

New-car registrations in Germany, France, Italy and Spain, year-on-year percentage change, June and year-to-date 2020

Source: CCFA, ANFIA, ANFAC, KBA

Brands and types broken down

The number of private registrations in Germany fell by 38.2%, with a share of 32.7%. Commercial registrations fell slightly less, by 29%. A total of 1,210,622 brand-new passenger cars were registered in the first six months of the year, 34.5% less than in the first half of 2019.

Compared with June last year, registration figures were down for all German brands. Porsche recorded the smallest decline at 0.5%. The decline at Mercedes-Benz was also in the single-digit range at 8.7%. For other brands, drops ranged from 23.8% for Mini to 83.6% for Smart. With 17.8%, VW again achieved the largest share of new registrations in June.

Growth was recorded for imported brands, Mitsubishi was up 11.2%, Honda up 2.8%, Subaru up 2.6% and Fiat up 1.5%. Other imported brands recorded registration declines ranging from 1% for Volvo, to 66.6% for Suzuki. The largest share of new registrations was recorded by Skoda at 6.2%

Some 21% of all new cars came from the compact class, which came out as the strongest segment. SUVs followed in second place with 19.9%. On a half-yearly basis, the balance of these two segments came out at a 20.3% share of new registrations each. Small cars (14.7%) and off-road vehicles (11.2%) also reached double-digit new registration shares in June. The declines in new registrations extended across all segments, with losses ranging from 14.3% in the luxury class to 63.4% in the minivan segment.

Drive-train performance

At 51.5%, more than half of all new cars were petrol-driven (down 42.2%), followed by diesel passenger cars (down 34.5%), which accounted for 30.6% of the market. A total 30,254 new vehicles with hybrid drive led to an increase of 60.8% and a share of 13.7%. A total of 10,479 of these were plug-in hybrids (PHEVs), which, following an increase of 274.4%, achieved a share of 4.9%. Some 8,119 electric vehilces generated an increase of 41%, gaining a share of 3.7%. Liquid gas (0.2%/ up 52.7%) and natural gas (0.3%/ up 5.5%) remained below the one percent mark.

At the end of the first six months of the year, the number of petrol- (down 43.6%), diesel (down 37.0%) and liquefied petroleum gas (down 81.3%) powered passenger cars was down. The alternative drive systems – electric (up 42.7%), hybrids (up 54.6%), including plug-in hybrids (up 199.8%) and natural gas (up 11.2%) – achieved growth rates, some of which were in the triple digits.

Average CO2 emissions amounted to 150.2 g/km and were down 4.3% compared to the same month last year. On a half-yearly basis, average CO2 emissions amounted to 150.8 g/km and were 4.4% lower than in the same period last year.

In June 2020, 762,442 vehicles changed owners, which is 14.7% more than in June 2019. At the end of the first half of 2020, the statistics showed 3,742,318 transfers of ownership, 9.9% less than in the same period last year.

Elsewhere in Europe

France saw its first increase in passenger-car registrations for over six months, as the country’s automotive market bounced back into life. Some 233,820 new cars were registered in June according to the CCFA, an increase of 1.2% compared to the same period last year.

Meanwhile, both Italy and Spain recorded further declines during the month, although these figures show promise that their markets are recovering. In Spain, registrations declined by 36.7% in June, and is down 51% year-to-date, according to industry body ANFAC. Italy did see a smaller drop, with the country’s automotive body ANFIA announcing a decline of 23.1% in the month, and a drop of 46.1% year-to-date.

Monthly performance of Spain, Italy and France registrations from January to June 2020

Source: ACEA, CCFA, ANFIA, ANFAC, KBA

The French numbers are a beacon of hope for other markets that incentive schemes can work. The country’s €8 billion package includes a €7,000 grant for BEVs costing less than €45,000 (up from the standard €6,000 premium). Meanwhile PHEVs can claim a €2,000 subsidy.

France also doubled its premiums for those looking to trade in their older vehicles for a cleaner model, with a €3,000 grant for internal combustion engine (ICE) vehicles and €5,000 for BEVs. This means drivers could get up to €12,000 off the list price of a zero-emission vehicle.

German incentive scheme

In June the German Government announced its coronavirus (COVID-19) economic recovery package which leant heavily into incentivising green mobility. Schemes to boost the sales of low- and zero-emission cars were partnered up with investments into green transport infrastructure. Conversely, petrol- and diesel-powered vehicles did not feature in the package.

The federally-backed buyer incentive scheme doubled to €6,000 for battery-electric vehicles (BEVs) and hydrogen fuel-cell electric vehicles (FCEVs) costing less than €40,000. When paired with a manufacturer bonus of €3,000, customers were given the potential to save €9,000 on a zero-emission cars. More expensive BEVs and plug-in hybrids (PHEVs) receive slightly lower subsidy rates as part of the package. These incentives look to be available until December 2021.

New-car buyers will also benefit from a lowering of value-added tax (VAT) to 16% from 19% between 1 July and 31 December 2020. This was one of the few measures announced that also applies to diesel- and petrol-powered vehicles.

01 July 2020

The concept for the 2021 Internationale Automobil-Ausstellung (IAA) has been unveiled, with the show billed as a ‘triad’ featuring three different zones set around its new Munich location.

For next year, organisers want to focus the IAA around future mobility, more so than the traditional vehicle show. The event will feature a ‘Summit’ section on trade show grounds, while the ‘Open Space’ will turn Munich’s inner-city locations into interaction forums on future mobility concepts  and stages showcasing technologies as experiences.

These two areas will be connected by the third concept, the ‘Blue Lane’, a test track where visitors can trial future mobility concepts. The event will also become more compact, with a six-day schedule, rather than 10 as seen in recent years.

‘Individual mobility is a basic human need, and satisfying it in all its facets is an ever-growing challenge for our society, which business and policy-makers have to address,’ announced Hildegard Müller, president of the German Association of the Automotive Industry (VDA), during the IAA concept release. ‘The new IAA will point up solutions for connecting these mobility demands in ways that are efficient, economical, and socially and environmentally acceptable.’

Three areas

The ‘Summit’ on Munich’s trade show grounds is positioned as the meeting place for professionals and the venue for brand and product presentations. It will focus on innovations, rather than complete product ranges, along with the unveiling of new products.

Meanwhile, the ‘Open Space’ will appeal to the general public, with prominent locations becoming venues for a ‘city-wide dialogue on visions, innovations and sustainable mobility solutions for the future,’ according to the organisers.

Visitors will be able to try out and experience new forms of mobility and low-emission powertrain technologies for themselves as part of a pilot project on the connecting ‘Blue Lane’. This will integrate car traffic and local public transport to produce the experience of a connected multimodal route.

Changing times

The new concept, together with the new location, is an effort to revitalise the IAA following a dramatic drop in visitor numbers over the last two events. Just 560,000 people attended the event in 2019, down from 810,000 that walked the halls two years prior, and the 932,000 visitors, the highest attendance for the event in eight years, in 2015.

The days of ‘traditional’ motor shows, with visitors looking at static displays in large halls, is now a thing of the past. While new concepts and launches once drew in crowds, today’s digital age allows carmakers a more direct route to market, meaning some big names have pulled out of the European show circuit in recent years. Also, an increase in mobility services, a drop in vehicle ownership and, in the wake of the coronavirus (COVID-19) pandemic, economic issues, have all transpired to turn manufacturer and visitor attendance from a must, into a maybe.

Therefore, some of the biggest events on the calendar are looking to introduce new themes, focus on technology and mobility alongside stand displays, and include interactive elements to engage with the public. The North American International Auto Show (NAIAS) in Detroit was set to relaunch this year, taking in more of the city and featuring a festival atmosphere, while last year’s Tokyo show saw attendance rocket with the inclusion of interactive elements and a focus on smart cities, amongst other things.

Meanwhile, following the cancellation of the Geneva International Motor Show for 2021 in the wake of COVID-19, and the planned sale of the event to Palexpo SA, the new organisers will have time to consider the future of the Swiss event and how to adapt it for the future.

Opportunities

Therefore, the IAA needed to embrace change to ensure its survival, and a fresh start in a new city, together with interactive zones and the opportunity to expand beyond the exhibition hall grounds offers a chance to do just that.

‘The new IAA in Munich will have a totally novel event concept. Content, exhibits, experiences and discussions will be accessible to everyone – that is, residents of Munich and guests from all over the world,’ said Klaus Dittrich, chairman and CEO of Messe München, describing the show of the future. ‘Repositioning the IAA is one of the most challenging tasks in the international trade show business and a unique opportunity for Munich.’

29 June 2020

According to provisional data published by the European Environment Agency (EEA), average CO2 emissions from new passenger cars registered in the EU, Iceland, Norway and the UK increased in 2019 for the third year in a row.

Emissions levels increased by 1.6 grams of CO2 per kilometre, reaching a total of 122.4g of CO2/km. This remains below the target of 130g CO2/km that applied until 2019 but well above the EU target of 95g CO2/km that is now in play.

The EEA recorded a steady decline in new passenger-car emissions of almost 22g of CO2/km, from 2010 to 2016. However, average emissions increased by 0.4g CO2/km in 2017 and by 2.3 g CO2/km in 2018, reaching 120.8g CO2/km, 7% below the 130g CO2/km target.

SUVs vs EVs

According to the EEA, the growing share of the sport-utility vehicle (SUV) segment, as well as the slow market penetration of electric vehicles (EVs) are responsible for 2018’s and 2019’s CO2 increases.

Some 38% of new-car registrations were SUVs in 2019. Compared with other cars in the same segment, these cars are typically heavier, feature more powerful engines and boast larger front ends. However, all of these features combined can dramatically impact fuel consumption. The majority of the new SUVs registered were powered by petrol, with average emissions of 134g CO2/km, which is around 13g CO2/km higher than those of other new petrol cars.

‘The EU must stop this maximising of profits at the cost of public health and the planet by bringing in annual or bi-annual emissions targets,’ said Julia Poliscanova, senior director for clean vehicles at T&E. ‘That way carmakers will bring the zero-emissions cars they have developed to the forecourt quicker.’

Meanwhile, the sales of plug-in-hybrid electric vehicles (PHEVs) and battery-electric vehicles (BEVs) continued to increase to about 3.5%, compared with the 2% growth in 2018. Roughly half of the BEVs were registered in Norway, Germany and the Netherlands.

The combined shares of PHEV and BEV registrations were highest in Norway at 56%, Iceland at 19%, the Netherlands at 16% and Sweden at 12%. These were also some of the few countries where the average emissions of new cars decreased from 2018 to 2019.

Petrol vs diesel

In total, roughly 15.5 million new cars were registered last year in the EU, Iceland, Norway and the UK. Petrol-powered models dominated with 59% of all new registrations, increasing to 63% when including hybrid-electric vehicles (HEVs).

Diesel-powered models accounted for 31% of new registrations (32% including HEV), marking a decrease of 4% from 2018, and 23% from 2011 when diesel cars peaked with a 55% share. The EEA revealed that on average, diesel car’s CO2 emissions (127g CO2/km) are now very close to those of petrol cars (127.6g CO2/km). The difference of 0.6g CO2/km was the lowest observed since the beginning of the EEA’s monitoring.

26 June 2020

Ford, together with consortium partners, has received backing from the UK Government for the introduction of 5G connectivity, which it believes will speed up the electric vehicle (EV) manufacturing process.

A 5G mobile private network, delivered by Vodafone Business, will be installed this year in the new E:PriME (Electrified Powertrain in Manufacturing Engineering) facility on Ford’s Dunton Campus, the carmaker’s main research and development facility in Europe. The Vodafone Business 5G solution promises reduced delays, wider bandwidth, improved security and reliability, and faster deployment time.

By the time installation is complete in the autumn, E:PriME Dunton will have the fastest possible connectivity alongside the consortium’s second network at welding research specialists TWI, based in Cambridge.

Both sites’ connected equipment will offer real-time control, analysis and remote expert support, ensuring that new manufacturing processes are shop floor-ready.

EV production

As Ford begins to increase its electric-vehicle manufacturing, with the Mustang Mach-E leading its charge into the market, the carmaker will focus on the connectivity of the welding machines in the manufacture of these models.

The batteries and electric motors within an EV require around 1,000 welds. For a single EV product, this could generate more than half a million pieces of data every minute. Fast, reliable, high capacity data capture and analysis will be a significant requirement of these processes. Connecting the data with experts, such as TWI and manufacturers, is critical if processes are to develop at the same rate as these innovative products demand, the manufacturer believes.

As carmakers increase the number of EVs they produce, manufacturing methods are always under development to ensure costs come down and the technology can be affordable. While 5G is often touted as a much-needed technology for autonomous vehicles, its use in production can accelerate communications between equipment and allow for automated machinery to work more efficiently.

Backing needed

The move by Ford comes as part of an announcement by the UK Government to invest £65 million (€71.8 million) in nine consortia for harnessing the potential of 5G.

‘We are determined to harness this revolutionary technology to boost the productivity and growth of UK industries,’ commented Oliver Dowden, secretary of state for digital, culture, media and sport.

‘We want Britain to be a world leader in 5G, and since 2017 the Government has invested millions in ground-breaking testbeds and trials across the country to achieve this.’

Ford is already credited as a leader in autonomous driving systems, another area in which 5G connectivity is seen as essential, thanks to its investment in Argo AI. Earlier this month, the carmaker closed a deal with Volkswagen that will see the German manufacturing group take an equal stake in the business.

24 June 2020

André ten Bloemendal, VP Commercial Sales, Europe, at ChargePoint and Christof Engelskirchen, chief economist at Autovista Group, explore the world of electric-vehicle infrastructure – from pricing to grid capacity management to leasing models – and envisage the infrastructure of the future.

You can read the full interview here

Q: What is your view on the technology roadmap for battery-electric vehicles (BEVs) and plug-in hybrids (PHEVs)?

A: If you look at a plug-in hybrid, that is a little bit of a strange animal, because it has two engines in one car. Why would you want two engines in one car? It is a transitional technology towards the battery-electric vehicle.

If you look at the recent press release from Daimler saying that they have decided to stop all efforts to make a hydrogen fuel cell private car, that is along the lines that we think things will go. Fuel cells will play a role in heavy-duty trucks, but less so for private consumers. Where you need a fuel cell to store more energy than you can with a battery, fuel cells make sense.

Batteries would be too big and too heavy if they were to power a long-distance drive in trucks. Here, you offset the less efficient means of getting energy into the vehicle against the mileage capacity you gain from the fuel cell.

Q: Do you have a vision for what electric vehicle infrastructure looks like? How far should you have to drive to find an empty charging station, for example?

A: If you drive an internal combustion engine (ICE) car, sometimes you will drive it until your tank goes empty or until your fuel tank indicator lights up on your dashboard. That is not the behaviour you see in people driving BEVs.

When you see somebody driving a BEV, they readily adopt the behaviour of connecting the car to the grid the moment they park it for a long period. Not for 10 minutes, but say you park your car at your home, you connect it. If you park your car at your workplace, you connect it. That is generally what you do. I would rephrase that question, from ‘how far should you have to drive’ to ‘how likely should it be that a charging station is available at the place I leave my car for, say, longer than three hours?’.

Q: So, if I plan to park my car for three hours or more…?

A: …you should assume there would be a charging station available, in 100% of the cases. There are two reasons this is desirable. One is you always start with a charged battery, which means on normal use, the size of the battery doesn’t matter that much anymore, so you don’t need oversized batteries. The second thing, which is maybe more important is, to do with one of the questions I am often asked: ‘what about grid capacity? Can the grid in Europe cope with the enormous amount of energy that has to distributed if everyone uses EVs?’.

The answer to that is ‘no, not at all’. However, how can that be? For a very simple reason: the behaviour of people is that they start working in the morning and start going back home in the evening and there is only a window of two and a half hours where people arrive at their workplace and arrive at their home. If, as I just explained, you then connect your car to the grid, and everybody does so at the same time, the peak at the start of the charging session is enormous, and the grid cannot cope.

But that’s not an issue if you allow smart charging, whereby you allow the start point of your session, or the maximum power provided in your session, to be influenced by the grid, or by the station operator or by whoever does it, so that the peak is flattened. Again, this requires easy access to charging stations at the places people park the longest.

Q: It is not always desirable for good battery health for a battery to be charged to 100% all the time. How do you manage those types of considerations? What are the rules for battery charging?

A: Our systems ‘handshake’ with the car. We listen to the car, and in fact, the car dictates the charge-power. The manufacturer of the car sets it. While the manufacturer has to provide a warranty to the driver or owner of the car, it does that on the basis that the battery is treated in the right way. So, the manufacturer allows the charging station to influence the length of the session and the amount of power that you push to the car, but the car, in the end, decides what the maximum charge is, what the minimum is. The rules are set between the car manufacturer and us.

This article contains extracts from the full interview between Christof Engelskirchen and André ten Bloemendal. You can read the full transcript, in which the two discuss ChargePoint’s business model and the rules for battery charging, here.

For more of the latest thinking, insight and data from our Auto Mobility LIVE speakers and TCO Awards judges, check out our Auto Mobility LIVE Insights page.

22 June 2020

The Autovista Group Daily Brief team is back with another insightful look into some of the biggest news stories of the past fortnight. This time around, Phil Curry, Tom Geggus and Neil King discuss an investigation into the PSA-FCA merger, incentive schemes rolling out across Europe and how Toyota is revolutionising the crash test…

You can also listen and subscribe to receive further episodes direct to your mobile device on Apple, Spotify and Google Podcasts

19 June 2020

The coronavirus pandemic has heightened the need for those in the business of selling cars to be able to do so without face-to-face interaction. Farid Kandil, senior vice president, Business Consulting Services at DEKRA provides steps for success to dealerships looking to digitise their sales and marketing.

Customer experience is central to sales in the automotive industry, and with consumers increasingly turning to convenient digital sources of information, dealerships (and manufacturers) must adapt.

Digitisation of the sales and marketing process poses a new set of challenges. Tackling them is primarily about retaining what has been tried and tested on the one hand, while incorporating new channels and responding to changing customer behaviour trends on the other. So, what are the steps to success in this digital retail world?

Learn and enhance

The used-car market has proved more stable and less vulnerable to shocks causing economic peaks and troughs than new-car sales recently. Recognising this potential, digital companies have emerged to disrupt traditional used-car sales channels.

Looking to the US, for example, companies such as Carvana, Fair and Vroom all operate sophisticated digital used-car platforms, using big data analytics to understand their customers. The new digital players know their customers inside out and shape their service offering accordingly.

Offering end-to-end transaction capabilities, extensive search options supported by high-quality photographs, exhaustive data points and custom recommendations – as well as a home delivery service – these companies are responding to consumer behaviours and demands in the modern era.

Go digital

The customer’s digital journey begins with an online search; visits to the manufacturer and/or dealership website; image searches; watching demonstrations and advertising videos.

At the start of the journey, a digital marketing strategy should help foster new business leads. Google AdWords campaigns, along with Search Engine Optimisation (SEO) and well-informed social media management, builds brand awareness and target specific customer segments. This allows dealerships to talk to the right people at the right time, with relevant messages. These campaigns are measurable and incur lower costs than traditional advertising, meaning a business can start with a smaller budget and adjust over time.

Start with strategy

However enthusiastic you are about going digital, it is wise to consider your objectives, market position, customer needs and product groups, and to derive a digital transformation strategy from these findings.

At DEKRA, we have repeatedly observed how retailers unsuccessfully jumped on the digital bandwagon when they are not fully prepared. Just because there is an internet page, some sales representatives have an email address, or the company maintains an electronic car file, these things do not automatically make that company ‘digital-ready’.

One has to differentiate between the digitisation of individual processes and the digital readiness of a company. The latter ensures that the entire business – all employees and processes – can provide a consistent customer experience with maximum efficiency for the organisation.

In the full article – Used car retailing in a digital world – Farid Kandil goes into detail on the three steps to success when considering an online platform. You can read it here.

For more of the latest thinking, insight and data from our Auto Mobility LIVE speakers and TCO Awards judges, check out our Auto Mobility LIVE Insights page.

18 June 2020

The European Commission has opened an in-depth investigation into the merger between PSA Group and Fiat Chrysler Automobiles (FCA).

The two carmakers announced plans last year to create the world’s fourth-largest automotive company – and Europe’s second-largest – with a 50/50 merger that would see annual unit sales of around eight million vehicles worldwide. However, the European Commission is concerned that the proposed transaction may reduce competition for light commercial vehicles (LCVs) below 3.5 tonnes in the European Economic Area (EEA) and, more specifically, in 14 EU member states and the UK.

‘Commercial vans are important for individuals, SMEs and large companies when it comes to delivering goods or providing services to customers,’ commented executive vice-president Margrethe Vestager, responsible for competition policy at the Commission. ‘They are a growing market and increasingly important in a digital economy where private consumers rely more than ever on delivery services.

‘Fiat Chrysler and Peugeot SA, with their large portfolio of brands and models, have a strong position in commercial vans in many European countries. We will carefully assess whether the proposed transaction would negatively affect competition in these markets and ensure that a healthy competitive landscape remains for all the individuals and businesses relying on commercial vans for their activities.’

Market competition

According to the Commission, in many European countries, either PSA Group or FCA is the market leader in LCVs. Therefore, the merger would remove one of the main competitors to the dominant company.

The Commission concerns include that the proposed transaction could significantly reduce competition for certain types of light commercial vehicles in Belgium, Croatia, Czechia, France, Greece, Hungary, Italy, Lithuania, Luxembourg, Poland, Portugal, Slovakia, Slovenia, Spain and the UK.

‘In many of these countries, PSA and FCA combined would hold high market shares, together with the widest range of brands and models across all sizes,’ the Commission states. ‘The parties appear particularly strong in the smaller vans segment. There are fewer competitors in vans than in passenger cars, and in most of these countries, all competitors would be significantly smaller than the merged entity.’

Continued planning

The announcement of an investigation could put back the proposed completion date of the merger. When announced, the two groups were looking to finalise the deal within 12-15 months. In an emailed statement, PSA Group confirmed they were still targeting a Q1 2021 deadline.

‘Both companies will continue to cooperate with the European Commission to answer its questions in the same constructive spirit that has defined our proposed merger from the start,’ the carmaker said. ‘As we continue to make progress through our cross-company project teams, we will be detailing to the Commission, and other regulators, the substantial benefits of the proposed merger to our customers, the European industry and each company.

‘Preparations for the merger are advancing as planned. Antitrust approvals have already been granted in other jurisdictions, including the US, China, Japan and Russia. PSA Group and FCA reaffirm the shared objective to close the transaction by the end of the first quarter of 2021.’

The merger will benefit both businesses in what are increasingly challenging times for the automotive industry. PSA Group will gain access to the US market through FCA’s Jeep brand, a territory is has been looking to re-enter. At the same time, the US-Italian business will take advantage of the French manufacturer’s electric vehicle (EV) technology and platforms.

The Commission will now carry out an in-depth investigation into the effects of the merger to determine the impact on the LCV market through reduced competition. It notes that PSA and FCA have decided not to submit commitments during the initial investigation to address the Commission’s preliminary concerns.

The investigation will last a maximum of 90 working days, meaning a decision should be reached by 22 October 2020.

15 June 2020

The coronavirus (COVID-19) will leave no area of the automotive industry untouched. Autovista Group’s chief economist Christof Engelskirchen talks to Joachim Deinlein, partner at global management consulting firm Oliver Wyman, about the pandemic’s impact, consumer buying behaviour and the business models of the future: car-sharing and subscriptions.

You can read the full interview here

Q: Joachim, your job is to advise car manufacturers, suppliers and service providers to the automotive industry on areas spanning the entire value chain, from R&D, procurement, operations and production, to sales, marketing and aftersales. With COVID-19 so fundamentally affecting the way we work, how has the way you support your clients changed?

A: The nature of the topics is changing. There is a shift from growth strategy work, and we are more involved in projects addressing needs coming out of the COVID-19 situation. Many OEMs are concerned about immediate supply-chain resilience.

Q: Clearly, COVID-19 has disrupted automotive supply chains. It is challenging to re-synchronise supply chains as they are global. Alternatively, is interconnectivity an advantage as this aligns interests across regions? As a result, will governments and players swiftly coordinate for a quicker ramp-up of production globally?

A: The initial reaction, when the coronavirus impact became visible in China, was that people immediately challenged the industry about being so reliant on one region. Now, with China’s operations starting before others, people realise that globally diversified supply chains can increase resilience. I think there is going to be some reorganisation of the supply chain, for example, adding further backup, but also reducing the overall number of suppliers. I do not think it is going to be a completely renewed setup, however.

Q: Is there anything positive coming out of this pandemic for our industry?

A: In some areas, the transformation will accelerate. For several weeks and months, people were able to search for or configure vehicles online, to buy them online. Our industry was not prepared for this. There are still too many OEMs that do not have the full range of vehicles available to be purchased online. What we can observe in China is that the use of online channels across all sectors has been increasing dramatically. This will further boost the transformation of the automotive sales value chain towards a more online-enabled channel setup. It will feel like a more seamless user journey from online to offline and offline to online. COVID-19 is pushing us hard in this direction in Europe, too.

Q: What is your view on the business models of the future? Will the pandemic have a lasting impact on car-sharing and car subscriptions?

A: Car-sharing, in my view, is a great concept for addressing the underutilisation of a vehicle. A passenger car is only utilised between 5% and 10% a day. However, the way it has been executed in metropolitan areas is not solving a crucial customer need: easily parking the car at the destination. As long as this is still the same pain it often is today, the concept of car-sharing will not live up to its full potential. I agree that the demand for car-sharing services will stay low as long as we are living through the COVID-19 period, but still, it is a mode of individual transportation that may be attractive. In a post-COVID-19 world, this may change again.

You can download and read the full interview with Joachim Deinlein here. In it, he talks about the impact of COVID-19 on the industry in the next six months, and how the pandemic is driving interest in car subscription models.

For more of the latest thinking, insight and data from our Auto Mobility LIVE speakers and TCO Awards judges, check out our Auto Mobility LIVE Insights page.

29 June 2020

Stock markets are surprisingly bullish. There appears to be a disconnect between the darkening economic outlook and investor behaviour. Autovista Group chief economist Christof Engelskirchen asks Laura Lembke, executive director at Morgan Stanley why, and explores what automotive industry investors are looking for post-COVID-19.

Q: Stock markets seem to be behaving irrationally. Why are there phases of recovery when economic forecasts are getting darker by the week?

A: The stock market is highly dynamic and typically much more sensitive in its appreciation of big events, such as a global health crisis than economic indicators or forecasts. We have seen the fastest sell-off in global equities on record. The sell-down was triggered initially by macro and quant funds following the COVID-19 spread into Europe in late February, followed by others on the back of the shut-down of the global economy and company guidance suspensions across industries for the 2020 financial year.

Q: What happened after this initial drop in stock prices?

A: We quickly entere a phase where investors saw depressed stock prices as a major opportunity because some of the movements had been exaggerated. This is why the sell-off was instantly succeeded by the steepest recovery in global equities in decades, further driven by the enormous fiscal stimulus packages across G10 countries and central banks, which by far exceeded investors’ expectations. As a result, we have also seen sharp valuation re-rating of equities across sectors. There is clear evidence that investors are already looking ahead to 2021 and budgeting for some sort of ‘V-shaped’ recovery.

It will be interesting to see the upcoming H1 2020 results what will be the next inflection point for investors to reconsider valuation levels assuming there is no additional, meaningful fiscal stimulus left ‘in the G-10 tank’.

Q: There has been a lot of talk about stress on supply chains and a potential need to become local. Are there new aspects that investors are looking for when they assess an automotive company, post-COVID-19?

A: Supply-chain management is already a core capability for OEMs and their procurement departments, however. During this crisis, many companies have set up specific task forces to monitor and re-assess how the supply chain is working and where potential bottlenecks could lie.

Investors follow general news related to the supply chain and production, but there are no explicit KPIs for this area. From an investor perspective, it is difficult to assess supply chain performance systematically. The shift to electric vehicles (EVs) may help reduce supply-chain complexity as the number of parts in electric vehicles is around 30% lower than for traditional cars.

OEMs will continue on their path to reduce complexity, all the way from model portfolio to specifications, for example, by reducing the number of available options or variants of the same component. My favourite example is the VW Golf. Did you know that until a few years ago you had a choice of 117 steering wheels? They cut that to 43, but it is still a lot. However, standardisation is a double-edged sword. It gives you economies of scale, but it may also increase your exposure, as you have to rely on a smaller set of suppliers. Finding a balance is crucial, especially for the very high-volume components that run across multiple vehicles on a platform.

Q: Do you believe that consumers will purchase a car differently after the crisis? What is the role of car dealers going forward?

A: Most OEMs had already embraced the need to develop digital channels prior to COVID-19, including selling directly to consumers. There are also new ownership concepts, for example all-inclusive ‘subscription models’ such as ‘Care’ by Volvo or Mercedes’ ‘Flexperience’, which are gaining in popularity.

The real challenge lies on the dealer side and how they will need to be set up in the future. Car dealers typically make the most money with aftersales, services and used car trading, rather than new car sales. We will probably see a shift towards brand experience stores in prime city locations, where customers can interact with the brand as you would in an Apple store.

Commonly, OEMs know little about their individual customers. There is a lack of ongoing customer contact by OEMs and often dealers. OEMs have to rethink how they leverage dealers, and what kind of dealer channel and network they really need. The traditional car-dealer model has been under pressure for many years. The dealer of the future may, for example, manage and maintain vehicle fleets. There is a whole range of options, but their role will change.

This article contains extracts from the full interview between Christof Engelskirchen and Laura Lembke. You can read the full transcript, in which the two discuss investments in technology, mergers and acquisitions and more, here.

For more of the latest thinking, insight and data from our Auto Mobility LIVE speakers and TCO Awards judges, check out our Auto Mobility LIVE Insights page.

12 June 2020

A pan-European survey carried out by Autovista Group has revealed how firms within the automotive industry are reacting to the impact of coronavirus (COVID-19). Part two of the results focuses on the activities and opinions of dealers, manufacturers/importers and leasing companies. It highlights the staggered nature of the impact of the pandemic and the variances in responses as businesses try to adapt.

Carried out in April, over 400 Autovista Group customers completed the survey from across Europe. This included respondents in Germany, Spain, France, Italy, Austria and the UK. They also ranged from dealerships to manufacturers and from workshops to financial services.

Closures

By early May, only 46% of dealers’ showrooms were closed; a further 10% of dealers were considering closure. An additional one third had limited their service to key handovers, according to respondents.

Independent dealers were more likely to have gone for full closure than franchised dealers (55% compared with 39%), however, and single-brand franchises were more likely to have shut up shop than multi-brand franchises, suggesting a quicker response to the crisis from smaller firms. Only 23% of dealers had closed their repair shops entirely, but 34% had limited their service to emergency repairs.

Analysis by country tells a more complex story, however. In the UK, 90% of dealers had closed their showroom entirely by May compared to only 9% in Germany. In Austria, the figure was 51%. Only 50% of UK dealers expecting to remain closed for two months or less, compared to 100% of respondents from Germany and 97% of respondents from Austria.

Consumer behaviour

In part one of the survey results, we saw that, for now, the industry does not see consumer behaviour changing as a result of the pandemic to the extent that people will prefer to buy their next car online rather than from a showroom.

While only 27% of respondents agreed that was likely, this has not stopped dealers seeing a move to online retail as an important tactic in tackling the pandemic while in its midst. Over half of dealers (57%) have already increased their efforts to sell vehicles through online portals, and a further 14% are considering doing so. Franchised dealers are slightly more likely to be taking a lead online, with 57% (compared to 50% of independent dealers) already having increased their efforts to sell online.

It appears the comparative uncertainty faced by dealers in the UK is having an impact on digital sales, too. While in Germany and Austria, two thirds of dealers have been proactive in selling vehicles online, this figure drops to less than one third in the UK.

The survey found that 75% of dealers are already controlling costs or considering doing so by decreasing advertising, and almost 66% have stopped – or will stop – adding cars to their stock.

Perhaps unsurprisingly, independent dealers have been more likely to control costs in this way, with 52% of them stopping adding cars to their stock compared to just 32% of franchised dealers. Conversely, 60% of franchised dealers have already decreased their advertising compared to 48% of independents.

Manufacturers and importers

Automotive manufacturers and importers appear to have responded more quickly than dealers to the coronavirus pandemic, possibly because business as usual was even less of an option for them. When the survey results were analysed in early May, the vast majority had already made all the suggested changes to the way they operate. Almost all manufacturers and importers (96%) had already asked their office staff to work from home; almost two thirds at reduced hours, with this option still under consideration by a few. Over two thirds had closed production lines, (the remaining third saying this option was not applicable to them).

Two thirds of respondents expect their operations to remain closed for one to two months and 17% for less than a month.

In contrast with dealers, a significant majority of manufacturers and importers have increased their efforts to sell vehicles via e-commerce, with 71% saying they have already done this and a further 17% saying they are considering online options. Delays to model launches or moves to do them virtually are not an option for most OEMs yet, but around half to two thirds of them are at least considering these tactics for the future. While online uptake may increase, automotive distribution still needs a point of sale.

By the start of May, only 3% of leasing firms were still considering whether to ask office staff to work from home; 80% had already done so, and 17% said this was not an applicable option for them. When those companies that had closed their offices were asked for how long they anticipated they would remain closed, 46% of respondents said it would be one to two months and 21% said three to four months, suggesting leasing firms might expect to remain closed for longer than car dealerships and manufacturers.

Actions that leasing firms have taken to address the pandemic include measures to re-open while protecting customers and staff, reduction in fleet volumes and the creation of new financing plans to meet changing customer need.

Overall, many dealers, manufacturers and importers agree that used cars will be more attractive to consumers than new cars as a result of the crisis. Some leasing firms expect that consumers will require lower outlays and greater flexibility still, with one third predicting that car subscriptions may become more attractive because of the crisis.

The results of part two of the survey can be seen in this whitepaper authored by Sarah Walkley, chief research officer, Autovista Group. Part one of the results can be seen here.

The survey will remain open indefinitely, as Autovista Group continues to monitor the industry’s response to the COVID-19 crisis. The survey can be taken here.

10 June 2020

The cancellation of Autovista Group’s inaugural TCO Awards due to the coronavirus (COVID-19) pandemic meant we could not celebrate the automotive industry’s achievements in person. Christof Engelskirchen, chief economist at Autovista Group, along with the Daily Brief team, recognise the cars that would have been competing for an award.

Electrification, shared economy, digital demands, a shifting industry landscape and new business models have dominated the headlines in the last 12 months. However, the growth driver for the automotive industry, in particular with additional powertrain choices available, continues to be the Total Cost of Ownership.

To recognise this and to reward the vehicles across our industry that deliver against this key metric, Autovista Group planned to host the inaugural TCO Awards 2020 on 9 June 2020 in Berlin, an event that sparked huge interest from the automotive industry. The awards closed for entries mid-March, just as the COVID-19 pandemic hit Europe. As for many others, the pandemic forced us to adapt our approach, leading to the cancellation of the awards presentation.

Since then, we have worked together with our judges and speakers to provide some of the insights we would have shared at the events. While we will not hand out TCO Awards this year, we asked those who submitted an entry whether we could share them with you and display some of the achievements of our industry. You can learn more about the entrants here.

Contenders were split into four categories, battery-electric vehicles (BEVs), hybrids, petrol and diesel. Each category saw many strong contenders, each making a compelling argument for their consideration.

BEV

As carmakers increasingly turn to BEV technology to reduce fleet CO2 emissions, a number of exciting models are now available. While the jury would have been challenged by this strong set of contenders for the BEV of the Year TCO Award, we are happy to see the hight quality of TCO-based sales arguments for alternative powertrains.

Those included in the shortlist include three urban B-segment cars: the Corsa-e, the Peugeot e-208 and the Renault Zoe. Hyundai offered the Kona BEV as a worthy contender, while Polestar threw its Polestar 2 into the ring. Ford included its first foray into the mass-BEV market with the Mustang Mach-E while a nomination was received from MG for its ZS EV model. There was also a consideration for the Tesla Model 3 and Jaguar Land Rover’s I-Pace.

Hybrid

We received 10 impressive nominations for the TCO Awards 2020 Hybrid Car of Year. This award was even more sought after than our BEV award. The eligible entrants were the Ford Kuga PHEV, Volvo XC40, XC60 and XC90 PHEVs, the Mercedes E-Class PHEV, the Skoda Superb iV, the DS7 Crossback E-Tense, the Citroën C5 Aircross PHEV, the Peugeot 3008 PHEV, the Opel Grandland X PHEV and the Range Rover Evoque PHEV.

There are plenty of choices in the category, and these cars can become a natural pick for those seeking the independence of driving an internal combustion engine (ICE) combined with the advantages and power output of an electric drive.

Petrol

The line-up for the BEV and PHEV categories is remarkable. But we have equally as many contenders for the internal combustion engine categories. Among the TCO Awards 2020 Petrol Car of the Year entrants were the Ford Puma, Renault Clio V, Dacia Duster, Renault Captur II, VW T-Cross, Peugeot 208 and Opel/Vauxhall Corsa.

From a TCO perspective, the latest petrol technology is hard to beat, and petrol cars usually do not get the extra boost of government incentives, which are increasingly focused on BEV technology following the COVID-19 pandemic. Consumers should feel confident when picking a vehicle from the list of contenders for Petrol Car of the Year.

Diesel

Several manufacturers chose to enter brand-new vehicles in several categories, highlighting the versatility of their ranges. Renault re-entered the Clio and Captur, Dacia the Duster, JLR the Evoque, Citroën the C5 Aircross and Peugeot the 2008 in the TCO Diesel Car of the Year. Newcomers to this category are Skoda’s Octavia and Scala.

Despite a growing market share of PHEVs and BEVs, diesel still represents one third of passenger-car registrations in Western European markets. The latest diesel technology is clean and impossible to beat when it comes to long-range and low fuel consumption, and the diesel engine has the reputation of being extremely robust and enduring.

The article – TCO Awards 2020: vehicle category contenders – offers detailed thoughts on each nominated vehicle. You can read it in full here.