KPMG GLOBAL SURVEY PREDICTS CHANGE

KPMG released its 2018 Global Automotive Executive Survey in February, outlining key automotive trends around the world.

One of its key findings was that 56 percent of executives believe physical retail outlets will be reduced by 30 to 50 percent by 2025.

AADA CEO, David Blackhall, recently wrote about this in the AADA newsletter.

Another finding was that market capitalisation of the top 50 auto companies had fallen from above 40 percent in 2010 to just over 20 percent in December 2017.

Automotive key trends

Better use of resources

Fuel cell electric vehicles have replaced battery electric vehicles as the #1 key trend until 2025. Although fully electric drivetrains dominate the ranking again this year, trends indicate the future technology roadmap is likely to see various drivetrain technologies co-existing.

“Learning from the aviation industry – almost 90 percent of executives fully agree that remanufacturing is a feasible concept for the automotive industry to ensure best use of resources,” the report said.

Three out of four executives are convinced that making the most efficient use of resources will be one of the biggest drivers in the industry and will evolve as the overarching key trend, essentially influencing the way we think and live, even in areas that exceed mobility.

The rise of China

China is no longer just a hub merely focused on volume growth in the automotive world. According to this year’s survey respondents, China is also outstripping mature markets in regard to new business model innovation launches.

Autonomy

Autonomy, sharing and platform-based delivery services will revolutionise mobility patterns and lead to ‘mobilistics’, the merging of mobility and logistics. Nearly three-quarters (73 percent) of executives believe traditional public transport solutions could be replaced by on-demand autonomous capsules in 10 years’ time. Recent concepts for urban transportation solutions covering longer distances, like Hyperloop or Sedric by the Volkswagen Group, already highlight developments that can potentially turn mobility patterns upside down.

‘Competition’

Transformation readiness
Data supremacy

Asked whether they expect ICT companies and automotive companies to compete rather than cooperate, 49 percent voted for competition and 51 percent for cooperation. This is the first time the tendency is more towards the cooperative than the competitive approach.

Two out of every three executives are convinced that product-centric usage of data to improve bottom line results, performance and safety of the product should be the focus for asset-based auto companies.

One-third of respondents consider customer- and ecosystem-oriented business models based on downstream data as a great opportunity to monetize data.

“Standard equipment of connected cars will need to be redefined. 85 percent of all executives and three out of four consumers are convinced that data and cyber security is the #1 prerequisite for future purchasing decisions,” the report said.

Providing data security will only be a prerequisite in the future ecosystem; it will not be a USP. Failing to provide it, however, will lead to severe negative consequences.

Auto OEMs are considered to be more trustworthy as data guardian than digital players – but only so long as no data breach occurs.

“The answer to this will play an integral role in defining which player can use and, consequently, monetise the data generated in the ecosystem.”

Looking at the results, neither the executives nor the consumers seem to actually differentiate between the value and ownership of upstream (vehicle) and downstream (consumer) data yet. The #1 strategy for success is cooperation with non-asset based players from converging industries to fully tap the potential of the future ecosystem that extends beyond the product ‘car’.

Aside from the difficulties in matching the often completely diverging business models and corporate cultures of asset- and non-asset based companies mentioned before, almost every second executive (48 percent) considers cooperation with players from converging industries extremely important.

Customer centricity

Mobility on demand

This year’s results reveal that finding one single player who owns all customer relationships and dominates/manages the entire ecosystem alone is rather unlikely. 44 percent of executives and 37 percent of consumers believe OEMs to be the big winners in the battle for the direct customer relationship

“OEMs will never succeed with all other features not directly linked to the vehicle and which are far away from their home turf, and should think of forming partnerships and cooperation with non-asset based players from the converging ICT industry,” according to the report.

Retail of the future

“Over half of all execs (56 percent) are highly confident that the number of physical retail outlets as we know them today will be reduced by 30-50 percent already by 2025,” the report said.
Mobility patterns are changing and if customers request more and more intelligent mobility solutions instead of owning a private car, we will see a shift from a one-off transaction towards TCO-driven recurring transactions throughout the entire customer lifecycle.

Almost half (43 percent) of the surveyed respondents show confidence that half the car owners they know today will no longer want to own a personal vehicle by 2025. According to this year’s executives, the most important reasons for this are living circumstances (32 percent), followed by total cost of ownership (23 percent). Vehicle manufacturer executives, especially, believe that living circumstances and the resulting urbanisation are the most important reason (43 percent).

Primacy of brand

“Brand above all – this year 41 percent of execs believe a trustful brand to be the key success factor for a sharing economy, followed by communities sharing the same values (24 percent),” the report said.
In the past, customer perception of a trustful brand was very much linked to the product itself and possibly to a visit to the retailer – an environment which was solely dominated and managed by the manufacturer. The future is more complex: brand perception goes far beyond the mere product.

Combustion engines

Autonomy readiness
Electric readiness

There will not be a single solitary drivetrain technology. Executives project a similar split by 2040 for BEVs (26 percent), FCEVs (25 percent), ICEs (25 percent) and hybrids (24 percent). Differences in market maturity, economic wealth and national interest lead to different regional distributions of ICEs, Hybrids, BEVs and FCEVs, driven by CO2 and NOx emission agendas.

It is still undecided whether diesel is dead or not. 50 percent of executives still believe that diesel is a technologically viable option. [2017:47 percent].

The consumer results show that even though the majority opposes diesel cars, a quite significant percentage continues to favour them, mainly due to cost advantages followed by longer engine durability.

Infrastructure first, e-mobility second

Of the executives surveyed, 55 percent still believe that pure battery electric vehicles will fail due to the challenge of setting up the required infrastructure.

Norway, a leading e-mobility market, has suffered first drawbacks in their ambitions of a complete e-mobility rollout. In September last year, Norwegian officials recommended refraining from buying new electric cars due to a shortage of public charge points. An imposed growth of e-mobility subsidized by tax benefits, or imposed by bans of ICEs, will fail if the foundation of a reliable charging infrastructure is not put in place first.

Executives see BMW as the #1 e-mobility leader. BMW, already last year’s #1, has strengthened its position by increasing the gap to Tesla, which stabilised its second place ranking. The Chinese manufacturer BYD has made a big leap forward, moving up on the podium to replace last year’s third place, Honda.

Of the executives, 74 percent believe that mixing autonomous and non-autonomous traffic will lead to severe safety issues. ‘Secured spaces’ for an interim time might be a solution to disconnect autonomous vehicles from the complexity of today’s car environment, making it nearly impossible to include every eventuality into an algorithm.

94 percent of executives believe that a fully working and effective driving policy and regulations for autonomous vehicles will be set up no later than 2040.

“Mixed traffic is not possible; it is unlikely that fully autonomous vehicles and human drivers will use the same roads. As a result, we will see the trend of separation instead of integration and, with it, the implementation of new road concepts and traffic systems over the next 10 years,” the report said.

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