What challenges will the car industry face – now and in the future? Environment, ownership, and new technology stand out. Having a client in the auto industry? This is what you need to know.
Clients in the car industry? Then this is what you need to know about a business in transformation
After several years of steady growth, global car sales in 2018 stood more or less still, primarily due to a decline in demand in the world’s largest market, China.
What challenges will the industry face in the future? Environment, ownership, and new technology stand out. This is what you need to know about the transforming business.
#1 Environmental considerations continue to define the industry
There is an ever-increasing demand for environmentally adapted vehicles and technology. Reuters recently reported that in the EU, the sales market share for diesel cars dropped to 36.5 percent in the first half of 2018 from 42.5 percent in the first half of 2017 and that demand for diesel in Europe is declining. Above all, it is a concern for the environment and tax changes that have led to a considerable reduction in diesel sales, but also the introduction of new strict standards for CO2 emissions – which in turn makes it much more expensive to build cars.
From 2021, manufacturers within the EU will face significant fines if their fleets breach agreed on emission limits, and these limits will gradually become tougher. Therefore, to reduce emissions levels, car manufacturers will have to sell many more electric vehicles. At the same time, many car manufacturers are not ready to deliver electric cars at the right volumes. Creating a mass market for electric cars requires significant investments. The other side of the problem is that the market is not yet ready. Global sales of electric battery cars increased by 73 percent in 2018 to 1.3 million units, but it was still only a fraction of the 86 million cars sold overall.
Electric cars on the rise
– The new registrations of rechargeable cars in Sweden, ie, electric cars and hybrids, increased by 46.6 percent in 2018 and the proportion of rechargeable cars was 8.0 percent, which can be compared to 5.1 percent the year before, says Anders Norén, CTO on BIL Sweden, which forecasts an additional 13 percent increase in 2019.
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Of these, pure electric cars accounted for 8 percent, which, according to Anders Norén, is partly explained by the limited production capacity of the manufacturers. Other issues are the lack of charging infrastructure as well as the limited supply of electric cars in the lower price segment.
#2 A shift from ownership
Monthly subscriptions are becoming an increasingly common business model. The customer signs up for the service she wants and ends the service at any time. Paying monthly for mobile services, Spotify, Netflix, etc. is entirely natural, so it is no wonder that the corresponding has now come to the car industry.
Airbnb for cars
Among other things, Uber uses the preference for access to cars on demand. Further innovation comes from services like Turo, which positions itself as Airbnb for cars by allowing owners to make money on their vehicles when not in use. Turo is not established in Sweden, however, in some 70 other countries.
These days, Volvo Cars launch its new service M (in which Sunfleet will migrate). First up is Stockholm where its inhabitants will be able to, with the new app, find an available car in their immediate area.
New target groups
Then there are apps like Whim, which allow users to browse through all travel options and buy tickets or rent vehicles in the app. All new apps and services will not make it, but they point to a fluid and innovative environment in the automotive industry where the challenge will be to market in entirely new ways and also succeed in adapting to new industry innovations and business opportunities as well as new target groups.
In Sweden, private leasing hit an all-time high in 2018, and for the first time, one in three new car buyers choose private leasing over other ways to buy or finance their new car.
– You should not be surprised if we see continued growth within private leasing,” says Lars Lieberg, car sales manager at MRF. More and more people are discovering the product and want to continue with it, as long as an equivalent offer is available when renewing the lease.
Keep it simple
In the age span of 26-35, more than 50 percent choose private leasing. Also, the majority of customers live in large cities. It is also interesting that as many as 86 percents have decided to switch from owning their car to private leasing. Here the marketer has a challenge in reaching a rather demanding group with communication regarding, above all, simplicity and personal preference.
#3 New technology on the roads and in the cars
Traditional car companies also have to fight to stay relevant when tech giants like Uber and Google’s driverless car company Waymo show up in the market. Therefore, because research and development (R&D) are expensive, several actors work together to spread the risk. For instance, Ford and Volkswagen, together “explore” ways to work on electric and autonomous vehicles and Honda invested $ 2.75 billion in rival General Motors driverless unit to launch a fleet of driverless taxis.
Will driving still be driving?
Regarding travel itself, AI can make it possible to collect and monitor real-time data on road conditions, routes, driver habits, etc. This is likely to affect insurance while changing how it feels to drive. More intelligent and integrated systems, together with smart assistants, will offer drivers the opportunity to spend time in the car for something other than driving alone. Changes in how roads work and how cars interact with each other can also change how we perceive driving.
The challenge will include technological developments and keeping track of changes in consumer demands. Staying up-to-date with developments, to understand the scope, and act accordingly will, therefore, be a significant challenge in the future.
Starts with online search
Today, 95 percent of car sales take place at the dealership, but at the same time, online search is the first step in the customer’s journey. For marketers of the automotive industry, online advertising is the key to creating new leads and encouraging the customer through the door to the dealer.
At the same time, if you want to buy a brand new Tesla, you can only order online. There are no physical dealers, only showrooms with the ability to test drive. Maybe this is also a way forward for the car industry in general? Regardless, the requirements on digitization, new technology, and smart marketing solutions are enormous.