Automatous vehicles sentiment rides high among global consumers

09 August 2016

Self-driving cars are around the corner, with a range of stakeholders keen for their implementation. The vehicles promise reduced emissions, improved efficiency, improved safety standards and improved utilisation. Consumer sentiment remains relatively divided, however, with many weary of potential risks associated with a complete loss of control. While weary, the majority of consumers in a recent survey would put down more than $5,000 for a fully automatous vehicle.

Driving has, since the birth of the modern car, become both a necessity in many places around the world as well as an activity of leisure. The freedom and practicality associated with motorised vehicles have seen more than 37.1 million cars on UK roads – sales continue to grow, with more than 100 million new units expected to be sold by 2021 globally.

Cars, particularly ICE models, however, are polluting. Besides the large amount of greenhouse gas emitted, other noxious gases are produced during combustion which have direct negative effects on city environments. Large numbers of cars also create congestion, as well as vehicle accidents – which claim 1,732 lives in the UK each year and seriously injures more than 22,000.

Consumers open to self-driving cars

Times are changing, however, with ever increased focus on efficiency, environmentally friendly, safety and practicality driving forward new technologies that aim at revolutionising the car through full automation. According to a recent analysis of the potential impact of fully automatous self-driving vehicles (SDV) – their full implementation could see up to a 60% drop in the number of cars on city streets, an 80% drop in emissions and a 90% drop in accidents.

The high impact of SDV means that there is considerable drive to their development and implementation from stakeholders. Consumers will need to be on board, however, for the major benefits to be realised in the long-term. To identify in how far they are keen on the new technology, The Boston Consulting Group (BCG) and the World Economic Forum surveyed 5,500 consumers across 27 cities in ten countries; aiming to identify their respective sentiment to the potential arrival of automatous vehicles.

Consumer sentiment in favour of trying a self-driving car is relatively robust. Globally, 29% of respondents say that they are very likely to try one, while 29% said they are likely to do so. Only around 12% say they are very unlikely to do so.

Top reasons for consumer sentiment

Respondents from India display by far the most interest in trying a SDV at 56% very likely to do so, followed by UAE at 38%. In terms of likely or very likely to try, Chinese consumers are only slightly behind Indian consumers, at 75% and 85% of respondents respectively. Drivers in Singapore too are relatively keen to get into an SDV at 62% of respondents being at least likely to try.

Japan, the Netherlands and Germany hold the most sceptical consumers. In Japan just 12% say they are very likely to try, while in the Netherlands 19% say they are very likely to try. In Germany 21% say they are very unlikely to try the technology, just one point behind Japan where 22% say that they are very unlikely to try.

The research also ask consumers to highlight why they are interested in the technology. The top priority for consumers is that it is able to self-park, as cited by 41% of respondents. Being productive while being driven comes in second, cited by 40% of respondents. Just under a third cited improved safety as a reason to use a SDV, with a similar number citing environmental benefits. Lower insurance premiums were cited by a quarter of respondents.

Safety concerns top hurdle

As it stands, safety is the biggest barrier to positive consumer sentiment for the SDV, with 50% of respondents saying that they do not feel safe in cars that drive themselves. 45% of respondents want to be in control of the vehicle at all times, while 43% say that they do not want the car to make any mistakes. Around 30% of respondents say that driving is a pleasure for them, while 27% are weary of their own ignorance towards the technology.

Around a quarter of respondents is keen to wait until the technology is proven before allowing it to take the helm, while 23% say they are concerned that cars may be hacked. 20% fear breakdowns, given the increased complexity of repairs.

Consumers willing to pay more for SDV

The analysis also ask respondents whether they would be willing to pay a premium for a SDV. Globally, around 43% of respondents said that they would be keen to do so. Interestingly, while the least likely to try, Japanese consumers are the most keen to pay a premium for a SDV, at 51%, followed by France and India, both at 50%. Around 46% of UK consumers said that they would be willing to pay a premium.

In terms of the premium paid, the majority across the globe would be willing to put down more than $5,000 for an SDV equipped vehicle. German and Singaporean consumers are the most willing to spend more than $5,000, at 75% and 89% respectively. Indian consumers – while the most keen for the technology – are the least keen to put down more than $5,000, at 51% of respondents.

Consumers trust OEMs more for SDV development

When it comes to the developers of SDV, traditional OEMs are considerably more trusted than technology companies or new entrants. Germans in particular are trusting of OEMs, at 58% of respondents, with few trusting tech companies, at just 7%. The Dutch are the most critical, with around 34% of respondents saying that they do not know who to trust. The US has the highest level of trust for tech companies, at 21% of respondents, just behind OEMs at 22%. In the UK the most trusted group are OEMs at 41% of respondents, 24% said that they don’t know who to trust.

“There is a compelling case to be made for SDVs in cities,” says Nikolaus Lang, a BCG senior partner and report co-author. “Ride-shared, electric robo-taxis can substantially transform and improve urban transportation and, by direct extension, liability, by providing more people with easier access to mobility, making streets safer, and freeing up space no longer needed for parking. The major players—industry, consumers, and policymakers—are excited and engaged.”

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Four ways digitalisation is transforming car brands and dealers

16 April 2019

From changing expectations from the customer to new stakeholders entering the industry, the digital transformation of global automotive industry means it is facing the wholesale transformation of its business model. In a new white paper, global consulting partnership Cordence Worldwide has highlighted four major digital trends that are transforming the relationships between car brands and dealers with consumers.

With digital transformation drives booming across the industrial spectrum, automotive groups are no different in having commenced large digital transformation programmes to improve productivity, efficiency, and ultimately profitability. Falling sales figures mean the automotive sector is facing an increasingly difficult road ahead, something which means companies in the market are even more hard pressed to find new ways to improve their bottom lines.

While it offers major opportunities, the industry’s move to digitalise is not without complications. It has triggered a series of major internal changes, which have presented automotive entities with the challenge of becoming a “customer-oriented” industry. A new report from Cordence Worldwide – a global management consulting partnership present in more than 20 countries – has explored how automotive companies are navigating the rapidly changing nature of digital business.

New business models

The level of change likely to be wrought on the automotive industry by digitalisation is hard to overstate. Automation could well lead to significant reductions in the number of accidents, higher vehicle utilisation and lower pollution levels, while leading to a $2.1 trillion change in traditional revenues, with up to $4.3 trillion in new revenue openings arising by 2030.

As a result of this colossal opportunity, it is easy to see why almost all automotive groups now have digital departments, with generally strong communication within the digital transformation and the customer approach. The changes to society which this may have are potentially distracting automotive firms from the change it is leading to in its own companies though, according to Cordence’s paper.

The automotive market is dead, long live the mobility market

Because of this, the sector’s business model is set to transform over the coming decades. With digitalisation speeding up the appearance of concepts such as car-sharing, a subscription package model will likely become more palatable. At the same time, car and ride-sharing models will cater to the sustainability criteria of millennials, who will rapidly become one of the automotive market’s leading consumer demographics in the coming years.

Antoine Glutron – a Managing Consultant with Cordence member Oresys, and the report’s author – said of the situation, “These ‘old school industries’ are now working on creating new opportunities, but in so-doing are facing challenges and threats: new jobs, new technologies, new ecosystem of partners, necessary reorganisation, different relationship with customers, and even new businesses. The customer approach topic is in fact a real challenge for car companies as it implies changing their business model and adjusting their mind-set to address the customer 4.0: from product-centric to customer-centric, from car manufacturer to service provider.”

Digital customer experience

In the hyper-competitive age of the internet, even top companies face an uphill challenge when it comes to holding onto customers through brand loyalty. Digital disruption has resulted in changes to consumer behaviour, which is forcing a range of marketing strategists to reconsider their old, possibly out-dated strategies. As modern customers wield an increasingly impressive array of digital tools and online databases, they and are now able to quickly and conveniently compare prices, check availability and read product reviews.

The automotive sector is no exception to this trend, according to the study. In order to adapt to the needs of the so-called ‘customer 4.0’, car companies will increasingly need to change their business model and move away from product-centric companies to customer-centric ones, from car manufacturers to service providers.

Glutron explained, “As an automotive company, you can no longer expect customer loyalty simply with good products; you must conquer and re-conquer a customer that “consumes” your service. The offer now has to be global, digital and personalised. Your offer has to be adapted to this customer’s needs at any given moment. A key issue related to data control is to build customer loyalty by creating a customer experience 'tailored' throughout the cycle of use of the 'car product': purchase, driving, maintenance and trade-in of the vehicle.”

One way in which the sector may be able to benefit from this desire for a tailored experience is via connectivity. Consumers are generally positive about new connective features for automobiles, and many are even willing to pay upfront for infotainment, emergency and maintenance services. Chinese consumers, where the connected car market is set to hit $216 billion, are already particularly interested in paying a little more for navigation and diagnostic features in their future new car. This can also enable automotive companies to exploit a rich vein of customer data, enabling them to rapidly tailor their offerings to consumer behaviour.

New automotive segments

Digital transformation has also brought with it the rise of completely new application areas. As mentioned earlier, the most well-known example is the autonomous or self-driving car, where the last steps forward were not taken by major automotive groups but by technology companies such as Tesla. While this may have given such firms the edge in the market briefly, a number of keystone automotive names will soon be set to take the plunge into the market themselves, leveraging their car manufacturing prowess and huge production capacities to their advantage.

Before companies rush to invest in this market, however, it is worth their while to remember that the readiness and uptake for such vehicles differs greatly geographically. For example, following a study published in 2018, 92% of Chinese would be ready to buy an autonomous car, compared with only around 35% of drivers in France, Germany and US. Meanwhile, the infrastructure of different nations will also be significantly less accommodating of the new technology.

Use digital for steering thr activity

Elsewhere, Cordence’s analysis has suggested that hooking the cars of tomorrow into the Internet of Things is also likely to see a rapid change in the business model for car maintenance, providing real-time diagnostics for problems. This presents chances for partnerships to improve the connectivity of cars, especially with tech companies; for example, PSA partnered with IBM for a global agreement on services in their vehicle. Meanwhile, data could also be sold to other parties with an interest in this data, such as the government, which could use it to manage traffic levels, or ensure that only adequately maintained vehicles take to the road.

Glutron added, “With the increase in the amount of client data and connected opportunities, the recommendation is to set up data-centric approaches. The value is now in the customer data. The general prerequisites are to rework the data model and the Enterprise Architecture and generally build up a data lake including data from all sources (internal and external, structured and unstructured).”

From automotive to mobility

Relating further to the idea of connectivity, the report claimed that automotive firms must now adjust their models in line with the provision of end-to-end mobility, rather than treating the sale of a car as an end point in their relationship with the customer. In order to realise this transformation, transformations are likely to become more and more important.

A network of partner companies means automotive firms can provide a global mobility experience. As the vehicle is increasingly connected to its environment, new partners can also be cities, governments, and other service providers within the global mobility services industry in which the car brands want to take part.

According to the study, the target is clear. Companies must look to a holistic transport service, offering to move customers from A to B in a unique and pleasant way – otherwise they might as well take public transport. At the same time, they should extend the services reachable “on-board” (especially the enhancement of the connectivity between the car and smartphones or other connected devices), and reach high standards in terms of user experience (online sales, online payment, customised experience during and after the use of the car).

Concluding the report, Glutron stated, “These mobility market transformations could be considered a threat for the car manufacturers. Quite the opposite: if they take up the challenge and review their business model so that they become the service provider – communicating no longer to a driver but to a ‘mobility customer’ – they can then take advantage of their expertise and their position as a historical player. The most convenient means of transport are cars, and building a car is highly-skilled work.”