Electric vehicle market continues to rise as city drivers focus on future

19 January 2017 Consultancy.uk

Germany remains the forerunner in electric vehicle technology while China is set to become the world's largest electric vehicle market. Cities are a key driver as the world moves towards more sustainable, clean and efficient forms of transportation, while supply issues for key battery materials remains a potential issue for the industry.

As the effects of pollution, from climate change to negative health outcomes, become more acute, transformations of key sectors away from fuels with extensive negative externalities continues apace.

One industry seeing increased focus is the automotive industry. In total, the industry produces around a quarter of all global carbon emissions, while exhaust fumes are implicated in the premature deaths of more than 40,000 people each year across the UK. One way forward is the electrification of vehicles.

Japan remains in pole position

In a new report from Roland Berger, in association with Forshungsgesellschaft Kraftfahrwesen, current market conditions are indexed. The report, titled ‘E-Mobility Index’, in addition, considers trends going forward – from potential supply bottlenecks to wider market developments.

The index finds that while Germany remains the electric vehicle technology forerunner, yet its industrial capacity lags considerably behind Japan, the US and China. China is by far the forerunner in industrial capacity, while Japan is the most well rounded ranked. Italy is the furthest behind in both segments.

Sales figures and share of EV Q3 2015 - Q1 2016

In terms of absolute sales figures for electric vehicles and plug-in hybrid electric vehicle in the major countries forming part of the survey, China and the US were found to be well ahead at 276,000 and 125,000 respectively. France saw sales of around 33,000 while Japan came in at 28,000. In terms of sales as a % of total market share, China came in second at 1.25%, with France on top at 1.68%. The US took third spot on 0.85%, while Germany came in fourth at 0.76%.

Research and development investment into EV

In terms of research and development in the e-mobility segment, China continues to invest the most in absolute terms, at €4.4 billion, or around 0.045% of GDP. Germany takes second spot in absolute terms, with investments of around €1 billion, while France, also with investments of around €1 billion, comes in first in terms of % of GDP at 0.046%. Korea, Japan and the US invest mere fractions of their GDP into R&D for the sector.

Call manufacters and production

Batteries remain a key component in the value chain of electric vehicles. The technology has in recent decades settled on a lithium-ion type. In terms of global market share for production, Japan remains out ahead, with Panasonic producing around a third of global cell supply. China has, however, in recent years sought to catch up – BYD is set to produces around 18% of global supply by 2018. Korea too, through LG Chem and Samsung, will play a key role in total cell production by 2018 at around 26% market share.

While lithium-ion technology remains the forerunner in the battery space, concerns have been raised around supply of key precursors. While lithium, in the near term remains relatively abundant in terms of ease of market access, cobalt is more precarious with around 50% of supply stemming from the Congo – where political instability, among others, threatens access. Further concerns for trace precursor requirements, particularly graphite, mean that disruption to global markets may affect market transformation in the near term.

Projected Production

With global compacts in place to significantly reduce carbon emissions, the move toward electrification of the transportation fleet continues apace. The production of electric vehicles is, thereby, projected to continue to rise. China is to see the biggest leap, with production hitting 1.2 million units by 2017 – the country will see even faster increases as legislation requiring up to 15% of all sales are electric by 2025 transforms the market. The US too is shifting further from ICE, as propositions from Tesla, among others, support transformation of the wider industry.

According to the report, one of the key concerns for the market remains consumer sentiment. Their sentiment is affected, in particular, by concerns around charging stations, charging time and range. New, and advancing charging technologies, are likely to make charging more convenient. Technologies include inductive and fast charging options. The infrastructure for these technologies are, according to the report, set to be rolled out in the near future – particularly by cities seeking to reduce pollution and meet climate goals. The range of vehicles too is projected, the report notes, to increase as more efficient battery technologies are developed and mature.


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Four ways digitalisation is transforming car brands and dealers

16 April 2019 Consultancy.uk

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.”