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As we leave 2023 behind, we can now look at the year ahead to discuss some of the key trends shaping the automotive industry in 2024. Despite the abundance of news headlines detailing the sector's challenges and opportunities, certain trends continue to dominate the global discourse.
RSM’s global automotive group recently hosted a webinar to discuss some of the prominent trends they see shaping the industry over the next 12 months. Larry Keyler, Partner, Global Automotive Leader in the US, hosted the session, and was joined by RSM automotive experts Markus Muhlenbruch from Germany, Jim Ward from the US and Mario van den Broek from the Netherlands.
Watch the video or read the summary detail below:
- Interview with Tristan Hamelink from NIO (02:40)
- The growing strength of Chinese and Indian automotive manufacturing (21:35)
- Evolving ownership models and the shift away from private ownership (32:00)
- The rise of micro-mobility, micro-mobility as a service (39:25)
- Evolving regulatory landscape impact on the automotive industry (46:40)
The growing strength of Chinese and Indian automotive manufacturers in global markets (21:35)
The global automotive landscape is undergoing a seismic shift with the rise of Chinese and Indian car manufacturers, challenging the dominance of established players like Toyota and Volkswagen. Looking at the market in India, it is evident that the country is poised to emerge as a leader in automotive manufacturing, with substantial investments from various OEMs. India has recently surpassed Japan to become the third-largest automotive hub globally, trailing only the United States and China. Despite India's burgeoning presence in the automotive sector, concerns appear to be persisting among consumers in mature markets regarding the technical sophistication and quality of vehicles manufactured in India. This underscores the importance of addressing regulatory compliance issues to gain greater acceptance, particularly in markets like the United States.
Government policies play a pivotal role in shaping the trajectory of the automotive industry. Whether governments incentivise consumers or manufacturers directly impacts foreign investments and the overall Electric Vehicle (EV) landscape globally. Such policies could trigger reactions from other governments and will have a significant impact on the competitive dynamics in regional markets.
Similarly, Chinese manufacturers face challenges related to brand awareness and quality perception in European and North American markets. While China has made significant strides in innovation and production quality, overcoming scepticism and stigma remains crucial for wider market acceptance.
In North America, legacy tariffs and regulations have hindered the competitiveness of Chinese and Indian vehicles. Measures like the U.S. Inflation Reduction Act have limited tax credits for EVs with components sourced from foreign entities of concern. To mitigate these obstacles, Chinese OEMs are exploring opportunities to establish manufacturing facilities in Mexico.
Cost is also a driving factor in consumer behaviour, particularly in the EV market. Chinese manufacturers, with their cost-effective production capabilities, may disrupt established norms by offering affordable EVs without the need for tax incentives. This affordability factor, coupled with innovative business models like shared ownership and battery-as-a-service models, presents a compelling proposition for consumers worldwide.
The entry of Chinese and Indian car manufacturers introduces diversity and innovation to the global automotive market. Their distinct business ethos and approaches to design, customer service, and marketing challenge established brands to innovate and adapt to evolving consumer preferences. This intensified competition ultimately benefits consumers by expanding choices and accelerating technological advancements across the industry.
As Chinese and Indian car manufacturers continue to gain momentum on the global stage, their impact on the automotive industry will only grow stronger. Embracing diversity, innovation, and consumer-centric approaches will be essential for both established and emerging players to thrive in this evolving landscape.
Evolving ownership models and the shift away from private ownership (32:00)
The automotive industry is on the cusp of a profound transformation, driven by evolving consumer behaviours and advancements in technology. One of the most significant shifts anticipated is a move away from traditional private car ownership models. This evolution carries far-reaching implications for the industry, including changes in new and used car sales, economic dynamics, and urban infrastructure development.
Economic factors play a pivotal role in shaping consumer spending patterns, particularly with regard to new car ownership. With ongoing economic uncertainty, consumers are holding onto their vehicles for longer periods, resulting in sustained demand for used car sales. Additionally, rising interest rates are making leasing less attractive, impacting a significant portion of consumers that use lending to finance their purchases, especially in North America where leasing has been popular.
Moreover, a generational shift is underway, with millennials showing less interest in vehicle ownership and a more favourable sentiment towards ride-sharing services. This trend is builds on the advancement of technology and on-demand apps, offering cost-effective alternatives to car ownership, particularly in urban areas. As a result, global car sales may see a decline over time, although premium car sales and demand for advanced technology features could potentially offset this trend.
The decline in private vehicle ownership is expected to have a positive impact on public transportation and alternative mobility options, particularly in urban areas. With fewer personal cars on the road, cities can anticipate reduced traffic congestion and increased utilisation of micro-mobility solutions. This should create opportunity for increased investment in alternative mobility solutions such a protected cycling lanes and shared electric scooters. However, the success of these alternatives hinges on factors such as infrastructure development, population density, and demographic preferences.
Ultimately, the private ownership model is undergoing a paradigm shift, driven by changing consumer preferences and technological advancements. Enhanced taxi concepts like Uber and micro-mobility providers are poised to play a pivotal role in shaping the future of transportation. Just as the advent of the automobile revolutionised mobility centuries ago, the current era presents an opportunity for innovation and transformation in how we perceive and utilise transportation.
The rise of micro-mobility and micro-mobility as a service (39:25)
The rise of micro-mobility is reshaping urban transportation and challenging the traditional approaches of the automotive industry. With urbanisation on the rise and a growing emphasis on eco-friendly commuting options, micro-mobility services are gaining traction among consumers seeking cost-effective and sustainable alternatives to traditional modes of transportation.
This shift towards micro-mobility is driving the automotive industry to embrace integrated mobility solutions that incorporate cars, public transport, and micro-mobility devices. Investments in technology, particularly in autonomous and connected vehicles, are being made to ensure the safe coexistence of various transportation modes in urban environments.
Moreover, changing consumer preferences are compelling automotive companies to explore new business models, such as vehicle sharing and subscription services. This evolution signifies more than just diversifying products; it represents a fundamental reimagining of the automotive industry's role in urban mobility.
Evolving regulatory landscape impact on the automotive industry (46:40)
However, alongside the rise of micro-mobility comes a complex regulatory landscape, both in the US and the EU. New regulations like the Corporate Sustainability Reporting Directive (CSRD) are enhancing transparency in sustainability targets and standardisation. These regulations are pushing automotive companies towards becoming more ESG-driven organisations, with a focus on compliance, risk management, and business model innovation.
In 2024, EU regulations will have a decisive impact on the global automotive and mobility industry, requiring manufacturers to develop decarbonisation transition plans, align reporting with their strategy and business models, implement extra financial reporting requirements, establish risk management processes, and set up due diligence processes to identify and mitigate risks in their supply chains.
The transition towards electric vehicles (EVs) is also accelerating, driven by strict environmental regulations. Manufacturers must invest more in zero-emission technologies to reduce CO2 emissions and meet regulatory requirements. Additionally, digitalisation necessitates investments in cybersecurity and data protection.
However, despite regulatory efforts to promote EV adoption, consumer demand for EVs still lags behind regulatory goals. Government policies play a crucial role in shaping the sales and development of EVs, as incentives for manufacturers and consumers can significantly impact the build-out of critical infrastructure like charging stations.
As the US aligns its legislative agendas with the EU on ESG, other regions are also evaluating how to accelerate progress towards sustainability and corporate governance initiatives. Policies around the mining and processing of critical minerals further underscore the intricate interplay between regulation, technology, and consumer behaviour in shaping the future of mobility and the automotive industry as a whole.
2024 is a year filled with opportunities and challenges throughout the automotive industry. New vehicle sales may lag a bit but EVs will continue to gain momentum.
There will be an intentional focus on government regulations and legislation supporting the EV sector with government subsidies and credits.
New EV battery technologies will be available in 2024 that will allow longer driving range, a reduction in charging time, improved safety and more cost efficacy, and innovations like the Battery as a Service model could prove transformative.
Given the 2024 US Presidential election, we expect a slow-down in approved legislation in the US. While the EU’s Carbon Border Adjustment Mechanism will likely bring an increase in overall raw material costs for EU automakers.
Overall, the industry will be challenged with a continued focus on maximizing returns to the investors.
To learn more about the other trends shaping the automotive industry in 2024, read our recent article Automotive and mobility trends to watch in 2024.