The automobile industry is about to be majorly disrupted. Here, we unpack a series of potential challenges at an ecosystem level.
As a result of multiple governments adopting a firm stance on fossil fuels, and many making commitments to NetZero targets and cleaner air for city residents, car manufacturers have made huge investments and pivoted their innovative operations in new directions.
In 2030, there’s set to be a ban on new sales of combustible vehicles in the UK, and IEA predicts that 60% of new car sales will be electric vehicles (EV). To remain competitive in an evolving market, manufacturers are adapting their production strategies and investing in the development of electric, hybrid and hydrogen vehicles. Consequently, resellers are starting to follow suit.
But what about the people who buy, rent, and drive the cars? While manufacturers prepare their production lines, are they adequately preparing their consumers for the upcoming change?
The second-hand ticking time bomb
The second-hand car market is huge, representing around three-quarters of all cars sold in the UK. In recent years, it’s slowed slightly and we’re already seeing demand for second-hand electric vehicles going above the supply that’s available.
However, with the switch to EV, is the combustible market the thing to watch out for? Many people are either not ready to make the leap to EV, cannot afford it, or simply prefer driving combustible vehicles. Given this challenge, and with the clock firmly ticking, how might the second-hand combustible car market evolve?
Currently, we have resellers, dealer networks, local dealers and myriad other options that range from Facebook marketplace right back to placing a written-note in a car window. This area seems prime for disruption; new players could take control of the marketplace by providing a more unified experience for customers when buying and selling vehicles.
Given the likely increase in demand for second-hand combustible cars, what does this mean for the maintenance of these vehicles? We’re likely to see two models of repair and supply, one each for EV and traditional vehicles. These two models require very different skillsets and ways of making goods, shipping them, and using them for repair.
Not only is it inefficient to have two models for repair running in parallel but, again, it could put strain on supply-and-demand for combustible parts, and cause prices to rise without a proper way of effectively managing them. Of course, large supply networks exist today to service repairs; however, how much further can these networks scale and how ready are they for potentially dramatic price-and-demand fluctuations? Also, given shifts towards EV manufacturing and part production, are we likely to see other part brands come to the fore?
Thinking further, with the advent of Internet of Things (IoT) and progression in spatial computing, could we see a shift in the right-to-repair movement or a reduction in labour costs due to better, more targeted diagnostics and fitting of parts in both the combustible and EV space? Could this prolong the lifetime of vehicles?
As the popularity of EVs increase, car manufacturers may opt to ramp-up their brand-specific mechanic and repair services, much like Apple have done with their products, which could have an impact on more generalist mechanics worldwide. With this in mind, mechanics and car-repair businesses would be wise to invest in training their staff and pivoting knowledge towards EV specialism, so they don’t get left behind and lose business.
Insuring old vehicles in a new world
Car manufacturing isn’t the only industry that will be impacted, insurance companies will also need to pivot to accommodate changing consumer needs. Currently, many people struggle with policies that should cover the cost of their car, but if they bought it for a good deal, they may not be able to replace their vehicle like-for-like in the event of it being written off.
Unfortunately, this scenario is only likely to become more common as stock of older petrol and diesel cars is reduced. If this does happen, it may be that the products offered by car insurers will no longer meet the practical needs of motorists, leading to a shift in services they offer. However, this could be a fantastic opportunity for insurers to create new offerings for their customers.
Alternatively, it could increase premiums and make some aspects of insurance redundant if combustible vehicles become sought-after items. What could also affect this is deceptive design in the form of accentuating the scarcity of combustible vehicles, or combustible vehicle part-supply, to consumers.
Circular vehicle design
As well as providing quick, convenient, and reliable ways for drivers to access repairs when things go wrong, manufacturers will need to go beyond this by incorporating recycled products into their processes.
Offering cash in return for vehicles which no longer work through return schemes will be an important part of the lifecycle. Advancements in recycling technology mean more value can be extracted from returned cars than in previous years. It may also mean that companies from different industries, that are more geared up for the recycling and processing of used parts, could capitalise on the vehicular market.
This could also affect the environmental impact of some items if specialised recyclers can be used on both combustible and electric vehicles, thus reducing extraction efforts and the use of combustible fuels in production processes.
What about financing EVs?
Some may view car manufacturers or dealers as financial services companies, but many people can’t afford to buy a car outright and this means that financial solutions are required. The sweet spot for many manufacturers is the interest that can be earned on these vehicles.
However, with EVs typically being more expensive, and with many people being resistant to buying one combined with potential market conditions, does the shift to EV present a challenge to the established model of interest rates? Could we see the interest applied to loans for vehicles increase? Will all-new models for financing electric vehicles emerge, or will it be more of the same? While there are many unknowns, it’s likely we’ll see more people turn to their existing financial provider for larger loans as opposed to the white-labelled financial products many offer in the space currently. This presents a new opportunity for banks and other providers of loans to create or augment products in this space.
Electrical drain: the darker side of electric vehicles
Given the amount of investment needed to build out the infrastructure for EVs, there are environmental implications that shouldn’t be “green-washed” away; these include the mining of the metals required for production, plus the fossil fuels burnt to power the charging ports and manufacturing lines. Considering this, are mass adoptions more likely if the production and fuelling method is more closely aligned to our current layout and design of our built environments? And, could this mean that electricity is a step on the journey towards another fuel of non-combustible fuelling?
The brand-experience gap
Although a change to electric or alternate fuelling is coming, we do see a disconnect between the development of vehicles powered by new technologies, and the digitalisation of making the consumer aware of these changes when buying-and-selling online and in person. This isn’t a new challenge, it has long been an issue for combustible vehicles too, but it’s being compounded by a new lexicon, lower levels of basic knowledge and different mental models based on learned behaviours and levels of understanding developed over decades.
At a brand level, some manufactures have transformed their advertising, particularly digital, to align with the benefits of EV. Typically using compelling creative, clear messaging and even celebrity influence. For example, Audi cleverly harnessed negative customer perspectives around range, prevailing through the winter, finding charging stations and speed, all whilst creatively demonstrating that their EVs combat all these common customer problems.
Despite these steps in the brand space, there have been minimal actions taken to digitally merchandise EVs effectively by many manufacturers. This reveals that there’s a gap in the digital experience that exists between the marketing and the purchasing of EVs, both online and in dealership. We could call this a brand-experience gap.
It’s unsurprising that this gap exists. We’ve spent the last 100 years understanding petrol and diesel cars; when deciding if we’re going to buy (or rent) one we know roughly how it works. But electric vehicles are the new kid on the block and many pivotal questions remain unanswered by those trying to sell them. To combat the confusion, marketeers should look to provide clarity around some of the most pressing queries, such as: what’s the difference between hydrogen and electric? Exactly how much money might I save with a hybrid? Or, could it be more expensive? Where do I charge it?
If you search online to find answers to some of your EV questions and find helpful answers from a car brand at the top of your search, your perception of that brand will be positively influenced – you’ll see them as a knowledgeable and trustworthy voice to listen to. This means owning and influencing the conversation, rather than being a passive actor.
Given this, it’s clear that car brands need to ramp up their education around electric vehicles to help consumers become as familiar and comfortable with electric options as they are with combustible ones. Weaving information throughout marketing campaigns and digital estates will be one of the most effective ways of embedding that broader understanding from consumers; not simply focusing on why this car is great, but also reassuring people about the things they’re uncertain about. As part of digital experiences, this can be achieved through progressive disclosure; gradually revealing information to match the pace of the user’s browsing and behaviour to aid comprehension and understanding without being overwhelming. To make this more targeted, manufacturers and sellers could use analytics platforms that blend actions across a range of touchpoints to hone in on the information to be relayed and when and designing around it.
Embracing innovation is at the heart of the vehicular revolution
New product offerings will form a crucial part of the revenue made by companies who go on to dominate this space. Manufacturers will need to consider more than just how to sell new cars, but also think about the services they offer related to their vehicles.
Car manufacturers could play a bigger role in the infrastructure that supports the charging and use of electric vehicles. Reimagining the petrol station presents an extraordinary opportunity to create a new world, plus new products and services that shape the way people live and travel.
Some people see electric vehicles as a distraction from a better long-term and sustainable solution to transport infrastructure, public transport. However, cars will always have a place in getting people around and this is for many reasons, not least for those with limited mobility or children. It’s fair to say that not everyone needs to buy a car of their own, and rental services and ride sharing services could become more popular as the availability of combustible cars, through the second-hand market, is reduced.
The wider considerations around second-hand cars, and how car insurance will change, must be prioritised sooner rather than later to avoid consumer confusion. Change is coming either way, but companies across industries must get ready for that change now and consider how it could benefit their business if they embrace new possibilities.