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The Road Ahead. Predictions for 2023

Updated: Oct 26, 2023

Our annual predictions are now the best read and quoted articles and blogs that Boost Auto produces. They are created and curated from reading countless hours of white papers, listening to podcasts, and six key automotive subscriptions plus a Chinese automotive WeChat group!


This year we will break the predictions into Trends and Brands.

TRENDS


Multi-modal.

It is likely that you have a new cycleway, that recently popped up near your home or workplace. This is part of a global trend, to get individuals out of cars and onto public transport and bicycles.


In NZ 68% of trips are single occupancy and 53% of trips chains are less than 7km long. Simply put we can't continue to put one person in one car. Even if it is electric. There's an increasing realisation from governments that switching ICE to BEV is only the first stage of de-carbonisation. In simple terms we need to go multi-modal. This is a global trend, and central and local government are embracing it it nearly every developed nation.


You might not like losing a handy parking place, however it is inevitable and cities around the world are become revitalised by the shift to multi modal transport. The results show that the changes largely benefit local businesses, road users and local communities. And universally, no-one likes losing a car parking space.


Ownership vs Usage.

Guaranteed Future Value (GFV) products are gaining huge traction here. In the UK GFV products account for over 80% of all new car sales. But GFV aren't the end game for consumers (who are slowly but increasingly seeing ownership as unnecessary). Most cars sit idle in a driveway or at a workplace most of the time, and so in this context asset utilization is terrible, and therefore the car itself is expensive.


NIO who are a big innovator now sell most of their cars on subscription, AND have customers subscribe to BaaS - swappable batteries as a service. In London it’s been the case for years that owning a car is not the default, but renting one as needed is the way forward.


In NZ innovative companies like Zilch offer commuting options on subscription or on-demand as an alternative to owning a car. In this case, one car is utilized much more. MaaS - Mobility as a Service - is the flexible solution created by looking hard at vehicle utilisation. 75% of the cost of owning a car is fixed costs, and utilisation for private vehicles is very low. Expect MaaS to become more mainstream quite quickly as larger corporates look hard at their fleet utilization.


The endgame is not a GFV product but MaaS. MaaS adoption will come along just after electrification, when corporates and private customers look at the cost of owning an expensive asset and then look at how much it is used. Subscription is much more widely accepted now than it was even five years ago, which means that consumers are more likely to get used to the idea of paying for usage instead of ownership.



Micromobility.

Micromobility is not one thing but many. Light micromobility is anything from scooters to skateboards, to ebikes, to mopeds, and heavy micro-mobility is vehicles up to about 500kgs. The Paxter that NZ Post uses is an example. The rate of change here is dramatic and accelerating hard.


Why do you need to be concerned about micromobility? Because this is competing against cars on your yard. They are cheap to run, typically zero emissions, and often MaaS.


They are powered transport for shorter journeys, and your retail and fleet customers are looking at these as solutions for city transport and delivery. Globally the market was worth $44bn is 2020 and is projected to grow by nearly 5 times for $214bn USD by 2030.


Cargo bikes and last mile will drive growth for segments that we barely consider domestically right now. If you want to see a city embrace micromobility look to Paris and New York or London.


Some cities are looking at micromobility as a way of creating public transport reach beyond local transport hubs. Micromobility has huge momentum, and its one of the reasons behind Boost Auto investing in Horwin and Goscoot in NZ.


Utes versus Vans.

Utes are the second largest segment in automotive sales pie, bested only by medium SUV.

But unlike SUV there is only one BEV you can order today.


Utes are hit hard by CCA fees and are in the gun because of their poor emissions and FBT gaming. Despite being a business purchase, there's a large slice of emotion involved in purchasing a ute.


But here's the thing, Peugeot’s Expert (that's their small van) has a longer cargo length and is marginally wider between the wheel arches (and doesn't need a canopy), so can carry more. No, it can't tow your 3.5T boat. It also emits 100g/km less than a Triton and is 50% more fuel efficient (plus its Euro 6 not Eu 5, so its other particulates emissions are lower). Citroen overseas has even ditched its ICE Berlingo (sister product to the Partner) and is BEV only.


Corporates will tire of buying high emitting vehicles, when they see there are better alternatives (aided by their very own in house vehicle emissions reduction target). After all, pick-ups might be common here, but they are not common in Europe or China. One of us has got it wrong. Utes aren't going away, but they are under pressure, for good reason. Expect to see the segment decline significantly in 2023.



Circular Economy.

Meanwhile, all brands are under pressure to manage the circular economy of their vehicle.


It’s no longer enough to say that a dashboard is recyclable. Brands need to demonstrate how to recycle car parts and take advantage of the value of the parts and materials. Since 2015, Toyota have had a goal of 85% of their vehicle being reused or recycles and 90% recovered.


This increased focus is partly because of the cost of batteries and their component materials. Last year European manufacturers got together with the World Economic Forum to commit to change.


Circular economy approaches can help the automotive industry reduce the lifecycle carbon emissions per passenger km by up to 75% by 2030. They'll use significantly less resources as a result. Dealers will have an important role to play in this.


Customer Experience.

Most customers now only visit one dealer for a new car.


They've done their homework, read your reviews, watched the road tests, joined the FB group and they know what they want. NZ now has three brands that use the agency model, and new entrants will lean towards this too (or direct). For these brands CX is critical and a keen focus.


Are you still hiring salespeople? Or customer service people?


McKinsey and Co say that haggling will disappear as we move towards tomorrow.

Agency in part will help that along, noting that agency typically comes lower pricing. As agency progresses across brands MRRPs will come down. Either way there's a squeeze on your margins and the market isn't as strong as it has been in the last 24 months.


Do you need to pay salespeople as much as you do when the skill you hired them for are not necessarily the skills they need? How much of your sales process can you do online. And how do you do it well?


CX is your battleground, and you need to win. It might be time to deploy your troops to the new front line, which may well be online.


Affordability

EV's are great for dealers; they drive up the average sales price - even if they do sometimes come with skinnier margins, courtesy of a 'new rules' approach by brands.


But EV's are too expensive, and NZ has a fascination with big batteries and high specifications. For example, VW's first iD4 model here is 5th on the hierarchy in the UK and has an $80K price tag. Do we really need 77 kWh when speed of charging is more important? No one buys a petrol car and compares petrol tank size.


Emerging brands will bring lower priced EV's. with lower spec, smaller size and smaller batteries. Like an early 24kW Leaf brought up to date. And they'll sell loads of them because they are not fixated at $60K plus price points


BYD EA1 / Dolphin comes with 31 or 45 kWh battery. Might be $40K. They'll sell loads and cause a rethink. Not every car sold has to be a primary car....


Now take that with BaaS or a subscription and we have truly made BEVs affordable. A NIO for example is 10,000 USD cheaper because you subscribe to the battery plan, rather than buying the battery.


Mainstream brands that ignore affordability will be left behind.


BRANDS


World’s Best Selling Car.

Could Model Y become the best-selling car #1 globally? We think so. Already #1 in Europe in September last year, and #1 in NZ. Its factories are still ramping up, and each of the four Tesla factories aren't just big, they are huge (Mega, maybe).


Tesla may well be closing stores overseas as they become more mainstream and moving to more traditional locations (plus to areas where they have better service facilities), but their sales dominate nearly every other EV, in nearly every market. They are a clear leader in EVs.


VW plans to overtake Tesla next year, and they might...but Tesla have a small model range so each nameplate, especially 3 and Y sell in very large numbers.

In the US Telsa sold 156K Model 3 and 190K Model Y, YTD (Sept). #3 was Mach E with 28K and #4 was Tesla Model S. So their lead is huge, not just big. In NZ, the question is not which model will be #1, but which will be #3.


New Brands Arriving.

Chery is coming - this much we know. They’ve been set up in Au for over 3 months, working on their NZ plan. Who is next?


Look to Norway and then Netherlands, Germany, Denmark, and Sweden. NIO is all about subscriptions and battery swaps, or BaaS. Their cars are about $10K USD cheaper because the battery is a subscription. Geely, who now owns a share of Volvo, Polestar, LEVC and more recently 8% of Aston Martin, plus a stake in Renault's Korean operation has been clear about its global expansion aspirations. Bestune is FAW's renamed PV brand and offer sharply styled well priced SUVs. Whether they will make it in late 23 or early '24 is unclear. What is known is there is a large number of brands circling, and Boost Auto is working with a large number of them.


Standardised Engines.

Euro VII standards are causing headaches for manufacturers. Stelantis CEO, Carlos Tavares states that Euro VII is a distraction that manufacturers could do without. They require brands to invest in a range of petrol motors which will be the last European ICE for many brands and will be sold in declining numbers, and will be outlawed before they have paid back their development costs.


Yet Euro VII has very tough 'always on' emissions standards. His view is brands should be focussing on electric. This distraction will only help emerging Chinese brands get a greater BEV foothold in many markets. We passed peak ICE 3 years ago.


To illustrate the point, Mercedes-Benz will halve its engine line up to manage costs. Geely on the other hand have been working hard to become the Euro 7 manufacturer of choice with their Leishen Hi-X, a powertrain that comes with a 3-speed Dedicated Hybrid Transmission DHT.


With manufacturers forced to develop engines that will soon be outlawed, many manufactures will struggle with ROI and will slash their engine line-ups and look towards brands that can provide powertrains at scale and minimise sunk investment.


Maybe your next ICE car - if there is another 'next ICE' - will be powered by a Geely engine. And maybe so will your neighbours.


Chip Shortages.

The chip shortage isn't going away because cars are using more of them.


Our cars, like our phones are coming with more and more computing power. They need chips to run, and lots of them. Lead times are still long, demand is ahead of supply in most developed nations, and the chips per car quota is increasing. Especially electric cars, that use nearly twice as many chips as an ICE.


It’s going to be another 12 months of not quite getting what you want. Unless you are a Chinese brand, where your supply constraints won’t be as bad as the rest of the world.


BEV share at 40%?

Consumers are now demanding cleaner more efficient vehicles, and in New Zealand despite our slow start our BEV market is sophisticated, underpinned by The Electric Highway, used Nissan Leaf and the CCA.


As more affordable BEVs come to market, BEV share of passenger vehicles might touch 40% this year. MHEV (Mild Hybrid Electric Vehicle) might make 25% at the expense of petrol.


Mild hybrid will become the default affordable choice while PHEV will be squeezed as offering the best and worst of both worlds. Look at a used Acqua. In the used car market a Tiida used to be the import leader, but it was twice as thirsty with twice the emissions and roughly the same price as an Acqua. For cheaper cars fuel economy is more important than full electric because it makes a car affordable. It is an easy win.


But BEV share will accelerate because more people want them and there is increasing choice. Local brands must keep an eye on their price points because the rebates won't last for ever, and brands with $79,990 cars are most at risk.


Cap Change.

Which leads us to the $80 CCA cap. Maybe rebates are here to stay. But for sure they won't remain at the level they are at.


Some time next year the government will plug the fiscal whole in the current scheme. They'll do that firstly by lowering the amount of money offered. Frankly only a government department could come up with numbers like $8625 and $5750 - consumers likely don’t care whether its $8625 or $6000.


Or they could do it by lowering the cap. Both is probably a safe bet - the question is how much lower could they go, and not lower the adoption rate for clean cars?


Perhaps $10K and $2000 less on a BEV wouldn't affect many. I'm pretty sure Tesla would tweak their pricing to stay under the cap. After all they wouldn't want to give up their 4000 cars YTD, for the sake of a relatively small discount.


And high prices have a limited effect on the affordability of trickle-down used cars.


What do you think?


Add your comments below.



Please credit this article, website and the author when using content from this blog.

Boost Auto is an automotive consultancy working in seven main areas.

· Market Insights & Trends

· Sales Training

· Sales and Marketing effectiveness for brands and dealers

· Green fleet facilitation for large corporates

· Go To Market strategies for emerging brands

· Business Planning and facilitation

· Operational Effectiveness



You can contact us at hello@boostauto.co.nz





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