Automotive Industry Hot Topics with CAR Research Fellow, Kwaku Prakah-Asante – (03/01/2024)
This week we are joined by a special guest, Kwaku Prakah-Asante, Research Fellow at CAR. Kwaku covers and shares his thoughts on the latest Hot Topics happening in the automotive industry.If you would like to receive this bi-weekly insight into critical industry issues you and your organization are facing, sign up for our mailing list to get Hot Topics sent directly to your inbox.
SUVs in Europe:
Kwaku’s thoughts:
Sustaining the development of products which resonate with consumers is essential for creating and capturing value. How should a company continue to anticipate the evolving needs of consumers globally? While SUV production has predominantly catered to the multi-purpose vehicle demands of the US market, what about Europe? How is the SUV market evolving there, and how does consumer demand shape decision-making for SUV production, technology development, societal implications, and policy decisions?
An interesting phenomenon is occurring in the European SUV market. SUV sales were dominant in 2023, with 6.63 million units sold, accounting for about 51% of total vehicle sales. The sales figures in 2023 represent an increase of about 19% from 2022. Small and compact SUVs have been instrumental in driving growth. OEMs have provided electrified options that present alternative choices for European consumers. The increasing demand for SUVs is fueled by characteristics such as additional space for more passengers, flexible luggage storage, along with a range of propulsion options available at different price points. As SUVs increase in the fleet, implications on infrastructure, safety, and policy decision-making become extremely relevant.
The Paris vote to triple parking charges for SUVs underscores the significance of employing an integrated systems approach to innovation to understand the social and economic impacts. Utilizing vehicle connectivity and computational intelligence methods to inform drivers about available parking resources may be beneficial. In addition, multi-modal transportation strategies may become more significant for respective SUV owners in city environments. Having a continuous laser focus on the evolving needs of the consumer to tailor vehicle design, technology, and the consumer experience drives opportunities to maximize value globally.
Push for Tariffs:
Kwaku’s thoughts:
The Electric Vehicle (EV) market’s response to consumer demands for more affordable options has intensified global competition. OEMs have been working on innovative solutions across the EV value chain to develop and manufacture vehicles between $11K to $25K. Cost advantages in some countries may foster the development of lower cost options, contributing to the increasing call for more tariffs in the EV domain. The US tariffs on passenger vehicles for imports from Europe and China are 2.5% and 27.5%, respectively. While tariff policy discussions continue, it is imperative for OEMs to strategically position themselves for ongoing innovation.
To successfully produce lower-cost EVs that align with consumer preferences and remain profitable, a shift toward consumer-driven personalized approaches in vehicle design, product development, and technology-driven manufacturing is underway. Collaboration with other OEMs, supplier alignment, and leveraging intellectual property should be exercised.
Ultimately, policy decisions and innovation strategies should account for socio-economic implications, extended consequences on the supply chain, and availability of consumer choices to ensure the sustainability of a viable automotive ecosystem.
Affordability Future Factors:
Kwaku’s thoughts:
The increasing prices for new cars and the overall cost of vehicle ownership is impacting consumer behavior. Consumers unable to afford new vehicles may opt for used vehicles, or even keep their vehicles longer, thus impacting new vehicle sales. The US Bureau of Transportation Statistics indicates that the vehicle fleet average age is now about 12.2 years. Consequently, stakeholders in the automotive industry are focused on developing Profitable Affordable Cars (PACs), and strategically incorporating features to maximize value in the consumer ownership experience. EV price points under $15K are being realized, prompting intense global competition in the affordable electric vehicle space. Companies are galvanizing resources to innovate across the EV value chain to identify, develop, and introduce viable affordable options.
In addition, incorporating artificial intelligence, machine learning, and vehicle connectivity to understand consumer usage of features and services provides the means to prioritize consumer preferences, delivering enhanced value and minimizing costs. Furthermore, it is beneficial to align PAC product development and manufacturing initiatives with existing resources and capabilities. Where capability gaps are identified, strategic use of build, buy, or partner options should be considered to generate value. EVs that resonate with consumers provide opportunities to grow and promote adoption in the EV market.
