Cars: Selling cars remain priority, as brands invest in change

June 15, 2017
Industry News
Content Provided By:

Rupam Borthakur
CEO, Kantar Insights Hong Kong
[email protected]

Carmakers faced reality. Consumers preferred SUVs. The new US administration considered rolling back emission standards. In this context, car brands continued to plan for a vaguely defined future of mobility, but they also invested in sustaining their current combustion engine businesses.

Ford best illustrated this tension. In New York, the automotive pioneer opened Ford Hub, a World’s Fair-like exhibition of the future of mobility, while in Detroit, the company announced that it would resume producing its popular off-road Bronco. Electric carmaker Tesla, founded a century after Ford, recently surpassed Ford and GM in market value.

Tesla led the BrandZTM Car Top 10 in value increase, rising 32 percent, followed by Land Rover, the iconic standard of off-road vehicles, with an increase of 17 percent. Only two other brands rose in value, Porsche by 16 percent, and Mercedes-Benz by 4 percent, having outsold BMW for the first time in a decade after BMW’s US sales slowed. Toyota remained No. 1.

The value of the BrandZTM Car Top 10 stayed flat overall, compared with a 3 percent decline a year ago, as sales increased globally while margins remained thin. China experienced another record year, with 22 million cars sold. The US also reached a record, selling 17.6 million light vehicles. Sales rose for the third consecutive year in Continental Europe, and UK sales hit a record of 2.7 million cars.

Financing arrangements improved affordability and drove the UK sales. Discounts squeezed margins in the US and in China, where buyers rushed to purchase energy-efficient cars before the end of the year, anticipating the expiration of a government incentive program.

Meanwhile, carmakers invested in the development of electric and autonomous cars, and in connectivity to integrate cars into the Internet of Things. Technology brands entered the category both as competitors and collaborators.

Technology changes mobility

Technology challenged the very conception of mobility as a system of vehicles and infrastructure designed to move people from place to place. With the rise of e-commerce, people increasingly stay in place and receive the delivery of goods, from clothing to ready-made meals. When people need to move, rising global urbanization suggests that they will be more likely to use public transportation or a ride-sharing option.

Today, however, most consumers in the developed parts of the world reside in less dense areas, and are still dependent on networks of roads and highways. For them, the fastest way to get from place to place is to climb behind the wheel of a car, and probably one with some cargo space, like an SUV.

Brands in the capital-intensive car business face this difficult challenge of meeting the needs of today’s consumers, while placing big bets on an uncertain future. The potential return on investment is long term and based on fluid assumptions around rapidly changing customer needs and societal trends.

Competition and collaboration

Many car brands already have made substantial investment in autonomous cars and have significant capability

In theory, the automatic pilot function could put the driver in the passenger seat reading a magazine or otherwise engaged, but ready to respond instantly if necessary. The first applications may happen with commercial vehicles. And legislation, rather than technological capability, may determine when full autonomy enters the market.

In the meantime, car brands are making strides in connectivity, with systems to communicate smartphone data and personalize cars with adjustments to seats, steering wheel, and the entertainment system. And brands are forming partnerships to combine industrial manufacturing expertise and capacity with technological wizardry.
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