Betekintés: The Future in Motion, Automotive Current and Future Trends, White Paper

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THE FUTURE IN MOTION Automotive Current & Future Trends White Paper OVERVIEW WHAT’S HAPPENING NOW? WHAT’S NEXT? The global automotive market is experiencing a number of disruptions that influence consumer, retail, and services strategies including hybrid/ electric cars, autonomous vehicles, decreased car ownership in younger urban consumers, car/ ride-sharing, and environmental and sustainability concerns. The Australian automotive market, estimated at $62.8 billion in revenuei is facing domestic changes to government subsidies and tariffs, in addition to shifts in consumer behaviours and preferences, including younger Australians foregoing their driver’s licence; THE DISRUPTED FUTURE ABOUT ACRS the number of under 25-year-olds in Victoria without a licence increased from 10% to 35% in the last ten years.ii While new technologies and competitors such as Uber and Tesla are transforming the automotive industry, they also present new opportunities. Considering these

disruptions and the rapid advancement of technology, ACRS has prepared this white paper to address current trends and the future of the Australian automotive industry. OVERVIEW WHAT’S HAPPENING NOW? WHAT’S NEXT? THE DISRUPTED FUTURE ABOUT ACRS WHAT’S HAPPENING NOW? Consumer Decision Making The purchase and upkeep of a car is a significant consumer sold in 2017, representing 18.5% of the total amount of decision as it represents 5% of average annual household vehicles sold.iv expenditure or $77 per week.iii The ACCC identifies three types of costs consumers consider when purchasing a new car: yy purchasing costs (i.e. the price of a car); yy running costs (i.e. petrol, registration); and yy depreciation costs (i.e. sale price after use).iii These are compared to the relative tangible and intangible benefits a consumer gains when purchasing a particular Consumers are becoming increasingly informed on car models before purchasing; 55% of consumers spend between one

to four weeks researching brands and models to identify cars of interest.iii Audi presented the Audi VR experience for the first time at the North American International Auto Show in Detroit, early 2015. At a car dealership, a sales advisor can configure any Audi model in the device so that customers can virtually experience their dream vehicle. model, such as status and lifestyle. Other considerations There are two critical touchpoints during the information to research models while at dealerships.v In response, for consumers when purchasing a car include city type, search phase; dealerships are incorporating more digital aspects into where population density, parking availability, and public yy the physical dealership, and physical spaces. For example, Audi launched its virtual reality transportation infrastructure influences the need for a car. yy online resources. (VR) showroom in August 2017, integrating it into consumer For example, in cities like Canberra, where

there is little The physical dealership (particularly information from experience.vi Dealers can present the complete range of public transport infrastructure and residential areas are salespeople) influences consumers’ decisions, with models to consumers, including add-ons and customisation spread over a wide area, cars will remain a necessary part consumers typically visiting two dealers before purchasing options. The experience encompasses an entire 360-degree of life. However, inner-city areas of Melbourne may rely less a car.iii Online (desktop and mobile) is the second critical view of the vehicle, sound effects, lighting, and the ability on vehicles due to heavy traffic, expensive car ownership, touchpoint, with 65% of consumers using manufacturer to explore the interior and mechanics. The VR showroom and readily available public transport. These considerations websites to source information before purchasing a car.iii is currently available in the United

Kingdom, Germany, and are reflected in the high volume of small passenger vehicles Fifty per cent of consumers also use their mobile phone Spain, with Australia expected to follow suit. OVERVIEW WHAT’S HAPPENING NOW? WHAT’S NEXT? THE DISRUPTED FUTURE ABOUT ACRS Sharing Economy In the past many consumers had to forego experiences Regardless, higher usage of vehicles will result in greater The Netherlands and Norwegian governments will ban the and products they could not afford due to the high initial wear-and-tear, changing what consumers require from a car sale of new petrol- and diesel-operating cars by 2025. The purchasing price and ongoing ownership costs, such as – fuel-efficiency and high durability (including the potential United Kingdom and France have committed to banning the maintenance. However, this is shifting over recent years to update the car as new technologies are released). sale of petrol- and diesel-operating cars by 2040. Electric Cars

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Electric cars are becoming more affordable for consumers with companies providing access to experiences and products without the exorbitant cost of ownership – this phenomenon is known as the sharing economy. For Environmental and product sustainability concerns have example, Airbnb provides consumers with the opportunity been on society’s radar for some years. Companies such to experience living a different lifestyle – whether this is as Starbucks and H&M are incorporating sustainability the high-life in a luxury apartment or experiencing the into their core principles, ensuring their operations and day-to-day life of residents. products have little to no impact on the environment. The automotive industry has also felt the impact of the sharing economy, with companies such as Ford and Mercedes-Benz opening car-sharing services across Europe.vii While the initial thought is that there may be a decline in car sales, it is not necessarily the case – the individual

purchasing the car may instead change. For example, car rental providers such as Hertz may purchase more cars to fulfil demand, while individual consumers may buy a vehicle for ride-sharing service use rather than household use. The automotive industry has also recognised the need to produce sustainable vehicles with minimal environmental impact, resulting in the development of electric and other fuel-efficient models. Electric cars are the way of the future, with many countries implementing policies and infrastructure to support their adoption. internationally – the latest Tesla Model 3 can be purchased for upwards of AUD 45,000. However, electric vehicle accessibility in Australia is limited, with 13 of the 16 models available in 2016 costing upwards of AUD 60,000, and the remaining three restricted by stock levels, specific purchase arrangements, and availability timeframe.viii Despite this, a number of institutions such as the CSIRO, Australian National University, and the

Department of the Environment and Energy predict that the adoption of electric vehicles in Australia is to increase significantly by 2030, assisted by the increasing number of models available on the market.viii This is supported by a 2016 survey of Victorians that indicated 50% would consider purchasing an electric car, with price and lack of infrastructure identified as key barriers to purchasing.viii Results were similar in a study of electric car adoption in Queensland.ix OVERVIEW WHAT’S HAPPENING NOW? WHAT’S NEXT? THE DISRUPTED FUTURE ABOUT ACRS Key to the adoption of electric cars in Australia is the Technology is advancing rapidly, with new models outclassing engine into the car, Snap uses a removable ‘skateboard’ availability of infrastructure such as charging stations. existing models sometimes within a year or two. Electric engine which can be updated with new technology as In October 2017, NRMA (NSW’s primary road user group) vehicles, in

particular, are seeing rapid advancements, necessary. The concept considers additional concerns announced an additional 40 electric fast-charging stations resulting in second-hand electric vehicles retaining less of such as autonomous vehicles, ride-sharing, and productive to be built across the state, bringing the total number to 61 their original value than the traditional model.xiv interiors through the use of a separate passenger pod that in NSW, and 90 stations across Australia. Total charging Manufacturers will need to consider how they will adjust may be owned, leased, or shared while the engine remains stations (including fast-charging and regular charging) designs to account for these rapid changes, as it may be for public use. in 2017 numbered 476 across Australia, with most being difficult for consumers to purchase new models as they concentrated in capital cities, though more will be built in are made. regional areas.viii Electric cars also present a

tremendous opportunity for Australian manufacturers. NRMA estimates that electric Some manufacturers such as Rinspeed have considered vehicle battery manufacturing will become a $240 billion Regulation of electric vehicles may also assist adoption, this, creating a concept car called Snap that addresses the industry within 20-years, an industry that Australia is well- although Australia has been slow to develop incentives shortening lifespan of vehicles.xv Rather than building the positioned to enter with its abundance of essential minerals.xvi to purchase. At the time of publishing, the only incentives offered for electric vehicles were the luxury car tax break and stamp duty exemption in the ACT.xi However, the luxury car tax would still capture most models available on the market, with consumers paying a 33% tax on fuel-efficient cars priced above the threshold.xii Other countries offer significantly higher incentives for switching to an electric vehicle, with the United

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States providing a federal tax credit of up to $7,500, in addition to rebates and tax credits offered by state governments.xiii Tesla Model 3 – smaller, simpler and more affordable, and the world’s first mass-market electric vehicle. OVERVIEW WHAT’S HAPPENING NOW? WHAT’S NEXT? 3D Printing Autonomous Driving Like other technologies, 3D printing has become cheaper Autonomous driving technology is being tested around and more accessible over the past few years. Retailers the globe, and Australia is no different. Major brands such are beginning to incorporate 3D printing into product as Mercedes-Benz have completed tests in Sydney and prototyping and beyond, offering consumers high-levels of Melbourne, and passenger trials for autonomous buses personalisation. A number of industries are exploring the commenced in Perth in early 2017. A recent study ranked potential to 3D print spare parts, the automotive industry Australia 14th overall in autonomous driving

preparedness, included. For example, in early 2017 Ford introduced a with our laws, lack of technology and innovation, and 3D printing system into its Dearborn, Michigan, research general consumer scepticism regarding autonomous and innovation centre. With the increasing affordability of vehicles as areas to improve.xvii Currently, Australian 3D printing and use of light-weight materials, Ford hopes laws require a human to be the driver of all vehicles to cut costs and improve fuel-efficiency in all its vehicles. and take responsibility for incidents that occur, limiting 3D printing can also be used to test prototypes, allowing the opportunities for autonomous vehicles. changes before the part is sent into mass production. Ford’s fully autonomous Fusion Hybrid research vehicle on the streets of Dearborn, Michigan, USA Ford is currently exploring potential applications of large-scale 3D printing for future production vehicles and personalised car parts THE DISRUPTED

FUTURE ABOUT ACRS Mercedes-Benz autonomous concept car at IAA 2015, Frankfurt, Germany OVERVIEW WHAT’S HAPPENING NOW? WHAT’S NEXT? THE DISRUPTED FUTURE ABOUT ACRS WHAT’S NEXT? Productive Interiors Health and Wellness Flying Cars? Car manufacturers based in China are rethinking the idea Even the automotive industry is unable to escape from the A Slovakian start-up is blurring the lines between car and of the car. Byton, a start-up based in China, has created a health and wellness trend, with Nissan creating a concept plane with the AeroMobil, the world’s first flying car. The self-driving concept car that aims to act more like a luxury car that tracks hydration of the driver. The seats and steering vehicle makes a smooth three-minute transition between leisure space than a vehicle, including revolving front seats wheel are fitted with a special material that responds to land and air and can travel up to 750kms by air at 75% of its and digital

capabilities.xviii Rather than a regular dashboard, sweat, changing colour from blue to yellow, with blue speed capacity.xxi Drivers will require a pilot’s license to fly the car has a wide gesture-controlled digital screen that signalling well-hydrated and yellow signalling dehydrated.xx the vehicle. The company is currently taking pre-orders, with provides entertainment and connectedness. Other brands such as ClearMotion are exploring the possibilities of productive interiors by utilising technology, while Uber filed a patent for a sensory simulation system to make the car While this concept is a one-off for Nissan to raise awareness of dehydration while driving, there are other companies such as Byton looking to implement health tracking technology as a standard feature in their cars. ride more comfortable and productive by reducing motion sickness and light interference.xix Aeromobil’s unique combination of car and aeroplane is expected to be in full production by 2020.

Byton’s autonomous, electric concept car aims to bridge the gap between tradition and vision by blending bespoke lounge experience with digital provisions. the vehicle expected to be in full production by 2020. OVERVIEW WHAT’S HAPPENING NOW? WHAT’S NEXT? THE DISRUPTED FUTURE ABOUT ACRS THE DISRUPTED FUTURE Disruption is becoming the status quo. Once unchanging constantly innovating to stay ahead in the increasingly insights that inform business decisions. In conjunction with industries are now faced with a range of new technologies competitive automotive industry. the Monash Business Behavioural Lab, ACRS can offer and innovation that are accelerating the global market into the future. Trends that in the past may have evolved separately are now converging – electric cars, autonomous vehicles, and the changing way people view car ownership are prime examples of this evolution. It is no longer enough to keep up with the market – manufacturers need to be ACRS

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offers a range of research services to uncover opportunities in a rapidly changing market. As part of the Monash Business School’s Department of Marketing, we have access to and experience with a range of research methods and technologies designed to extract actionable a number of research methods and technologies such as testing vehicle interiors with our eye-tracking capabilities to determine what stimulates a consumer, performing segmentation analysis to provide a detailed understanding of the Australian market and test virtual reality showrooms. OVERVIEW WHAT’S HAPPENING NOW? WHAT’S NEXT? THE DISRUPTED FUTURE ABOUT ACRS ABOUT ACRS The Australian Consumer, Retail, and Services (ACRS) Research Unit assists retail and services organisations seeking to better understand consumers, traverse global trends, identify bestpractice, or employ marketing as a source of competitive advantage. DR REBECCA DARE Positioned within the Monash Business School’s Department of

Managing Director Marketing, ACRS has a 35-year history as a globally respected source of retail, services, consumer and marketing knowledge. ACRS combines the latest academic research advances with business relevance, practicality, and strategy. Department of Marketing Monash Business School Monash University Level 6, Building S 26 Sir John Monash Drive Caulfield East, VIC 3143 DR ELOISE ZAPPOS PAULA DE AMICIS STEPHANIE ATTO Senior Research Consultant Senior Designer & Research Consultant Senior Research Consultant PAOLO DE LEON CLARICE HUSTON JACK PAGET Corporate Partnership & Research Consultant Corporate Partnership & Research Assistant Research Analyst TELEPHONE +61 3 9903 2869 EMAIL acrs@monash.edu monash.edu/acrs NOTES i. James Thomson, “IBISWorld Industry Report G3911: Motor Vehicle Dealers in Australia”, IBISWorld.com.au, accessed January 31, 2018. http://www.ibisworld.com.au ii. NRMA, The Future of Car Ownership, accessed February 12,

2018. https://www.mynrma.com.au/-/media/documents/reports-and-subs/the-future-of-car-ownership.pdf?la=en iii. Australian Competition and Consumer Commission, New Car Retailing Industry: A market study by the ACCC (Canberra, 2017). iv. Ben Selwyn, News & Views, 2017 Australian New Vehicles Sales Year in Review (blog), posted January 16, 2018, accessed February 5, 2018, http://www.acaresearch.com.au/australian-market-research-blog/2017-australian-new-vehicles-sales-year-in-review v. Richard Wolstenholme, Consumers Take the Wheel: How Digital is Changing the Australian Automotive Industry, accessed February 13, 2018. https://www.thinkwithgoogle.com/intl/en-aunz/consumer-insights/consumers-take-the-wheel-how-digital-is-changing-the-australian-auto-industry/ vi. “Audi launches virtual reality technology in dealerships”, audi-mediacenter.com, accessed February 2, 2018.

https://www.audi-mediacenter.com/en/press-releases/audi-launches-virtual-reality-technology-in-dealerships-9270 vii. “The Car Sharing Economy”, just-auto.com, accessed February 7, 2018. https://www.just-auto.com/analysis/the-car-sharing-economy id176400.aspx viii. ClimateWorks, The State of Electric Vehicles in Australia, accessed January 31, 2018, (Melbourne, 2017). https://climateworksaustralia.org/sites/default/files/documents/publications/state of evs final.pdf ix. Ergon, Queensland Household Energy Survey 2016, accessed February 1, 2018 (2017). https://www.ergon.com.au/ data/assets/pdf file/0005/426677/QHES-2016-Summary-Presentation-FINAL.pdf x. Siobhan Fogarty, “Electric car charging stations power up in NSW with NRMA set to add 40 around the state.” ABC News, October 20, 2017, http://www.abc.net.au/news/2017-10-20/investment-in-more-electric-car-charging-stations-around-nsw/9068906 xi. “Incentives”, Tesla.com/en AU, accessed February 1, 2018.

https://www.tesla.com/en AU/support/incentives xii. “Luxury car tax rate and thresholds”, ATO.gov.au, accessed February 1, 2018. https://www.ato.gov.au/rates/luxury-car-tax-rate-and-thresholds/ xiii. “State efforts to promote hybrid and electric vehicles”, NCSL.org, accessed February 1, 2018. http://www.ncsl.org/research/energy/state-electric-vehicle-incentives-state-chart.aspx xiv. Kathryn Diss, “The big problem with electric vehicle resale prices compared to petrol, diesel and hybrid cars”, ABC News, February 6, 2018, http://www.abc.net.au/news/2018-02-06/electric-vehicle-resale-price-compared-to-petrol-diesel-hybrid/9380186 xv. “Future-proof car features separating body & chassis”, Stylus.com, accessed January 31, 2018. https://www.stylus.com/yshqsz xvi. NMRA, The Future is Electric, accessed February 1, 2018. https://www.mynrma.com.au/-/media/the-future-is-electric.pdf?la=en xvii. KPMG, Autonomous Vehicles Readiness Index, accessed 1 February, 2018.

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https://assets.kpmg.com/content/dam/kpmg/xx/pdf/2018/01/avri.pdf xviii. “Concept”, Byton.com, accessed January 31, 2018. https://www.byton.com/ xix. “Turning car interiors into spaces of productivity”, LSNGlobal.com, accessed January 31, 2018. https://www.lsnglobal.com/ xx. “Nissan creates sweat-sensitive car”, Stylus.com, accessed January 31, 2018. https://www.stylus.com/jpfzpf xxi. “Flying Car”, AeroMobil.com, accessed February 1, 2018. https://www.aeromobil.com/flying-car/ Published by The insight in this white paper was correct at the time of publication (February 2018).