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No more signing on the dotted line as car buying will shift to online, finds KPMG survey

Car buying will shift to online, finds KPMG survey

UK automotive executives expect that almost half of all car dealerships will disappear in less than a decade, according to KPMG’s Global Automotive Executive Survey 2018.

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UK automotive executives expect that almost half of all car dealerships will disappear in less than a decade, according to KPMG’s Global Automotive Executive Survey 2018.

The survey found that 75 per cent of UK automotive executives think that 20-50% of the brick-and-mortar retailers will no longer exist by 2025.

Justin Benson, UK Head of Automotive at KPMG, said: “The majority of UK automotive executives are convinced that the only means for dealers to survive is by restructuring into a service factory or a used car hub in the future. This is certainly a warning sign for physical retailers and presents a need to rethink retail concepts and business models, particularly with customers purchasing more of their goods and services at the touch of a button.

With millions of consumers taking advantage of financing options such as contract hire and personal contract plans (PCP), 61 per cent of UK automotive executives believe that issues around vehicle financing may become a concern due to lower residual values.

We live in the age of credit, which is often convenient for those who want to make big purchases and spread the cost out over a period of time. However, existing credit arrangements for vehicles taken out over the past couple of years could cause additional risks for credit companies. This is particularly true if residual values fall further in the short term and people are handing their keys back when the residual value of the vehicle is lower than the PCP contract value,” Benson added.

The report findings also revealed that 63 per cent of UK automotive executives believe that by 2030 the global share of vehicles manufactured in Western Europe will drop significantly, to less than 5 per cent.

Whilst it sounds dire, the truth is that sustainable growth can only be generated in Asia, based on current market forecasts, and this is reflected by the opinions of UK automotive executives, and Western Europe is home to numerous premium brands. So European carmakers need to make use of the technologies offered by Industry 4.0, the Internet of things; and data analytics to take advantage of opportunities to manage costs and continue to be globally competitive,” said Benson.

Three out of four consumers highlighted data and cyber security as a prerequisite for their purchasing decision, suggesting that the companies who fail to provide this will suffer severe consequences. But will people trust carmakers to be their data guardians more than the current digital players?

Benson commented: “Data ownership is a sensitive issue, and the question of who owns the data generated by vehicles and consumers on the go is one that is yet to be answered. What is clear is that consumers predominantly only trust themselves, and with data breaches and hacks making headlines in recent years, who can blame them? What is interesting, however, is that almost one in three executives believe that car manufacturers will be the data guardians.

As the shift to a digital future progresses, many automotive companies have already started capitalising on opportunities by providing digital services, as well as selling cars. Which is why 75 per cent of UK automotive executives think that data is going to be the fuel for the future business model of automotive companies, as the shift towards an autonomous vehicle future accelerates.

In the UK, our findings are clear on one thing, there are more significant disruptors to the automotive sector than Brexit. Electric vehicles, autonomous vehicles and Mobility as a Service (MaaS) are going to drive change in the automotive sector for the foreseeable future. New business structures and new economic models are on the horizon, driven by these disruptors and the associated new technology. It’s an exciting but uncertain time for the industry. Whilst our report highlights concerns in some of its conclusions, it also helps chart a path to future success, “concluded Benson.

 

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Notes to editors

To access KPMG’s Global Automotive Executive Survey and interactive dashboard, click here

About KPMG International’s Global Automotive Executive Survey 2018

With more than half of our 907 respondents occupying a leading position of CEO, president, chairman or C-level executive, we have increased the number of highly ranked executives even further compared to previous years. Our sample is split evenly between upstream players (product-driven), including automakers and suppliers, and downstream players (service-driven), including dealers, financial services providers, rental companies, mobility services providers as well as information and communication technology (ICT) companies. In order to grasp the opinions from all players in the ecosystem we have, for the first time, reached out to energy and infrastructure providers as well as government authorities. This allowed diverse insights from different viewpoints with economic or political intentions.

Around one third of the executives are based in Western and Eastern Europe, the second largest group of respondents is represented by Chinese executives with 15%. 13% come from North-, 9% from South America and 13% originate from India and the ASEAN. 9% are from the Mature Asia region of Japan and South Korea. The Rest of the World represents the remaining 5%.

72% of our respondents are active in companies with revenues greater than US$1 billion, half of whom even have revenues of more than US$10 billion.

The survey was conducted online and took place between September and October 2017.

About KPMG in the UK

KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 14,500 partners and staff. The UK firm recorded a revenue of £2.2 billion in the year ended 30 September 2017. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 152 countries and has 189,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

For media enquiries and interviews, please contact:

Jo Chileshe, KPMG Corporate Communications

T : 0121 232 3343

M : 07919 211 803

E : jo.chileshe@kpmg.co.uk

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