THE FUTURE IN MOTIONAutomotive Current

& Future Trends White Paper

ABOUT ACRSTHE DISRUPTED FUTUREWHAT’S NEXT?WHAT’S HAPPENING NOW?OVERVIEW

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 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 NEXT?WHAT’S HAPPENING NOW? THE DISRUPTED FUTURE ABOUT ACRS

to research models while at dealerships.v In response,

dealerships are incorporating more digital aspects into

physical spaces. For example, Audi launched its virtual reality

(VR) showroom in August 2017, integrating it into consumer

experience.vi Dealers can present the complete range of

models to consumers, including add-ons and customisation

options. The experience encompasses an entire 360-degree

view of the vehicle, sound effects, lighting, and the ability

to explore the interior and mechanics. The VR showroom

is currently available in the United Kingdom, Germany, and

Spain, with Australia expected to follow suit.

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.

sold in 2017, representing 18.5% of the total amount of

vehicles sold.iv

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

There are two critical touchpoints during the information

search phase;

y the physical dealership, and

y online resources.

The physical dealership (particularly information from

salespeople) influences consumers’ decisions, with

consumers typically visiting two dealers before purchasing

a car.iii Online (desktop and mobile) is the second critical

touchpoint, with 65% of consumers using manufacturer

websites to source information before purchasing a car.iii

Fifty per cent of consumers also use their mobile phone

Consumer Decision Making

The purchase and upkeep of a car is a significant consumer

decision as it represents 5% of average annual household

expenditure or $77 per week.iii

The ACCC identifies three types of costs consumers

consider when purchasing a new car:

y purchasing costs (i.e. the price of a car);

y running costs (i.e. petrol, registration); and

y 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

model, such as status and lifestyle. Other considerations

for consumers when purchasing a car include city type,

where population density, parking availability, and public

transportation infrastructure influences the need for a car.

For example, in cities like Canberra, where there is little

public transport infrastructure and residential areas are

spread over a wide area, cars will remain a necessary part

of life. However, inner-city areas of Melbourne may rely less

on vehicles due to heavy traffic, expensive car ownership,

and readily available public transport. These considerations

are reflected in the high volume of small passenger vehicles

WHAT’S HAPPENING NOW?

OVERVIEW WHAT’S NEXT?WHAT’S HAPPENING NOW? THE DISRUPTED FUTURE ABOUT ACRS

The Netherlands and Norwegian governments will ban the

sale of new petrol- and diesel-operating cars by 2025. The

United Kingdom and France have committed to banning the

sale of petrol- and diesel-operating cars by 2040.

Electric cars are becoming more affordable for consumers

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

Regardless, higher usage of vehicles will result in greater

wear-and-tear, changing what consumers require from a car

– fuel-efficiency and high durability (including the potential

to update the car as new technologies are released).

Electric Cars

Environmental and product sustainability concerns have

been on society’s radar for some years. Companies such

as Starbucks and H&M are incorporating sustainability

into their core principles, ensuring their operations and

products have little to no impact on the environment.

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.

Sharing Economy

In the past many consumers had to forego experiences

and products they could not afford due to the high initial

purchasing price and ongoing ownership costs, such as

maintenance. However, this is shifting over recent years

with companies providing access to experiences and

products without the exorbitant cost of ownership – this

phenomenon is known as the sharing economy. For

example, Airbnb provides consumers with the opportunity

to experience living a different lifestyle – whether this is

the high-life in a luxury apartment or experiencing the

day-to-day life of residents.

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.

OVERVIEW WHAT’S NEXT?WHAT’S HAPPENING NOW? THE DISRUPTED FUTURE ABOUT ACRS

Tesla Model 3 – smaller, simpler and more affordable, and the world’s first mass-market electric vehicle.

engine into the car, Snap uses a removable ‘skateboard’

engine which can be updated with new technology as

necessary. The concept considers additional concerns

such as autonomous vehicles, ride-sharing, and productive

interiors through the use of a separate passenger pod that

may be owned, leased, or shared while the engine remains

for public use.

Electric cars also present a tremendous opportunity for

Australian manufacturers. NRMA estimates that electric

vehicle battery manufacturing will become a $240 billion

industry within 20-years, an industry that Australia is well-

positioned to enter with its abundance of essential minerals.xvi

Technology is advancing rapidly, with new models outclassing

existing models sometimes within a year or two. Electric

vehicles, in particular, are seeing rapid advancements,

resulting in second-hand electric vehicles retaining less of

their original value than the traditional model.xiv

Manufacturers will need to consider how they will adjust

designs to account for these rapid changes, as it may be

difficult for consumers to purchase new models as they

are made.

Some manufacturers such as Rinspeed have considered

this, creating a concept car called Snap that addresses the

shortening lifespan of vehicles.xv Rather than building the

Key to the adoption of electric cars in Australia is the

availability of infrastructure such as charging stations.

In October 2017, NRMA (NSW’s primary road user group)

announced an additional 40 electric fast-charging stations

to be built across the state, bringing the total number to 61

in NSW, and 90 stations across Australia. Total charging

stations (including fast-charging and regular charging)

in 2017 numbered 476 across Australia, with most being

concentrated in capital cities, though more will be built in

regional areas.viii

Regulation of electric vehicles may also assist adoption,

although Australia has been slow to develop incentives

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 States providing a federal

tax credit of up to $7,500, in addition to rebates and tax

credits offered by state governments.xiii

OVERVIEW WHAT’S NEXT?WHAT’S HAPPENING NOW? THE DISRUPTED FUTURE ABOUT ACRS

3D Printing

Like other technologies, 3D printing has become cheaper

and more accessible over the past few years. Retailers

are beginning to incorporate 3D printing into product

prototyping and beyond, offering consumers high-levels of

personalisation. A number of industries are exploring the

potential to 3D print spare parts, the automotive industry

included. For example, in early 2017 Ford introduced a

3D printing system into its Dearborn, Michigan, research

and innovation centre. With the increasing affordability of

3D printing and use of light-weight materials, Ford hopes

to cut costs and improve fuel-efficiency in all its vehicles.

3D printing can also be used to test prototypes, allowing

changes before the part is sent into mass production.

Autonomous Driving

Ford is currently exploring potential applications of large-scale 3D printing for future production vehicles and personalised car parts

Ford’s fully autonomous Fusion Hybrid research vehicle on the streets of Dearborn, Michigan, USA

Mercedes-Benz autonomous concept car at IAA 2015, Frankfurt, Germany

Autonomous driving technology is being tested around

the globe, and Australia is no different. Major brands such

as Mercedes-Benz have completed tests in Sydney and

Melbourne, and passenger trials for autonomous buses

commenced in Perth in early 2017. A recent study ranked

Australia 14th overall in autonomous driving preparedness,

with our laws, lack of technology and innovation, and

general consumer scepticism regarding autonomous

vehicles as areas to improve.xvii Currently, Australian

laws require a human to be the driver of all vehicles

and take responsibility for incidents that occur, limiting

the opportunities for autonomous vehicles.

OVERVIEW WHAT’S NEXT?WHAT’S HAPPENING NOW? THE DISRUPTED FUTURE ABOUT ACRS

WHAT’S NEXT?

Productive Interiors

Car manufacturers based in China are rethinking the idea

of the car. Byton, a start-up based in China, has created a

self-driving concept car that aims to act more like a luxury

leisure space than a vehicle, including revolving front seats

and digital capabilities.xviii Rather than a regular dashboard,

the car has a wide gesture-controlled digital screen that

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

ride more comfortable and productive by reducing motion

sickness and light interference.xix

Health and Wellness

Even the automotive industry is unable to escape from the

health and wellness trend, with Nissan creating a concept

car that tracks hydration of the driver. The seats and steering

wheel are fitted with a special material that responds to

sweat, changing colour from blue to yellow, with blue

signalling well-hydrated and yellow signalling dehydrated.xx

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.

Flying Cars?

A Slovakian start-up is blurring the lines between car and

plane with the AeroMobil, the world’s first flying car. The

vehicle makes a smooth three-minute transition between

land and air and can travel up to 750kms by air at 75% of its

speed capacity.xxi Drivers will require a pilot’s license to fly

the vehicle. The company is currently taking pre-orders, with

the vehicle 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.

Aeromobil’s unique combination of car and aeroplane is expected to be in full production by 2020.

OVERVIEW WHAT’S NEXT?WHAT’S HAPPENING NOW? THE DISRUPTED FUTURE ABOUT ACRS

THE DISRUPTED FUTUREconstantly innovating to stay ahead in the increasingly

competitive automotive industry.

ACRS 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

Disruption is becoming the status quo. Once unchanging

industries are now faced with a range of new technologies

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

insights that inform business decisions. In conjunction with

the Monash Business Behavioural Lab, ACRS can offer

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 NEXT?WHAT’S HAPPENING NOW? 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 best-

practice, or employ marketing as a source of competitive advantage.

Positioned within the Monash Business School’s Department of

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.

DR REBECCA DAREManaging Director

DR ELOISE ZAPPOSSenior Research Consultant

STEPHANIE ATTOSenior Research Consultant

JACK PAGETResearch Analyst

PAULA DE AMICISSenior Designer &

Research Consultant

PAOLO DE LEONCorporate Partnership & Research Consultant

CLARICE HUSTONCorporate Partnership & Research Assistant

Department of MarketingMonash Business School

Monash UniversityLevel 6, Building S26 Sir John Monash DriveCaulfield East, VIC 3143

TELEPHONE+61 3 9903 2869

EMAILacrs@monash.edu

monash.edu/acrs

i. James Thomson, “IBISWorld Industry Report G3911: Motor Vehicle Dealers in Australia”, IBISWorld.com.au, accessed January 31, 2018. http://www.ibisworld.com.auii. 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=eniii. 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-reviewv. 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-9270vii. “The Car Sharing Economy”, just-auto.com, accessed February 7, 2018. https://www.just-auto.com/analysis/the-car-sharing-economy_id176400.aspxviii. 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.pdfix. 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.pdfx. 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/9068906xi. “Incentives”, Tesla.com/en_AU, accessed February 1, 2018. https://www.tesla.com/en_AU/support/incentivesxii. “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.aspxxiv. 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/9380186xv. “Future-proof car features separating body & chassis”, Stylus.com, accessed January 31, 2018. https://www.stylus.com/yshqszxvi. NMRA, The Future is Electric, accessed February 1, 2018. https://www.mynrma.com.au/-/media/the-future-is-electric.pdf?la=enxvii. KPMG, Autonomous Vehicles Readiness Index, accessed 1 February, 2018. https://assets.kpmg.com/content/dam/kpmg/xx/pdf/2018/01/avri.pdfxviii. “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/jpfzpfxxi. “Flying Car”, AeroMobil.com, accessed February 1, 2018. https://www.aeromobil.com/flying-car/

NOTES

Published byThe insight in this white paper was correct at the time of publication (February 2018).