Event Type: Webinar

Autovista24 webinar: Can vehicle-equipment strategies keep pace with automotive trends?

As carmakers adjust to a more electrified, connected, and digitally-enabled automotive reality vehicle-equipment strategies are changing.

Living costs are rapidly increasing in all European countries, affecting new-car prices. Higher prices for raw materials and labour costs are driving list prices up, but factory-fitted standard equipment is also increasing. With less money in their pockets, consumers are postponing purchases. So, manufacturers need to find the right balance between affordability and attractive standard equipment.

Companies are also looking to lower costs and reduce production complexity. Simplifying equipment strategies leverages economies of scale, which should help ease pressure on the supply chain, increasing the availability of new cars. Furthermore, pan-European equipment strategies facilitate profitable cross-border sales of new or used cars. More unified approaches also enable features on demand (FOD), which require pre-installed hardware.

At the same time, the challenges surrounding vehicle equipment are higher than ever before. EU regulations are forcing manufacturers to build in more safety and driver-assistance features, such as intelligent speed assistance systems. Infotainment performance will become a major differentiator and requires huge investments in technologies and software development.

These topics set the scene for the latest Autovista24 webinar, How vehicle-equipment strategies are changing in the automotive market’. Autovista Group experts discuss current challenges, present data on how standard equipment and trim lines changed between 2019 and 2022, and share insights on equipment strategies applied by carmakers.

Complexity reduction

Christian Schneider, head of analytics at Autovista Group, analysed how rising list prices are connected to an increase in standard equipment. He took a closer look at the factory-fitted equipment on the German market.

For example, while LED headlights were standard equipment in just over 40% of cars in January 2019, the fitment rate doubled to over 80% in June 2022. ‘This means that 80% of cars now have this rather expensive feature worth between €1,000 and €1,500 built-in, and that compensates for the list-price increases to a certain extent,’ Schneider explained.

Other examples include DAB radios or navigation systems, many of these feature developments driven by either regulation or a change in consumer preference. The rate of factory-fitted 360° camera systems in D-SUVs doubled since 2019, probably related to cars becoming bigger. ‘We do expect this trend to continue, especially when it comes to EU-regulated safety features. This will also drive list-price increases further,’ added Schneider.

‘An increase in standard equipment also helps to simplify a carmaker’s equipment strategy and reduces complexity,’ he said. There is a clear trend of OEMs offering fewer trim lines. More complete standard equipment, together with rising list prices, also bolsters residual values (RVs), along with inflation and the limited availability of used cars.

Carmakers take different approaches

The most common equipment strategies applied by car manufacturers are the hierarchical trim walk, the Y-type strategy, and the base-plus-options approach. While the hierarchical trim walk has lines building on top of each other, the Y-type strategy advances into a sporty and luxurious branch, for example. The base-plus-options approach is traditionally used by premium manufacturers. It comes with the risk of introducing underequipped models to the used-car market, as well as increasing the difficulty in identifying built-in features.

‘In Car To Market studies, we therefore always analyse the standard and optional equipment of a model. By doing so, we can give our customers recommendations not only in comparison to their direct rivals but also in light of used-car market trends and requirements,’ said Guillermo Iniguez, senior market analyst at Autovista Group.

With the entrance of several new players into European markets, established carmakers also need to closely observe and potentially adjust their approaches. ‘New players typically avoid entry-trim versions and come with a high level of standard equipment,’ Iniguez explained. This approach gives many new players a head start on RVs.

To avoid residual value risks, some general rules include making high-demand features standard and integrating other popular or trending items into a clear and logical trim walk. The naming of trims and packages should give clear guidance for a used-car customer, such as ‘winter pack’ or ‘executive pack’.

FOD – the new kid in town

While the industry used to differentiate between standard and optional equipment in the past, there is a new kid in town now – features on demand.

Generally, FOD is a great opportunity to keep a car updated, allowing for flexibility on the used-car market and helping establish a direct customer relationship throughout a model’s lifecycle. However, it does not come without risks. Carmakers must select the right features and set the right price, especially as cars get older. Commercially viable FODs need to be selected based on the expected demand and the hardware pre-instalment costs.

Vehicle-equipment strategies find themselves at the core of automotive decision-making and are bound to change, adapting to the megatrends disrupting the industry. Robust RVs are always subject to the reconciliation of requirements between the new-car market and the used-car market. In the future, a robust hierarchical trim strategy that avoids costly mistakes in the form of underequipped cars and unidentifiable features will also be crucial.

Autovista24 webinar: Delayed delivery of Europe’s electric-van market

While much of the automotive industry stalled during COVID-19, the light-commercial vehicle (LCV) market developed at a pace. Demand for vans increased as shoppers turned to online retail and companies rushed to keep up with the change in purchasing behaviour.

However, the sector now faces the same external difficulties as the entire automotive market. Shortages of semiconductors, component-supply issues caused by the Ukraine war, and pressure to switch to zero-emission technologies are causing a decline in new LCV sales. New-vehicle list prices are rising, and residual values (RVs) are generally remaining positive.

Just like the passenger-car market there is an increasing push towards electrification, particularly as fuel prices rise. The LCV market presents a significant development opportunity for electrification. However, it must first overcome some serious obstacles such as charging times, infrastructure location, and logistical practicality. 

There is also a big opportunity for hydrogen fuel-cell technology in the LCV market. The technology offers significant advantages over battery-based propulsion when it comes to zero-emission LCVs. This includes reduced refuelling times and better payload opportunities without the weight of batteries, which could see the market spearhead development of the fuel type.

All these topics were discussed in the recent Autovista24 webinar, Europe’s light-commercial vehicle market – The road ahead for new and used vans. The panellists looked at economic scenarios in Europe, how RVs are faring, outlooks for the UK and German markets, the electric LCV market, and how hydrogen could grow in the segment.

Infrastructure and other challenges

The LCV market is a sleeping giant when it comes to electrification, Dr Christof Engelskirchen, chief economist at Autovista Group, stated. There are still challenges to overcome, not least with the infrastructure required. The existing electrification infrastructure has been built around the passenger-car market, and charging points can be restrictive for vans, which require larger parking spaces and car-park height clearance. Additionally, van drivers need a fast charging time to avoid delays to deliveries and the resulting impact on business costs.

One answer could be the development of delivery hubs on the edges of urban areas, with last-mile deliveries made by electric LCVs. Christian Schneider, head of analytics at Autovista Group, suggested that such facilities should have dedicated charging points for vans.

Although all manufacturers are introducing battery-electric vehicle (BEV) models, there are few vehicles filtering through to the used-van market, highlighted Andy Picton, chief editor (CV) at Glass’s, part of Autovista Group. Used BEVs may be a better fit for small and medium enterprises and sole traders. These businesses usually have smaller budgets, making these lower-priced models more appealing. Picton added that recent fuel-price increases may speed up the switch to BEVs.

Development of new BEVs is expensive, which is leading to an increasing number of partnerships, such as that between Ford and Volkswagen, Picton added. Andreas Geilenbruegge, Autovista Group’s head of valuations also observed that manufacturers should work on range and charging times if there is to be an uptick in adoption. This, above all, requires dedicated electric LCV platforms, something manufacturers are working on. There is another challenge when it comes to retail, with dealerships needing to explain electric-vehicle technology and its benefits, alongside specifications and pricing.

‘There are three main pressures on vehicle manufacturers, a personal CO2 reduction, carbon-footprint target, and regulations from the European Commission to reduce emissions to zero by 2035,’ stated Pierre-Yves Combeaud, sales director at Hyvia, a hydrogen mobility company. ‘It is a question of giving possibilities to companies to have an alternative-fuel source for demanding journeys, for big LCVs mainly, or even sometimes medium LCVs.’

Hydrogen option

Currently, more than 80% of LCVs on Europe’s roads are diesel-powered. Green hydrogen offers many of the benefits of diesel, such as short refuelling times and long ranges, but without the harmful emissions. The zero-carbon technology also allows for better vehicle payloads, without heavy batteries taking up crucial weight.

However, like in the early days of the electric-vehicle market, one of the areas delaying the development and deployment of hydrogen is the lack of infrastructure. But this is coming, as Combeaud highlighted: ‘It is possible that there will be 1,000 hydrogen refuelling stations in France and Germany by 2030, while by 2035, as part of the ‘Fit for 55’ package announced by the European Commission, there needs to be one refuelling station every 50km on European motorways.’ 

Picton pointed out that the LCV market is subject to the same supply-chain pressures as the passenger-car sector, with semiconductors a particular issue. He also stated that it may not be until the middle of 2023 that we see this situation ease.

New-van prices rise, but RVs stable

LCV list prices for diesel models in particular have been rising more than for passenger cars, with increases of 7% compared to 4%. Diesel vans have seen prices rise more than for BEVs. Engelskirchen pointed out that such price increments show manufacturers are heading towards price parity between internal-combustion engines and their electric counterparts, with petrol and diesel going up, rather than BEVs coming down in cost.

The COVID-19 boom led to a shortage of supply in the new-van market. This, together with the semiconductor supply problem, means that very positive RV development has occurred across all countries in Europe, according to Schneider. Additionally, an increase in purchases of motorhomes, driven by the desire for ‘staycations’ during the pandemic, is helping RV development. Motorhome customers are less price-sensitive than business buyers, added Schneider.

The LCV market in Europe is currently resisting change to electrification. This is in part due to the particular charging and range requirements of vans. Also supply issues are putting pressure on new models reaching the market. However, change is coming, with more electric models available, and used BEVs coming through remarketing channels. Although the sector is behind the passenger-car electrification trend, there is a requirement for it to fulfil zero-carbon targets, with hydrogen also a developing option in the years ahead.

Webinar on demand: Swiss automotive market remains volatile, impacting new and used cars

The Swiss new-car market has been especially volatile in the past two years. Marked by lockdowns, closed dealerships, plant closures, and delivery problems due to a semiconductor deficit, 2020 and 2021 saw passenger-car registrations drop considerably.
In 2021, around 238,342 new cars were registered in the country – compared with 311,434 in pre-pandemic 2019. Now, it looks like 2022 is not off to a promising start. A lack of chips, combined with missing wire harnesses and an increasing shortage of raw materials, all add to the Swiss automotive industry’s woes.
The Swiss National Bank (SNB) recently doubled its inflation forecast for 2022, due to production bottlenecks, rising energy costs, and the war in Ukraine. With 2022 inflation expected to hit 2.1%, consumer good prices are going up. Carmakers too are increasing list prices of new cars, making the prospect of buying a new vehicle in Switzerland more burdensome for consumers.
Pure internal-combustion engines are starting to lose their appeal to consumers, who increasingly opt to buy electric vehicles, including plug-in hybrids (PHEVs). Battery-electric vehicles (BEVs) and PHEVs took a combined 25% share of the new-car market in the first quarter of 2022. When it comes to light-commercial vehicles (LCVs), registrations are declining, except for motor homes.

Unstable used-car market
The Swiss used-car market is also showing signs of instability. The upward trend that marked the past 18 months or so has not continued into 2022 as the number of cars changing owners is clearly on the decline. This may be of little surprise as falling new-car registrations and a shortage of new cars are now impacting the used-car trade in Switzerland.
‘The volume of cars on offer has stabilised in the last two months, but the used-car market is still characterised by lack of supply with stable demand,’ said Hans-Peter Annen, head of valuations and Insights at Eurotax Switzerland.   
A closer look at developments indicates that used petrol and diesel cars might still dominate the market, but their share is steadily falling as electric vehicles gain in popularity. Electrified drives, including mild hybrid models, now make up more than 8% of cars changing ownership. Used LCVs were crisis-resistant in 2020 and 2021, and this has continued into the first quarter of 2022. Overall, the supply volume has now stabilised for both passenger cars and LCVs.

Residual value prices increase
When it comes to residual values (RVs), demand has been stable though supply remains tight. Long delivery times, the geopolitical situation in Ukraine, as well as the semiconductor crisis all means that fewer new cars hit the market.
Asking prices have risen sharply, especially in the second half of 2021, and are up 14% compared to February 2020. Older vehicles, ranging from four to five years, as well as diesel and petrol cars, have seen a particular increase in prices.
‘As new-car registrations will remain markedly lower than before the crisis, the market parameters will not change quickly. This will result in further asking price increases during this year,’ added Annen.  
By the end of 2022, Autovista analysts forecast RV prices to go up for all fuel types. For 36-month-old vehicles, a year-on-year increase of around 6.5% is expected. Looking further ahead, RV prices are likely to decline slightly in 2023 although petrol and diesel engines will see a sharp and short-term increase.  
The latest webinar by Eurotax Switzerland, part of Autovista Group, looked in depth at automotive trends in Switzerland. Find the full German-language slide deck of the presentation below. A video of the webinar is also available for viewing and download.

Autovista24 webinar: Ukraine conflict will see new-car prices increase due to economic uncertainties

The automotive industry is suffering further disruption as a result of the war in Ukraine. Carmakers are suspending joint ventures in Russia, while supply-chain issues lead to production stoppages and longer vehicle-delivery times.

In addition, the rising price of raw materials, oil and gas are causing economic fluctuations that are leading to rising prices for new vehicles, and increasing fuel costs for drivers. This creates questions around the transition to electric vehicles (EVs), the impact on new-car prices, and whether supply-chain issues will lead to increased demand in the used-car market, affecting residual values (RVs).

Best-case scenarios

These were just a few of the topics discussed in the latest Autovista24 webinar – How is the Ukraine conflict impacting Europe’s automotive markets? The presentation looked at the economic scenarios, as well as the automotive disruption and forecasts for Western Europe’s major markets, and the countries in Eastern Europe.

At present, the most positive possible scenario is that the war can be contained, and a ‘cold war 2.0’ scenario emerges, which may be a negative outcome but is the best currently possible,’ commented Dr Christof Engelskirchen, chief economist at Autovista Group. ‘This would at least bring stability back to the relationships within the industry that are currently unstable.’

New-car prices have been rising over the past two years. Spain, for example, has seen a 60% increase in new-car prices on average. ‘OEMs are reacting to two years of under supply by upping prices and optimising the margins by increasing prices for more-expensive variants even further, and this is not going to go away. We will have to keep this in mind when we talk about residual-value outlooks in the coming months,’ stated Engelskirchen.

The conflict in Ukraine is pushing up oil prices, meaning drivers are facing price increases at fuel pumps. There are questions around whether this will lead to an increase in EV sales. A survey held during the webinar saw 52% of respondents state they believed the situation would lead to a faster transition from internal-combustion engine (ICE) vehicles to EVs in the new car market, with only 19% saying it would not make a difference.

‘There is an ambition for customers to reduce dependency on oil and what better reason is there to move into the EV market as a consumer or business?’ Engelskirchen asked. ‘We may also see a positive effect on plug-in hybrids (PHEVs) as used cars, as these offer the best of both worlds. There are two caveats, however. The first is the rising cost of battery-electric vehicles (BEVs) and PHEVs, which are already expensive. The second is that purchasing decisions may be delayed, as the market has an under-supply and prices could come down, creating a different scenario on their usage, for example.’

Impact on big European markets already noticeable

The automotive industry has already seen the impact of supply-chain issues from the Ukraine war, with registrations in March declining rapidly as vehicle deliveries slowed. Several carmakers paused production, with items such as wiring harnesses not available and new sources of materials required.

‘In all the big five markets in Europe during March, we’ve seen double-digit declines,’ commented Neil King, senior data journalist at Autovista24. ‘These range from 14% in the UK to 30% in Spain and Italy, although there were extra mitigating circumstances in those markets. This impact was far more dramatic than expected, especially given that Russia’s invasion of Ukraine did not start until 24 February.

‘The current disruption that we are seeing in production is reflected in the outlook for these markets. There was optimism that a recovery from the semiconductor shortages seen throughout 2021 would be seen this year, but this recovery is now slower than anticipated. In Germany, for example, the market will be around 150,000 units lower than predicted prior to the war. This logic can be applied across all markets.’

Vehicle supply issues resulting from the Ukraine war, along with semiconductor shortages and COVID-19 could ordinarily push RVs up, due to potentially increased demand in the used-car market. ‘However, we have higher living costs, which not only affect demand for new cars, but also used cars, and higher financing because of rising interest rates, for example,’ cautioned King. ‘And secondly, as we have widely covered on Autovista24, RVs are at record levels, pretty much across the region. The net effect is that actually we are seeing very limited impact on residual values as it stands.’

Eastern Europe seeing reduced optimism

It is, of course, in Eastern Europe where much of the disruption to the automotive industry is focused. Inflation has increased, with the rate currently between 8% and 11%, increasing living costs as a result. Energy and fuel prices have also swollen rapidly, except in Hungary, where prices have been fixed for several years.

The war has also dampened expectations of a recovery from supply-chain issues in the region. Demand for new vehicles is still, therefore, higher than supply and due to the war, this will not be remedied in the short term.

‘The used-car market is being affected by the development of new-car prices,’ stated Zsolt Horvath, regional head of valuations, Eastern Europe, at Autovista Group. Prices have been rising steadily for three years now, and are currently around 16% higher compared to 2019. In the case of Hungary, the change is even bigger. The continued weakening of the local currency means the change is 30%. That has a huge effect on one to three-year-old used car prices as well. 

‘The question is the rising raw material and energy prices: how will increasing costs impact production cost, then indirectly appear in the new prices as well.’

When it comes to the subject of RVs in eastern Europe, Horvath added: ‘These are already extremely high, and recently hit overall records. There are several effects of the Ukraine – Russia war on the markets in the region, some of them would increase while others would decrease their used-car prices. The impact on residual values is, therefore, expected to be relatively modest less than 1%.’

Autovista24 webinar: Sales of new and used-electric vehicles to grow in 2022, but challenges abound

While the automotive industry is on a fast track to electrification, questions remain about the strength and viability of electric sales in both new- and used-car markets.

Every carmaker is unveiling new electric models or plans to reduce and end the production of internal-combustion engine (ICE) vehicles. Gigafactories are being built across the continent, and technology providers are continuing a pace to bring more relevant systems to the market – ones that emulate and improve upon decades of ICE rule.

But does this progress help or hinder the market for battery-electric vehicles (BEVs) and plug-in hybrids (PHEVs), especially in the used-car market? For the used market, there’s challenges. New automotive technology, improved ranges, and faster charging times for newly-launched electrically-chargeable vehicles (EVs) are likely to put pressure on EVs when they reach the forecourts of used-car dealerships across Europe.

In addition, numerous masking and economic factors are still at play. The COVID-19 pandemic impact may be much lower than it was throughout 2020 and 2021, but the automotive market is still suffering. Add in a new variant such as Omicron and a pattern of easy disruption is unveiled. With a car being undoubtedly one of the biggest purchases a consumer makes, and with new-EV prices still very high, this is a segment that can see dramatic changes in a short space of time.

Europe the leader

The recent Autovista24 webinar: 2022 outlook – electrifying Europe’s new- and used-car market, charted the progress of the EV market in Europe to date and considered the issues and challenges building pressure on the used-car market.

‘Europe was the driver in global EV sales in 2020, with sales outside the continent suffering more due to the COVID-19 pandemic,’ commented Roland Irle, managing director at EV Volumes, a panellist on the webinar.

‘Strong policies and incentives in the market helped to drive this growth, and with other regions picking up last year, total worldwide registrations equated to 6.73 million in 2021, or an 8.3% market share, he added.’

Currently, Tesla is the global market leader when it comes to BEVs. But the tech company, one of the pioneers of the EV revolution, has been unable to keep up with rapid demand in Europe. All models sold on the continent in 2021, totalling around 170,000 units, were imported from China or USA. Yet new gigafactories in Berlin, Germany, and Austin, US, will expand Tesla’s global capacity to 1.5 million units in 2022, meaning others will need to work hard to displace Tesla from the top of the sales charts.

Irle expects cost parity compared to ICE evolve in the market across the coming years. Sales of ICE models will decline and new gigafactories will power up across Europe and the US.

‘We expect around 9.5 million BEV and PHEV deliveries globally for 2022,’ Irle added. ‘Our outlook for 2030 sees 40% of global car sales being BEVs and PHEVs.’ 

Economics at play

Factors such as increased regulation of the automotive market, and awareness of environmental challenges, are helping drive electrification. However, this transition coincides with the pandemic and its related economic impacts.

This disruption has seen both new and used-car sales fluctuate wildly in the last two years. ‘Used-car markets still fared much better than new-vehicles markets,’ commented Christof Engelskirchen, chief economist, Autovista Group. ‘So, in relative terms, stakeholders in the used-car market did well. From a price-realisation perspective, the markets performed really positively over the past two years, and those that had cars to sell benefitted from this.’

When it comes to rising car residual values (RVs), Engelskirchen highlighted that the UK was experiencing the most dramatic rise, thanks not just to COVID-19, but also the impact of Brexit and the ongoing semiconductor crisis. The UK also struggles as it is the only right-hand drive market in Europe, meaning used cars cannot be imported into the country to make up for a lack of supply. Elsewhere, Poland saw a strong economic rebound, which has affected both inflation in the country and the demand for used-vehicles.

‘Strong monetary and fiscal intervention has, so far, been supporting a rather quick V-shaped recovery,’ said Engelskirchen of the main European markets. ‘Forecasts improved over the past two years towards the speed of the recovery, but the recent COVID-19 Omicron variant has affected things. Rather than creating another wave, however, it has merely put a small “hockey stick” into the recovery trajectory. By the second quarter of this year, economies should have caught up again.’

Bubble build-up

A depressed supply of new vehicles and a rise in EV sales may not be enough to justify talks of a bubble when it comes to remarketing in the near term, but it is a scenario that could be building in the coming years.

‘We expect the volumes of to-be-remarketed young used cars to rise by more than 50% by 2030,’ stated Sonja Nehls, principal analyst, Launch Intelligence, Autovista24. ‘With the rise of leasing and private contract purchases, holding periods decrease and that increases the number of young used vehicles entering the used-car market, from nearly new up to 36 months old. A bubble could very well be forming out of this. 

Further development to come

The used electric-vehicles market is still not fully developed in Europe, with numerous challenges facing the industry. Infrastructure is not yet on a sufficient level in some countries for drivers to consider an EV purchase, and the new-car market is still heavily incentivised in various regions. ‘This remarketing risk is difficult to grasp and requires close observation and risk management,’ added Nehls.

One challenge for BEV remarketing is lifecycle depreciation, which will continue to be higher than for ICE vehicles. The main reason for this is the high pace of technological developments, making older cars almost obsolete. ‘Over the past two years, the average range of a BEV has increased by 100km,’ Nehls highlighted. ‘That puts some realistic price pressure on used BEVs in the near future, until ranges in the used-car market are beyond 500km on average. Range is just one example, however, as upgrades to charging technology, and the introduction of features-on-demand in new cars pile pressure on older vehicles.’