The last five years have, in general, been a success story for the automotive industry. Sales have been highly lucrative and typically customers remain as passionate about their vehicles as they ever have been.
In the luxury sector alone, the ‘Global Luxury Car Market 2020’ report by Market Reports World anticipates a CAGR (Compound Annual Growth Rate) of about 5.83% during the forecast from 2019 to 2024. Of course, this has likely been stunted somewhat by the COVID-19 crisis, as we will explore.
What are the trends driving the automotive industry outlook for 2020? And which ones will have staying power in these unpredictable times? Let’s dive in.
The automotive industry outlook for 2020 & beyond
An electric feel
Fully electric cars have grown in popularity in recent years, with global sales rising 65% from 2017 to 2018, and a more modest 9% from 2018 to 2019. Despite global sales actually suffering a sharp decline of 25% during the first quarter of 2020 according to McKinsey, this has been attributed to largely reflecting the decline of the overall light-vehicle market rather than a rejection of electric cars, while Europe still increased its market share to 26% (growing by 44%) from 2019 to 2020. This growth can be attributed to a combination of 1) rising environmental consciousness across all class and age demographics and 2) government incentives and subsidies for buyers of electric vehicles (EVs).
The popularity of upstart car manufacturer Tesla has also been a real force in ensuring mainstream adoption of EVs. The US market almost doubled to 360,000 EV units through 2018, and this was mainly thanks to the strong sales performance of Tesla’s Model 3. This was the first time ever in the country that an EV model sold equally as well as comparable internal-combustion-engine car.
Combined, this all means that demand for EVs is a significant part of the automotive industry outlook for 2020. However, it is up for debate as to how prominent this trend is when we consider the luxury car industry specifically.
Electric, hybrid, and other eco-friendly models have largely been developed in tandem with smart technologies by manufacturers worldwide, offering an extra level of desirability for many. Everything from personal voice control and wireless charging to autonomous driving has become an expected feature of luxury cars in the eyes of the consumer, and building these into eco-friendly vehicles will be essential in ensuring customers see the value in moving to these, typically, higher priced cars. Expect the most successful electric models to be brimming with smart features, allowing them to gain a strong presence in the market.
For many, sustainability and luxury vehicles still don’t align, despite the advent of eco-friendly technologies. As more young HENRYs and UHNWIs look for ‘guilt-free’ methods of transportation, the luxury car industry will have to look for ways to improve the efficiency of their vehicles to ensure their brand is still desirable for this growing demographic.
It seems inevitable that electric cars will be the new normal, despite the global market slow in 2020. As we rev up to this future, expect luxury manufacturers to focus their branding on eco-friendly credentials that still offer uniqueness and quality.
New ways to buy
No recent economic trend has had a bigger impact on how we interact with brands than ecommerce.
Online shopping is nothing new, but innovative ways to buy and sell such as dropshipping and Facebook Marketplace have shifted the playing field and forced industries less accustomed to online retail to sink or swim. The popularity of online shopping is now too great to ignore, even in the luxury car industry.
Although some may be surprised to hear this, the concept of buying a car online has been popular for at least half a decade, and major brands are beginning to catch on. Indeed, a recent study estimated that e-commerce spending on automotive (including parts) would reach $81.64 billion by 2022.
More and more of the big players in the industry have at least given ecommerce a try, understanding the importance of not just literal online sales, but multichannel approaches to retail as an effort in brand building. The luxury automotive industry outlook for 2020 requires brands to understand that having a presence in all channels is vital for raising awareness, even if it doesn’t directly lead to conversions.
While Coronavirus saw online sales shoot up across many markets, much of this digital success has not been within the luxury car industry, likely due the high value of the purchase. However, even if we don’t see a significant number of luxury vehicles moving online, the industry can be bolstered by ecommerce purchases of apparel and accessories for the vehicles, which is an important part of building a luxury car brand and consumer relationships.
Self-driving towards success?
While the consumer is more focused on sustainability, the automobile industry seems adamant to push on with self-driving models as their next big trend.
Things are moving quickly for the concept of the self-driving luxury car. Daimler AG and BMW AG began developing a self-driving car together in February 2019. The manufacturers will jointly-develop this car, harnessing autonomous-driving technology, to be ready for the market by the middle of this decade, although COVID-19 has no doubt delayed works.
Many sources still cite autonomous vehicles as a trend set for significant growth, with Businesswire originally predicting 10 million self-driving cars on the road by 2020. While that prediction hasn’t quite come to fruition (in fact, enthusiasm for self-driving cars is dropping) progress has been made, with more and more companies being afforded opportunities to test their autonomous vehicles on the road.
For performance sports cars self-driving will surely be less important, with those behind the wheel craving the opportunity to operate the vehicle themselves, but for more usual luxury sedan vehicles like a Rolls it may be far more important to have autonomous features for the hired driver or the owner in the future. Only time will tell though whether self-driving will become an essential luxury feature or merely a gimmick.
Of course, we’d be remiss to not mention the elephant in the room when it comes to any industry trends at the present moment — the Coronavirus crisis.
Coronavirus is still very much a live issue and has had a significant impact on manufacturers, retailers and just about every inch of the luxury car industry throughout 2020. Right now, the goal is finding some light at the end of the tunnel, which industry experts predict will only become truly noticeable in 2021.
The Wall Street Journal has stated that in China the global pandemic caused an 80% fall in vehicle sales in February 2020 compared to February in 2019. Meanwhile Forbes highlights the suffering of the global supply chain, with automotive companies that rely heavily on parts from China facing the most significant delays.
Making long-term automotive industry outlook predictions when it comes to COVID is a near-impossible task. The crisis will undoubtedly continue to affect manufacturing, but this should not stop the luxury industry from continuing to innovate to retain consumer interest – whether through technology or latching onto trends such as autonomous driving. With sustainability at the forefront of HENRYs and younger UHNWIs alike, we should begin to see a broader range of stylish, high-quality and custom-made electric, hybrid, and alternative fuel vehicles. The crisis will have also forced many luxury car brands to adapt their online customer service and digital experience, taking those first steps towards offering e-commerce vehicle sales.
To find out more about our automotive industry outlook for 2020, or to speak to an expert in our team, please just get in touch.