Despite a backdrop of economic uncertainty, automotive brands are facing an optimistic picture – if they manage to timely transition their business models and optimize their fleet and services to seize the opportunities offered by a changing customer base. That is according to a global report from Simon-Kucher.
For the 2024 edition of its Global Automotive Study, Simon-Kucher surveyed over 7,000 consumers across four continents to uncover their key perceptions and behaviours in relation to purchasing or leasing a new (or used) car.
The report found that consumers overall have a more positive purchasing appetite to cars compared to the year previous, owing to a number of factors. A large number of consumers said for instance that their purchasing power (allocated to buying a car) has increased over the past year, while a larger chunkc of consumers said that they are keen to replace their current vehicle. Meanwhile, excitement around car innovations is also higher.
On average, 68% of the consumers told Simon-Kucher that they see car ownership as their preferred mode for mobility, with that belief significantly higher in countries such as the US, Turkey, and Saudi Arabia.
Source: Simon Kucher
A similar percentage of consumers said that driving a car is more than just a way of transporting them from A to B, but also a means of rewarding themselves. This sentiment is highest in India (90%) and China (85%) and lowest in France (46%) and Germany and Norway (53%). Notably, in some countries, particularly in the Asia continent, a car is regarded as a status symbol too.
While the study hints at a steady flow of car purchases, it does highlight that average purchase value may drop in the coming year, meaning that consumers are opting for cheaper cars. “The rise in inflation has led to declining budgets for owning vehicles,” said Martin Gehring, Senior Partner at Simon-Kucher and head of the company’s Global Automotive Practice.
Source: Simon Kucher
That development is also related to the fact that price remains the dominant factor when consumes make their next car purchase – a feat that is true for all markets assessed. This includes the vehicle price, but also later-phase costs such as maintenance, fuel consumption, road tax (if applicable) and rest value.
Beyond monetary considerations, consumers tend to look at factors such as brand, technology used in cars, longevity of the car, and design.
Source: Simon Kucher
Changing preferences
While the backdrop remains optimistic for the industry as a whole, Simon Kucher’s report does emphasize that to remain successful, players will need to adapt to changing preferences. If they fail to meet these new-age preferences, brands will risk staying behind and facing a financial hit, as seen by the recent challenges faced by a number of prominent German and Italian European car makers.
One trend highlighted by the report is leasing and subscription models. Driven by changing transportation needs, convenience, cost efficiency and the ability to access higher-end cars, leasing and subscription models are gaining market share, especially in the Western economies surveyed by the authors.
Source: Simon Kucher
Another is meeting changing purchasing journeys, with around 8 in 10 consumers stating that they nowadays start their vehicle purchase journey online. This means that car brands and dealers need to give their online channels sufficient focus, as that is where the initial battles take place.
Following orientation, 75% of consumer told Simon-Kucher that they still have a preference to finalize the purchase in a physical showroom, shedding light on the importance of proximity through outlets and dealerships, as well as offering a rounded omnichannel experience.
Going electric has been a trend for years, and the report emphasizes the need for brands to stay at the forefront of the development by launching new models, both fully electric and (plug-in) hybrid. Yet while enthusiasm for electric vehicles remains robust, with 64% of respondents “seriously considering” electric vehicles for their next purchase, the segment’s rapid growth is forecasted to stall in the coming twelve months.
Source: Simon Kucher
The report calls car brands to strike the right balance between their focus and developments between electrical vehicles and traditional powertrains, with a “balanced evolution to thrive together in the coming years.”
Reflection from leaders
Commenting on the report’s findings, Gehring said: “We’re seeing a dynamic market brimming with opportunity. While traditional car ownership continues to hold strong appeal, consumers are increasingly embracing alternative models like leasing and subscriptions, allowing them to access the latest vehicles with greater flexibility and lower upfront costs.”
Matthias Riemer, Partner at Simon-Kucher and a co-author of the report, added: “The automotive industry is at a critical juncture as it navigates shifting consumer expectations and evolving market dynamics. To stay competitive in this complex environment, manufacturers and stakeholders must thoroughly understand consumer preferences and adapt accordingly.”