The automotive industry is undergoing a massive shift. The rise of the electric car market presents a fundamental challenge to manufacturers since many traditional performance features are missing in EVs. The absence of engine size and manual or automatic transmission means consumers have a different set of buying variables to consider. Therefore, manufacturers must go beyond the vehicle itself and differentiate themselves in areas like finance and customer service.
Our recent roundtable discussion featured topical debate from industry professionals, Simon Oldfield (ex-Mercedes & Vauxhall UK), Tom Senior, Director Classic, Vintage & Sports Car Finance, at Cambridge & Counties Bank and Jerry Young, CEO at ieDigital. This article reviews the discussion points in a wider context and considers how EVs are impacting the auto industry in many different ways.
Electric car industry analysis at a glance
The number of EV models for sale in the UK has grown significantly since 2020, meaning consumers have much greater choice than 5 years ago. Tesla continues to dominate but incumbent ICE brands like Vauxhall and other manufacturers are introducing new EV models based on later battery technology.
In June, the number of new EVs registered in the UK increased by 39% (the eleventh consecutive month of growth for the electric car industry) while diesel registrations decreased by 22%. This builds on wider trends in the electric car industry, with EV sales surpassing diesel ones for the first time in January 2023. Combined, this meant that 17.9% of the UK market share was electric vehicles.
Fallout from the rise of the electric car industry
One of the features we see with the introduction of more EVs into manufacturers’ ranges is that EVs are increasingly commoditising the market between different models and manufacturers. In the words of Simon Oldfield, “You haven’t got a V8 engine or an exhaust note, manual, automatic – to a certain extent, it’s an iPhone on wheels.”
Unfortunately, this creates a challenge for manufacturers, as they need to create a new set of differentiating characteristics between their products and brand. While the shift to EVs addresses enables the move towards net zero, individual manufacturers are facing an existential challenge around the strength of their brand. Since EVs deliver a similar driving experience (they are all automatic for example), customers have to consider other ways to choose their ideal vehicle which may move them beyond traditional brand loyalty.
Where do manufacturers go from here?
Our speakers highlighted how manufacturers need to consider the full range of assets they have available that go beyond physical vehicle features to differentiate their offer. Namely, by enriching their brand’s remaining differentiators, like the quality and consistency of customer service delivered both in-person and online.
Brand = Product + Personality
“Once all of the variables are neutralised (and that’s the way it appears to be going), you need to look at what’s left. And when it comes to digital engagement, you’ve got so many touch points – none of which are the vehicle – that can influence customer decision making over what’s on offer,” Jerry says.
Opportunities within other areas of the purchasing experience were also noted. 2022 data on car finance industry trends shows that while new financing rates dipped to 84%, average borrowing sums for new and used cars grew by 6 and 10% respectively. Therefore, manufacturers could capitalise on this growth and generate new revenue by providing more flexible finance options to customers.
Pricing parity: Trends in the electric car industry vs ICEs
Some of the trends in the electric car industry are clear. In 2020, the UK Government announced a ban on new petrol and diesel car sales by 2030, signalling a definitive end date for the traditional automotive industry. UK drivers have also seen an increasing number of LEZs restricting their vehicle usage in recent years, creating further interest in electric and low-emission vehicles.
Yet, the same can’t be said for pricing parity between the electric car industry and ICEs. A 2019 Deloitte report initially forecast that battery electric vehicles would match the cost of petrol and diesel ones in the UK by 2021. However, “this threshold keeps getting pushed further and further back,” said Simon. Four years on from this initial forecast, and consumers are only marginally closer to an affordable market for new EVs.
Tom Senior was particularly sceptical of this outcome; “I don’t envisage a time where the electric car will ever be affordable, and that’s partly down to the finance companies. On a per-month basis, which is how most people finance their car, the cost of a new EV is double that of a new ICE car.”
Therefore, regardless of whether EVs achieve price parity or these elevated rates simply reflect the new cost of owning a car, the need for flexible financing options remains strong. All the more so, as a secondhand market has yet to emerge and consumers will need help spreading the cost of new purchases.
Get ahead of the car finance industry trends with ieDigital
With digital engagement, you’ve got many more touch-points to influence the customer. As a leading software provider, we ensure our automotive clients win and retain customers by offering the best lending experience on the market. So, make sure your dealership is well-placed for the rise of the electric car industry by adopting our end-to-end auto financing software.
Interested in learning more? Get in touch today.