At the latest IAFN Online conference earlier this week, delegates were updated on a series of key topics such as market and customer changes, digitalisation, mobility and servitisation, and the transition to alternative-fuelled vehicles by industry veteran Martin Muessener, vice president sales & marketing, Europe and Africa Region at Toyota Financial Services.
The conference, entitled ‘The COVID-19 legacy: Emerging priorities for the European auto finance industry’, was attended by a record number of delegates who actively engaged with a series of polls throughout the event, giving crucial insight into the minds of senior auto finance executives at a time of great uncertainty.
What do you expect will happen to car sales during the rest of 2020 (compared to last year)?
| Question Three | 70 Total Votes |
|---|---|
| Large drop in sales | 54% |
| Moderate drop in sales | 39% |
| No change | 1% |
| Slight increase in sales | 4% |
| Large increase in sales | 1% |
Out of the 70 total respondents, some 54% forecast a large drop in car sales during the remainder of 2020, when compared to the year before. An additional only anticipated a moderate drop in sales, with a marginal selection anticipating a positive change.
At the conference, Muessener explained that Toyota forecast a market decrease of 25%: “We are anticipating that the market in Europe for passenger cars will be around 16 million whereas it had initially planned for more than 20 million.
Of course, the lockdown has an immediate impact on the usage and purchase of cars. Also, most of our networks have closed apart from the Nordics, and several of our main manufacturing plants have been closed for around six weeks or more. So clearly, car sales will decrease this year, and then slowly recover in the years after.”
On the topic of residual values, Muessener claimed: “We are anticipating a decrease in residual values for a certain period of time. The reference we’re looking at is the Lehman crisis back in 2008, after which residual values dropped and about two years later, they recovered strongly, and we anticipate the same across all markets and brands. We’re a decade ahead of the Lehman crisis and our residual value management techniques have matured so I’m confident we’ll only have a small decrease.”
The COVID-19 crisis will accelerate the transition to online car sales
| Question Two | 75 Total Votes |
|---|---|
| Strongly agree | 41% |
| Moderately agree | 39% |
| Neutral | 11% |
| Moderately disagree | 9% |
| Strongly disagree | 0% |
When faced with the proposition that the pandemic would serve to boost digitalisation trends in the auto industry, some 41% of the 75 respondents ‘strongly agreed’, and a further 39% ‘moderately agreed’.
James Tew, chief executive officer at iVendi recently told Asset Finance International in an interview that key areas that would be suitable for digitalisation would be managing the trade-in value, financing and the sale of value-added products. He added that other paperwork should be able to be generated remotely and if legacy IT systems were preventing this, then that would be a real concern.
Muessener added: “I think it will accelerate the trend. In the crisis we have learnt from other industries that digitalisation can contribute to the solution, because if people cannot leave their homes then consumption needs to go on. A new car is often one of the biggest investments people make in their lives and they have a long consideration before purchase. We can’t yet see a strong trend of people attempting to transact online, but we can observe a strong demand for information, calculation and configuration online. As a society, it will take some adjustment before we’re comfortable with making something like a £25,000 transaction online.”
The COVID-19 crisis will permanently reduce customer appetite for car-sharing
| Question One | 79 Total Votes |
|---|---|
| Strongly agree | 4% |
| Moderately agree | 24% |
| Neutral | 13% |
| Moderately disagree | 40% |
| Strongly disagree | 19% |
As seen in the results above, some 40% of the 79 respondents ‘moderately disagreed’ with the statement that the pandemic would permanently reduce the demand for car-sharing, offering a potentially reassuring insight for the mobility industry.
A month after General Motors suspended operations in response to the pandemic, the OEM announced it would be ceasing the operation of its car-sharing service, Maven. According to the company, the lockdown provided a unique opportunity to reassess where it would channel funds, opting for areas that offered greater potential for profit.
Muessener said: “I think the move away from car-sharing is a temporary thing, but it definitely won’t come back in the next couple of weeks. It’s clearly related to the COVID crisis, now that people are afraid to sit close to each other and touch things. We have clear evidence now from the car-sharing providers that this is not good for business, but the long-term trends have not changed – sharing will remain increasingly important as a trend instead of owning a vehicle once we resume normalcy.”
The pace of transition to BEVs will be unchanged by the COVID-19 crisis
| Question Four | 62 Total Votes |
|---|---|
| Strongly agree | 23% |
| Moderately agree | 23% |
| Neutral | 16% |
| Moderately disagree | 32% |
| Strongly disagree | 7% |
In the final question put to the audience, the responses were evenly distributed amongst the categories; 32% of the 62 respondents ‘moderately disagreed’ with the statement that COVID-19 would not affect the transition to battery electric vehicles (BEVs). Some 23% strongly agreed, and a further 23% moderately agreed.
Muessener concluded: “Each crisis is an opportunity, and this crisis should be taken as an opportunity to accelerate the structural change. I understand the discussion that is going on now because the economic situation is sharpening and it’s not easy to be a politician or government these days - on the one hand they have to face the COVID-19 crisis and on the other hand the environmental changes which have not changed.
“We have even learned how the environmental situation is relaxing slightly when there is less traffic on the streets. But, to change the targets for CO2 emissions would not be a wise decision at all because mankind has learnt that we can fight global phenomena like this pandemic together and emissions and CO2 pollution are still a global challenge. It does not know countries or border lines, and the impact is global, and it would be wrong to step back from that. I think global society is now stronger in accepting that we need to stand together and to fight these global phenomena.”
