E8: Automotive Trends Europe

Afternoon all, with only 3 weeks until our Automotive Europe 2023 Conference (May 16-17, Munich) I thought I would share some trends transforming the automotive industry in Europe.

How the auto industry in Europe is evolving and what actions different companies are taking to make the most of the changes.

The global auto industry is moving towards electrification and digitalisation, and Europe is at the forefront of the switch to EVs. In terms of year over-year growth in EV adoption, in 2020 Europe has the highest rate at 137.1% in the past six years according to Frost & Sullivan. This is in large part due to proactive government schemes to encourage EV use. Almost every member state in the EU provides purchase incentives and/or reduced taxes to EV buyers. Certain countries offer benefits that are substantial and comprehensive. In Norway, for instance, EV buyers can skip the VAT tax, which often amounts to 25% of the cost of a new car. Norwegian EV owners also get half off on tolls and parking, the use of fast bus lanes, and free parking at many major cities and towns. In Germany, EV owners enjoy a reduced VAT tax rate, up to €9,000 in subsidies and a ten-year 75% in tax break in vehicle ownership tax. Governments

that are seeking to encourage EV adoption can consider incorporating similar elements in legislations.

Many OEMs that operate in Europe have launched bold plans to electrify their product offerings over the next decades. The approaches range from offering all-electric models among a brand’s lineup (Ferrari) to designating specific brands to go completely hybrid/electric (Genesis, Ford, Opel, Chrysler, Jaguar). OEMs can utilize grants from the Recovery and Resilience Facility, a European COVID-relief package that has designated 37% of its funds to green transition.

The expansion of EV production in Europe necessitates increasing the capacity to develop and manufacture batteries. In terms of R&D, there has been a sevenfold increase in patents in EV technology in 2018 compared to 2000. As for production capabilities, 27 battery gigafactories have been planned to operate in Europe by 2030. It is expected that a third of global battery production capacities will locate in Europe. Funding is likely to come from private sources, rather than governments, and analysts assessed that battery manufacturing hubs might be built in Central and Eastern European countries.

Alongside the expansion of battery production capacity is the expansion of charging infrastructure. Presently, 70% of all EU EV charging stations are located in Netherlands, France and Germany. If EV adoption is to be broadened to the whole region, there needs to be commensurate infrastructure growth. Tesla remains the leader in maintaining an extensive charging network, and it is considering opening up its network to non-brand EVs, starting with a pilot in the Netherlands. IONITY EU – a consortium of OEMs including BMW, Ford, Hyundai, Mercedes- Benz, and Volkswagen – is working to expand to 7,000 charging points at 1,000 sites by 2025.

In addition to electrification, OEMs operating in EU are also broadening the use of vehicle data in providing goods and services. This expansion needs to be handled cautiously, however. In a 2020 survey carried out by Otonomo, an automotive data marketplace, a majority (60%) of 2,512 car owners in France, Germany, Italy, Spain and the UK stated that it was very important to be told what data about them is being collected, how it is used and by whom. Nonetheless, in specific areas such as safety, car owners are more open to sharing data. 71% of respondents were interested in sharing data for safety-related services. If companies are diligent in compliance as well as informing their customers and obtaining their consent, there is a great deal of potential in providing goods and services based on connected car data in the European market.

The more customers consent to sharing data, the more robust the automotive data marketplace would become. So far, successful companies in this space focus on specific use cases or specific sectors. For instance, INRIX is working with entities such as fleet managers to use data for services that provide traffic and road conditions. WTW, on the other hand, uses telematics data from opted-in devices to understand insurance risk. There is still a lot of room for growth in the automotive data marketplace. In mature data markets, such as online advertising, data companies are able to provide anonymous profiles to advertisers based on targeting criteria. This is a direction in which the automotive data marketplace can develop as more and more connected data becomes available.

Actionable Insights

? Europe is at the forefront of EV production and sales, but the distribution of charging infrastructure remains uneven. With 70% of EV charging stations in the EU located in just three countries (the Netherlands, France and Germany), OEMs planning to expand EV sales in the region more broadly should include charging facility construction in their strategy

? In collecting and sharing data, OEMs should maximize transparency and allow opt-in/out as a majority (60%) of survey respondents in multiple European countries (France, Germany, Italy, Spain and the UK) expressed that they value data privacy. When respondents understand and agree with the purpose of data collection, such as safety enhancement, 71% said they would be interested in sharing data

? The potential of many areas in the automotive data marketplace remains untapped. Companies that have found success so far tend to focus on specific sectors or specific use cases. There is still room to grow for the market to be able to sell anonymous profiles of car owners to advertisers