2023 saw the automotive industry emerge from one of the most challenging periods in its history. Beyond the COVID-19 pandemic, investment in new technologies, the rapid move towards sustainable powertrains, and shifts in vehicle usage are acting as a catalyst for incredible innovation.
As the year draws to a close, we want to reflect on some of the main trends we’ve seen and what they might mean for the future.
Vehicle sales
Despite economic challenges, global vehicle sales have seen modest growth this year, with registrations increasing by 11% in the 51 markets JATO covers (Jan-Oct 2023 vs Jan-Oct 2022). Initially, this year-on-year expansion was attributed to easing supply chain issues, but demand for new cars has continued, though largely driven by fleet sales.
While powertrain shares are changing rapidly, uptake of BEVs among private buyers is perhaps not as strong as expected. In the EU5, for example, our Monthly Payments data shows that private customers account for 36 percent of BEV SUV sales and that a €300 gap has developed between monthly payment rates for ICE and electric vehicles since April.
We’re also seeing the advent of new and more flexible schemes. Some consumers are turning away from traditional car ownership in favour of ‘subscription services’ and shared mobility that allow them to get from A to B without any commitment. While in their infancy, the growing popularity of these short-term leases highlights how important it is to be aware of monthly fee options.
Both list prices and finance options will be interesting to watch over the next 12 months – how will automakers balance the high costs associated with developing leading BEVs with competitive pricing and subscription packages?
Sustainability
While prices remain prohibitive for many consumers, automakers are continuing to invest in new and sustainable technologies – and to use marketing to highlight their green credentials. Although combustion engines remain most popular by far, their volumes share has fallen, and alternative powertrains now make up more than 35 percent of automaker’s global volumes.
This focus – and subsequent growth – has been heavily influenced by several geo-political decisions. The introduction of the Inflation Reduction Act in the US in H2 2022 helped to support a general change of direction in the market. Similarly, the EU’s 2030 emission deadline mandates a move to EVs and will be front of mind for many automakers, with similar discussions around decarbonisation happening in China and India.
In 2023, within the BEV segment, Tesla’s Model Y is performing incredibly well in Europe and the US. In fact, it is expected to be the world’s best-selling car by the end of the year – no doubt driven by its controversial price cuts, as well as the brand’s focus on innovation. While the market leader has maintained its position throughout 2023, several new EV brands are now hot on its heels, including Geely’s Polestar and Chinese automaker BYD.
Chinese OEMs
Over the last decade, new OEMs have become established players in the industry, with Chinese-owned businesses leading the way. In China, automakers have made rapid progress, offering affordable electric vehicles at scale.
Notably, in H1 2023, the average retail price of an electric car in China was less than half of prices seen in the EU and US – and this competitive position is unlikely to decline. Of the 235 BEVs available in China, in H1 2023, only 23 percent were priced above €40,000/$43,500.
Chinese carmakers are also focused on exporting to emerging markets, accounting for more a quarter of BEV sales in Russia, Thailand, Brazil and many more. This acts as a reminder that while global retail prices are growing on average, the trend is driven by specific countries and areas, especially when BEVs are considered.
Low prices from Chinese OEMs could present a challenge to established carmakers in the West, especially when it comes to BEVs and in-vehicle technology.
Infotainment and tech
Interior innovations have also continued to be developed this year – it will come as no surprise to anyone in the industry that in-vehicle screens are becoming more functional and more complex.
In our 2023 schema, we added details about embedded infotainment user interfaces, 3D enhanced views and distance and object sensing technology. In other words, we know that the industry is looking at the ways technology can make our vehicles safer and more fun.
While there is interest in curved screens and augmented reality, many of these developments are closely linked to a rise in autonomous driving and ADAS. Display screen technology will be key as these areas mature.
2024
OEMs – and suppliers – are currently reimagining the customer experience. There is a focus on creating business models that support the transition to alternative powertrains, new ownership models, and innovative tech. The pace of change is considerable, with more pressure than ever to understand competitors and market trends.
While industry bodies are forecasting that the global automotive market will expand in 2024, the next year is not without risk. While interest rates remain high and consumer spending slow, automakers will be keen to protect revenues while accelerating much needed investment in modern technologies.
In the US, Europe and China – the three biggest auto markets – campaigns to offer the best quality and low prices at scale will continue. Whether Chinese automakers will be able to increase penetration in Western markets is yet to be seen, but we can be certain that the transition to EVs will continue to make progress in the coming year.