The Australian automotive industry has been put on notice with the warning that it is in for a “decade of upheaval”. The wake-up call arose out of extensive research completed by Roy Morgan Research which identifying 2025 as a “tipping point” for the industry.
According to its State of the Nation report focusing on the automotive industry, Roy Morgan found that fundamental change was on the way and those not embracing changes such as car sharing, driverless cars and purely online sales will find it hard to catch the first movers in these spaces.
The auto industry in this country has already been hard hit by the major brands moving manufacturing elsewhere, and the traditional dealership model is set to head the same way, according to Roy Morgan’s research.
Despite Holden and Toyota ceasing to manufacture locally in October this year, Australians are still buying more cars than ever, with record sales in 2016 of well over a million new cars. Additionally, around 2.1 million used cars were also sold last year in Australia, bringing total vehicle sales (new and used) in 2016 were worth in excess of an estimated $80 billion.
But while car sales are still strong in Australia, there is an evolution in the way approach transport. Leading the change in car buying behaviour are predictably enough, the younger generations – GenY or Millennials typically born between the 1980s and mid-1990s.
As well as car sharing and driverless cars, environmental concerns are also factoring into the purchasing decisions of younger Australians. Roy Morgan found that a majority of Australians (62%) would pay more for a car with “zero emissions” today compared to 38% that wouldn’t. If you were to split that figure by generations, 75% of Millennials would be prepared to pay more compared to 51% of Boomers. Millennials are especially drawn to new technologies – 32.4% would consider buying an electric vehicle and 50.3% would consider buying a hybrid compared to 22.6% of Boomers that would consider an electric vehicle and 40.5% that would consider a hybrid.
It’s not a huge surprise to learn that more Australians are comfortable with technology than ever before and that affects how we buy cars – almost 75% of potential new car buyers now go online to undertake car research before purchasing. In fact, Roy Morgan says that more than one third of Australians are ready to buy a car totally online and that this is only set to increase in the coming decade. Again, this change is led by the younger generation who have grown up digitally native and used to the choice and flexibility of online shopping.
The average Australian family spends $17,147 a year on transport, so changes to automotive sector such as driverless cars and car sharing will make a significant impact on this figure over the coming decades.
What the research clearly shows is that consumer expectations have changed, but that the industry as a whole has been slow to innovate to keep up with the changing expectations. Those who understand this will flourish and those who continue with their staid business model will not.
Michael Higgins is Director of HelloCars.