Automotive now oct-2010

AutomotiveNow
Summer 2010

Value Chain Crash –
New Business Models
for the Automotive
Industry
Rethinking fleet management
Exploring the trend towards environmentally-
friendly mobility alternatives in travel
management
The US – the rise after the fall
Automotive industry quickly adapts to the
challenges of the new global economy

Dear Readers,

Flexible and mobile – that’s how we We look beyond the European horizon
describe the current spirit of the times and, with our articles on the develop-
and the pressure to change it brings ment of the Chinese car trade and the
with it – if you don’t move, you get left US’s comeback as a competitive inter-

No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
behind. national production site, we also show

© 2010 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services.
that established structures in particu-
In this issue we highlight the future lar offer more and more new opportu-
changes in the automotive industry’s nities when seen from other perspec-
value creation chain and focus our view tives.
on the shaping of future business models
in particular. Will mobility service pro- The foundation of an international
viders with flexible usage and financing orientation must, however, be laid by
packages meet the requirements of sustainable cash and corporate capital
a younger target group better than management, because future challenges
“traditional” car dealers in the future? can only be overcome with a sound
Forward looking concepts and foresight and solid base. The magazine’s final
on societal developments are now article shows the way to build that
required. Anyone that is not caught up solid foundation.
in their existing business model can
score points where the readiness to be With this issue of AutomotiveNow we
creative in competition was previously want to transparently, actively and
lacking. insightfully inform you about current
trends and events in the automotive
Some of the discussion surrounding industry.
the automotive value creation chain
deals with the role of “brand manage- On that note then, I wish you an
ment”. We took a look at Formula 1™ interesting and stimulating read, and
and asked ourselves what role brand we hope this AutomotiveNow opens
management might play in the future up new perspectives for you.
for this business segment.

Another area of focus: the requirements Sincerely,
of corporate fleets of the future. What Dieter Becker
are the future requirements for vehicle Global Head of Automotive,
fleets? Should they become greener or KPMG in Germany.
simply more efficient? In our country
focus we discuss basic value creation
chain changes in a global context.

2 Automotive – Summer 2010

Lead article Contents

09 Rethinking fleet management
In Q1 2010 almost one in three
new motor vehicle registrations in
Germany was a company car.
12 The US – the rise after the fall
The world economy is starting to
show signs of recovery, but the
economic landscape has changed
dramatically.
16 Fast lane or hard shoulder?
There are contradictory views on
the pros and cons of a commitment
04 09 to Formula 1™.

20 The future of China’s auto

dealership market
Last year was a great year for auto
Business Models on sales in China, as it overtook the US
the Test Stand to become the world’s biggest car
Your car is no longer as important market by sales volume for the first
as it once was as a status symbol – time. But, paradoxically, it was far
in the saturated markets at least. from the best of years for the coun-
Both young and urban drivers in par- try’s auto dealers.
ticular now prefer time-limited use of 25 Sustainable cash and working
a car to meet their mobility needs. capital management
Mobility service providers have an It is an understatement to say that
opportunity to capture the previously the credit crunch has had a major
car manufacturer-dominated individ-
ual mobility market.
12 impact on the automotive industry.
28 Current Studies
29 Contacts

20

Automotive – Summer 2010 3

4
Automotive – Summer 2010
Business Models

previously car manufacturer-dominated individual mobility market.
in the saturated markets at least. Both young and urban drivers in
on the Test Stand
particular now prefer time-limited use of a car to meet their mobility
needs. Mobility service providers have an opportunity to capture the
Your car is no longer as important as it once was as a status symbol –

T
he car has been the symbol appropriately satisfy people’s mobility
of mobility and indepen- requirements. On the whole this
dence for more than a trend towards increased mobility will
hundred years now. It gives continue – because, for example,
us access from our front workers will always be asked to pro-
door to a global road network. And vide more spatial flexibility. Technical
the car is not merely a means of innovations do not solve problems,
transportation – it also represents an even if micro-cars and the generally
emotionally populated brand world. smaller electric cars can alleviate con- so to consumers in the emerging
Every car driver that can afford it finds gestion and environmental impacts in markets.
a suitable brand for their personality. cities. Nowadays it is far more about a Can a mobility service provider that
Or at least that’s how it used to be! basic reorientation that sees the car as offers the customer a usage and
Climate change, traffic problems in part of a complete solution for mobility, financing package satisfy mobility
urban centers and new social values and also incorporates alternative requirements better than a car dealer?
have changed the car’s image and modes of transport and new financing This kind of service menu could
use. Having one’s own car no longer and usage concepts. This includes include the use of one or two city cars
means that one has such an exclusive realignment of the car brands. during the week, a sports car at the
claim to flexibly and cost-effectively A look beyond the scope of one’s weekend, and an SUV for vacations.
meeting one’s own personal mobility own sector is always worthwhile in the The package would then also be sup-
requirements. This applies in particu- search for solutions. Buyer behavior in plemented by combination options

lar in cities where traffic chaos and the mobile communications industry, with other modes of transport, such as

parking problems turn many people for example, shows that in the bottom public transport, rail and air. Billing
off driving. The German pollution to middle price segment at least, the would then be at a flat rate for the city,
badge or London congestion charges complete package of mobile communi- fuel included, and a time tariff for the
are the frontrunners of regulatory inter- cation services and device applications weekend.
ventions to restrict car use in the is more important for the customer If these kinds of offers establish
future. Paris is also planning a city toll, than a specific mobile phone model. A themselves on the market, this will
and parking spaces for new commer- mobile phone or netbook contract with influence business models and estab-
cial properties will only be approved flat rate, fast Internet access, Facebook lished automotive industry brands.
there in exceptional cases. So can we networking and music subscription is As with mobile phone makers, manu-
actually be more mobile in the future the new status symbol. To satisfy their facturers could lose their interface to
without our own cars? communication requirements the cus- the customer to direct sales in the car
“The car is no longer necessarily a tomer does not turn to the manufac- fleet business and the associated sale
part of the family today, and nor is it a turer and their sales department – but via the car dealer. This of course has
symbol of freedom and independence,” rather to a mobile service provider. effects on the manufacturers’ entire
says Jörg Plathner, Automobile Division Is the automotive industry on the value creation chain. They could, how-
Head at Motor Presse Stuttgart. Your threshold of a similar development? ever, position themselves as mobility
first car has lost some of its significance A Vocatus survey of 500 car buyers service providers – with or without
for personal development. The number from Germany, France, Italy, Spain and cooperation partners. Branding and
of people that choose not to own a Sweden shows that the car brand is brand management are important suc-
car is growing in northern Europe in replaceable for every second buyer. cess factors here.
particular. In Stockholm it is consid- One in three said that the car’s func- The trend towards complete solu-
ered chic not to do your driving test. tionality is more important to them tions for automobility was started by
Martin Verrelli, Head of Remarketing than its appearance. Nonetheless, the manufacturers themselves –
at VW: “The car is losing its hold on having one’s own car is still considered together with their internal finance ser-
young people.” Experts believe the indispensable for flexibility reasons. vice providers. Financing and service
future is in new mobility concepts, But this could change if there are packages, which, in addition to a leas-
combined with new ing contract or
technologies that draw »The car is no longer necessarily a part of car credit, also
people away from car include usage
ownership through
the family today, and nor is it a symbol of services such
classic financing freedom and independence« as mainte-
options. In southern nance, insur-
Europe, and in Asia’s emerging mar- attractive alternatives to car ownership. ance, damage management and refuel-
kets in particular, your own car and Trend researcher Peter Wippermann: ing, have been on offer for many
the car brand still play a more central “It is not the product as such, but years now. The private driver is offered
role than in the mature markets of the rather its benefits for the ‘life feeling’ everything that is the norm in fleet
industrial states. that determine our relationship with management. Manufacturers’ advertise-
Car manufacturers and suppliers ownership.” This also applies to Japa- ments therefore frequently focus on
must find new answers to continue to nese consumers, for example, but less monthly car costs instead of purchase


prices. Car drivers are steered long term. Car sales today are already
towards asking themselves: “How driven by discounts – at least in the
much car do I want to allow myself mature markets. And the suppliers’
each month?” value creation and innovation share
Mobility service providers such as has also been growing for some
carsharing companies have ad- years now. With most vehicles it has
dressed this trend. “Carsharing and already reached 75 percent, if not
similar mobility concepts are becom- more. Suppliers develop into system
ing more influential,” says brand providers; the step towards the com-
expert Michael Trautmann. The im- plete car is no longer so great.
proved offering in rail and air travel Magna International Inc.’s ambitions
and public transport networks provides with Opel proved the point here. Car
attractive alternatives to the car – for makers would evolve such that sup-
specific mobility requirements at plier relations management became a
least. German Automotive Industry core competency. Model and brand
Association (VDA) President Matthias management and sales could shift
Wissmann emphasizes: “There is no towards mobility service providers.
longer any antagonism between the Similarly, mobile phone manufactur- “Mu” brand, Peugeot Motor Company
car and public transport networks. ers have lost a degree of their impor- PLC, for example, uses authorized
The car is still important, but net- tance in recent years. dealers as pick-up and drop-off sta-

working with other transport means With the introduction of electric tions. This could be supplemented by

is also important.” cars the suppliers’ value creation additional cooperation partners to guar-
The approaching electrification of potential increases significantly, as antee full-coverage mobility. Mu cus-
road traffic, in which, for example, the electrics industry has a clear tomers can download “mobility
electricity suppli- units” on the Internet
ers, suppliers of and book a convertible
big components »The car is still important, but networking with ride, a moving truck or a
and mobile com-
other transport means is also important« rooftop box for their
munication vacations.
operators Alternatively, companies
invest, will competitive advantage over combus- could also realign their business mod-
increase the tion engine manufacturers. Coopera- els and brands to become mobility
competition tion projects with electricity suppliers service providers that offer their cus-
pressure from and other infrastructure companies tomers comprehensive solutions as
non-automo- will contest car makers’ business globally as possible. Car production
tive industry interests. Ex-SAP Board Member would then no longer be a core activ-
companies. Shai Agassi shows how this is done ity. Supplying complete systems, or
With the elec- with the “Better Place” brand: The even final assembly, could be out-
tric car in particular, the mobility service company provides a complete service sourced. The new business model’s
consisting of car use, power supply for electro mobility. With the aid of core element is service quality – high
and battery change is a key decision- sophisticated software the customer availability, flexibility and benefit-
making criterion. High procurement only pays for kilometers traveled, a oriented prices for mobility offers
costs mean that, at first, only very pricing model that is similar to mobile across and beyond all modes of
few users will choose to buy an elec- phone contracts. And Renault pro- transport. And since cooperation proj-
tric car. The car therefore becomes a vides the cars for this. ects are success-critical for mobility
mobility carrier – similar to Amazon’s To offer mobility services in addi- offers, manufacturers could integrate
Kindle reading device for books: it is tion to the existing value creation, car their existing expertise in managing
about the content and the brand. makers must first expand their ser- supplier networks.
The automotive industry’s tradi- vice expertise. Internal financing Car makers have practically no
tional business model is therefore companies and brands such as the competition in today’s individual
called into question at several points, Volkswagen Bank GmbH or BANQUE mobility brand world. They can easily
and the manufacturers are faced with PSA FINANCE are good examples of transfer their brand strengths to new
the challenge of repositioning. Should this. Their range of offers can be model families, or even to neighbor-
they leave their current value creation beefed up with carsharing, short- ing product segments, such as bicy-
chain untouched; should they extend term leasing and renting, as well as cles or car financing services. But
them with mobility services; or must combi packages in cooperation with how will car brands assert them-
they redefine their key competencies other modes of transport. The exist- selves in the new mobility services
and adjust their branding policy? ing authorized dealers could possibly competition? They might very well
In the first case the manufacturers’ come in as points of sale. With its see competition from new mobility
value creation would shrink in the prepaid mobility offering with the brands and from service brands in


towards individualization, which has
even taken hold in Asia, may also
produce a wide variety of mobility
brands. The challenge will be to
bundle sub-brands into strong brand
families. The manufacturer brand has
brand features: the customer joins in, a lighthouse function here.
uses the car as long as they want, These features are decision-critical
and returns it at any parking space in for the long term, as shown by the
the business district. The provider iPhone success.
takes care of refueling and cleaning. New drivers are the first important
Unlike classic carsharing there are target group. Favorable introductory
neither basic charges nor membership prices and environmentally friendly
contributions. Billing is per minute – means of transport are important
mileage, fuel and insurance are in- brand features. In Ulm every third
cluded. The Smart models used are driver’s license holder between 18
especially low in emissions, which is and 35 is already a car2go customer –
why car2go 2009 won the ÖkoGlobe the users identify with the brand
other transport areas, and less so for mobility projects and visions. image. Combination offers of driver’s
from the suppliers. Even the brands CEO Robert Henrich intends to ex- license and mobility are conceivable

of major system integrators such as pand after the successful test phase to stimulate reluctant car users such

Robert Bosch GmbH, Continental AG in Ulm: “Market launch in other coun- as those in Stockholm. The Swedish
or Magna have, so far, represented tries is the next logical step.” automobile association, Motorbran-
technology more so than mobility. If expectations on the mobility mar- schens Riksförbund, is already con-
Car rental agencies, rail companies ket are met and an image change can sidering a subsidy program for driver’s
and airlines or automobile clubs have be introduced in parallel, many manu- licenses.
a significant head start here. facturers won’t have to do without A premium brand in this respect
But car makers excels with optimum
must also realign
»High technical quality and good design are availability, best pos-
their brand manage- sible flexibility and
ment, which has so part for the course today and products can first-class service.
far mostly been
therefore be replaced, with one exception: Included is the use of
based on technical specific road sections,
differentiation. High the ‘Green’ factor ...« such as in the US or
technical quality and even in big cities such
good design are par for the course strong car brands in their mobility as Bangkok, convenient parking
today and products can therefore be offers. In the growth phase it is options and waiting lounges at mobil-
replaced, with one exception: the about occupying market segments ity interfaces. Furthermore, the vehicle
‘Green’ factor or the vehicles’ envi- and securing your position for future must provide comfort, but in special
ronmental friendliness, which is cross-selling offers with a strong situations the requirements can be
totally different, at least for now. In brand. The specific mobility features better met by small models. Individu-
the future, services, especially mobil- are success-critical, as demonstrated alization options, such as seat set-
ity services, will be far more image- by the incredibly successful iPhone: tings, air con and infotainment sys-
building than technology. A combina- design, operability and innovation tem, for example, are a matter of
tion of sustainability and service were the driving forces during its course – and can be easily retrieved
quality is provided to attractively market launch and growth phase. via electronic customer cards. Sus-
boost brands. For many manufactur- “Apps” will mostly ensure sales with tainability can be added as a further
ers this means a new beginning, increasing market saturation. Apple ®’s element – with its “Efficient Dynam-
especially when they cooperate with crystal clear branding is the driving ics” BMW AG (BMW) has created a
other companies. The introduction of success factor in both product lifecy- platform from which suitable mobility
a new mobility brand reduces the risk cle phases. services can be built up, such as
of diluting the resident brand or of The model families and the associ- flights with low emission planes, a
damages with the offer’s failure; can- ated brand features play a pivotal role feeder service for an electric vehicle
nibalizing the existing car sales. with manufacturers‘ mobility offer and points of sale with modern, effi-
Daimler AG is testing a mobility features. The organization of new cient building technology, for example.
offering under its Mercedes-Benz services must be adjusted to this Corporate customers will be the
label with the Smart in Ulm and in branding – sustainability, premium, most important growth drivers when
Austin,Texas but under the new driving fun, sportiness, family-friendli- mobility applications are running reli-
brand, car2go. Environmental friendliness, discounts and combinations of ably. These customers are already
ness and service are the load-bearing these, for example. The social trend familiar with fleet management from


their experience of car manufacturer the US first, because the car still plays But the change could be completed
service offers, and generally have a greater role as a status symbol in rather quickly due to the acute traffic
extensive mobility requirements the Asian and South American mar- problems in the big cities. Public
across and beyond all modes of trans- kets. The German Institut für Automo- transport networks with electro mobil-
port. The range of offers must, how- bilwirtschaft (Institute for Automotive ity, for example, are probably a lot
ever, be expanded significantly. Research), for example, expects China closer to reality in China than many
The mobility service market’s focus to be the biggest consumer of pre- western experts think. The massive
will probably be Europe, Japan and mium brand vehicles up to 2015. support by the Chinese Government
has generated a head start. “In five
years,” says Shai Agassi, “the Chi-
nese will no longer be accepting cars
»The organization of new services must be with combustion engines.” And it is in
adjusted to this branding – sustainability, premium, the emerging markets in particular
that manufacturers have the opportu-
driving fun, sportiness, family, discounts and nity to experiment with new mobility
combinations of these, for example.« concepts – and quickly produce major
scale effects.
By Eric Czotscher, Head of the “Branchen-
und Managementdienste” department of
the F.A.Z. Institute

Comment

Automotive industry at the crossroads

T here can be no doubt that the automotive industry has reached a water-
shed point. Increasing vehicle electrification and drastic changes in con-
sumer behavior in the saturated markets will result in a redistribution of the
automotive value creation chain. Exactly what this will look like – whether
OEMs will be the mobility providers of the future or whether suppliers in the
module sector will develop into mass providers as part of a concentration
wave, and what business model will be the most successful in the future –
all remains to be seen. One thing, however, is already clear today: whoever
welcomes these changes as an opportunity and positions themselves early
on, will push to the fore in the long term. The ability of the automotive indus-
try to learn from other industries that have already undergone similar changes
will be critical to its success. Direction could be taken, for example, by busi-
ness models from the IT or tele-
communications industries, which
have already shown how success-
Dieter Becker
is Global Head of Automotive,
ful brand management boosts
KPMG in Germany. leadership in a highly developed
technological market.


Rethinking
fleet
management
In Q1 2010 almost one in three new motor vehicle registrations

in Germany was a company car. Within the medium to luxury
classes, every second car was registered by a company. Incor-
porating green strategies in corporate vehicle fleet management
therefore poses new challenges for the automotive industry.

I
n Germany the company car is Audi AG (Audi), this is an invaluable regarded as a problem in 2006 and
still an important status symbol benefit for high-end vehicle manufac- 2007 against the backdrop of explod-
used to attract employees to turers. The situation is most compara- ing fuel costs as the price of regular
higher positions. Ultimately the ble in Belgium; whilst in other Euro- gas rose to EUR 1.40 per litre. “This
company car provides indisput- pean countries the company car is far allowed cost reduction measures to
able benefits for both employer and less widespread due to lower social be nicely ‘green’ packaged. Over the
employee. Employers save on their security contributions for salaries and course of the financial crisis the vehi-
labor costs and the associated high luxury taxes on high-end vehicles. cle downsizing issue was tackled,
social security contributions, and at “Germany is the manufacturing coun- without company-internal discussions,”
the same time also secure a powerful try with the largest premium seg- says Thilo von Ulmenstein, Managing
price leader into the bargain. The ment, which is why the employee’s Director of FleetCompany GmbH, a
employees save on taxes and social image is so closely connected with TÜV SÜD subsidiary, which presents
security contributions – and can also their company car. In other European the annual ‘Green Fleet Award’ to
use their company cars for private countries such as the Netherlands or companies with especially ecofriendly
purposes. France, the car is far less image- vehicle fleet management.
bound than it is in Germany,” says A large-scale changeover of com-
The car – truly a German Marketing Manager Bettina Heinen pany fleets to vehicles with alternative
status symbol from LeasePlan Deutschland GmbH. drives is, however, still a long way off.
The figures are impressive proof of “Of the approx. 87,000 vehicles that
the real incentive of a company car for How “green” will fleets become? we provide to companies, only 37 of
many employees – it allows them to “The climate change debate won’t them are natural gas, and a couple are
drive a car that they couldn’t normally spare the so highly valued company electric vehicles,” says Bettina Heinen
afford in their private life. In a country car in the long run,” says a quite con- from LeasePlan. To date practicality in
that is primarily defined by its premium vinced Bettina Heinen. Vehicle fleet daily use is still the main missing ele-
brands, Mercedes-Benz, BMW and consumption in companies was first ment. “Alternative drives can only be


“Whoever gets into gear here the
quickest will be able to achieve real
competitive benefits,” says Bettina
Heinen. “Employees will also attach
more importance to the fun and image
factor connected with choosing the
company car than they will to environ-
mental protection. Companies will
restrict the selection with appropriate
CO 2 limit values to match their hierar-
chy. Those who want to stay in the
running must be able to offer the right
kind of vehicles.”
A review of the changes in new
company car registrations between
Q1 2009 and Q1 2010 shows who the
current winners and losers are. While
used on a large scale by companies Fuel is provided by a local supplier upper medium class and luxury class
when the right maintenance and filling who extracts biodiesel from various new registrations remained stable, the
station network has been put in place. waste sources from within the three bottom segments (mini, small

And of course alternative drives are region. The fleet’s CO 2 emissions car and compact class) enjoyed signifi-

mostly installed in small cars, and not were consequently reduced by more cant increases in places of up to 30
in the higher vehicle class model than 50 percent from 910 to 435 percent. SUV new registrations also
series that are most attractive to tons between 2006 and 2008. A goal increased by 17.2 percent. Large vans
employees.” of saving 75 percent of CO 2 for the and medium class cars, on the other
entire company over 3 years by the hand, both fell by 13 percent.
Sustainability grows in importance end of 2010 was announced, of
To date very few companies are which 57 percent has already been A market for mobility providers?
changing over their vehicle fleets achieved. “Total Cost of Ownership” – the total
because of a clear sustainability strat- purchase price and running costs over
egy, instead of purely economical rea- Challenges for manufacturers the entire service life – remains the
sons. One example is the global US These two examples clearly show key sales argument for manufacturers
chemical group, DuPont™, which that sustainable strategies are not when selling company cars. And yet it
made its name back in the day with about new materials in car manufac- is precisely here that lower gas con-
products such as nylon and Teflon ®, turing – it is actually about reducing sumption and therefore lower costs
and now intends to improve its image CO 2 emissions with thriftier models and reduced CO 2 emissions go hand-
with a green vehicle fleet. With its and alternative drives. “A growing in-hand. In addition to downsizing
‘Fleet Fuel Efficiency Program’, the number of companies with a highly engines, technical advances are there-
group has obliged itself to change all developed CSR are implementing fore especially important for sales in
of its vehicles to leading technologies sustainability in their fleets, too. And this area. “Employees are loath to
with combustion motors and alterna- with absolute conviction! Companies accept reductions in their vehicle’s
tive drives by 2015. This will help sup- are therefore increasingly setting performance, but on the other hand
port the right kind of innovations, CO 2 upper limits for their vehicles,” must make their contribution to meet-
while reducing the fleet’s consump- says Thilo von Ulmenstein. And this ing the company’s climate protection
tion levels. has effects on model ranges. targets, it really is all about being able
The English office furniture manu- “Manufacturers in particular have to to provide lower consumption vehicles
facturer, ‘The Commercial Group’ in adapt their range of models towards with the same performance,” says
Cheltenham near Gloucester, has also achieving CO 2 reduction due to this Alexander Bilgeri, BMW Group Busi-
introduced a series of measures with changing behavior patterns of fleet ness and Financial Communications.
its vehicle fleet to achieve the compa- operators. This is already in full The trend towards more environmen-
ny’s ambitious climate protection swing, and is very necessary, tal friendliness within fleet manage-
objectives. An elaborate system con- because the trend towards sustain- ment at companies is matched at
stantly monitors the company fleet’s ability is currently being spearheaded BMW, as the Munich-based manufac-
mileage and gas consumption. by big companies and is emanating turer has a good sales pitch for fleet
Drivers and employees are also outwards more and more all the managers with its ‘Efficient Dynamics
trained how to drive more economi- time. Without alterations manufac- Program’. “In some companies
cally, which results in gas savings of turers will no longer be able to place employees are rewarded by a bonus
up to 20 percent. Various options entire model series in company scheme when they contribute to
were tested before the decision was fleets, where the most important achieving the company’s climate pro-
made in favor of biodiesel vehicles. sales market is right now.” tection objectives and stay below the


Automotive now oct-2010

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