Seeing through the mist

The core of ICDP’s activities is our collaborative research programme which has been running for over thirty years at a European level.  This brings players from across the distribution sector – sales and aftersales, manufacturers, dealers, parts distributors and suppliers of services and technology – together to develop a better understanding of the challenges facing us all, and how to address them.  At this time of year, we get our heads together and consider what the most important topics are for the year ahead, which then drive the design of the research programme.

This coincides with various events and requests from the press where we are asked to provide input on the outlook for the coming year.  In some past years that has been fairly straightforward.  The rocks in the road have been relatively easy to spot, regulatory timelines were clear, technology change was evolutionary and the competitive landscape was stable.  This year – more than any other that I recall – is much tougher.  None of the above are true.  We know what the regulations say about electrification and F&I compliance, but the voices raised against the current roadmap to zero emissions are getting louder and we have seen sudden changes affecting F&I business in Norway and the UK.  The progress of BEV sales has been erratic in a number of markets rather than evolutionary, and the progress of newcomers is affected by protectionism and in a few cases so far, financial collapse.

That presents some tough choices for anyone in the market.  Slowing everything down and only working on the basis of what is immediately visible ahead may be safer in the short term, but you risk being overtaken by a Verstappen who somehow can deal with the limited visibility and pull off a win against the odds.  That could end badly however with a one-way ticket to the gravel traps, so the answer must surely be to take some risks, but manage those to allow avoiding action to be taken as and when necessary.  To do that we need to understand and quantify those risks – what might happen, and what can you do to reduce the impact if and when they become real?  Which brings us back to one of the reasons why companies join ICDP, and how important it is to get the scope of the research well defined.

At this stage we are setting some boundaries that could still be proven wrong, but we think the odds are very low.  We do not think that the various conflicts around the globe will escalate in a way that affects the European car industry, either in this market or in exports to key markets like China.  Protectionism will grow and be with us for at least the next five to ten years, which will limit choice but encourage localisation of production.  Whilst the path to electrification will be erratic, the huge investments that have been made will yield products that address many of the concerns held by customers, and BEVS will become the dominant (and possibly only) option in ten years.  The commercialisation of a hydrogen infrastructure or e-fuel production capacity will prove too difficult to deliver in the necessary timescale against a constantly improving BEV offer, though the latter could still prove an environmentally attractive option to sustain the ICE parc beyond 2035.

Consumers will value increasingly sophisticated online features to support their car purchase, including AI tools that help guide them to the right choice for them, but most will still want to see and touch the product in the metal before committing.  They will still be allowed to and want to have sole use of a car (even if it is leased rather than owned), because the offer from public transport and shared use cars will not improve to the extent that the majority will be persuaded to give up their independence.  More maintenance will be under some form of centralised management, rather than the control of the driver, and the size of the aftermarket will continue to decline.

Within these boundaries however, there are still many variables, particularly when it comes down to an individual business which is aligned with particular brands and markets.  Whilst the trendline may not move substantially, it will be based on the averaging out of some more extreme movements, including some real winners (some, but not all of the Chinese brands for example) and some departures (GM Europe for example from past history).  They say that retail is detail, and that is certainly applicable in our sector as well.  Each business needs to consider its own position.  Agency is almost certainly the wrong option for a brand like Suzuki who have declared they will remain with franchise, but Mercedes seems to be getting a genuinely good outcome from agency for themselves, their retail partners and customers – at least in the UK which is the market I am most exposed to.  It is naïve to make a broad statement that agency is either good or bad – it depends on the brand and the detail of the implementation.  Repair and maintenance within aftersales as a whole may be declining, but some OEMs are doing a better job of protecting their parts profits through second line parts for older cars and multibrand parts offers than others, some dealer groups are retaining customers much more effectively than their peers.

It therefore seems to me that the key challenges the industry faces are more about the ‘how’ rather than the ‘what’.  We know roughly what the challenges are, what will matter is how well each business is prepared to navigate those and deal with the unexpected.  As a one-time ‘gentleman racer’, I could describe what the challenges were with the weather conditions at the recent Brazilian Grand Prix, but it was how Verstappen coped with those that put him on the podium and would have put me in the tyre barrier at the first turn.

ICDP will be holding a webinar on December 11th at 1000-1100 UK, 1100-1200 CET, which is open to both our member organisations and others when we will outline the challenges that we see, and the first view of the content of the 2025-26 research programme.  We welcome input on what should be the most important topics for our research from across the industry.  To register, email our Project Office here.