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What's in Store
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Automotive

By Andrew Martschenko and Michel Gabriel

Automotive

Smarter, Cleaner, More Connected: Sustaining Momentum in 2013

Walking the floor of the Detroit Auto Show in January 2012 you could feel a sense of renewed energy. Two years of pent up demand and a slew of new product launches were just what the market needed. But the big question for 2013—what does sustained momentum look like?

In the U.S., a continuous stream of new products and low financing costs should keep automakers happy. In Los Angeles there were 50 new models on display and about the same number at the Detroit Auto Show. Technology that used to be reserved for high-end models is now making its way into mainstream models. And from collision avoidance to greater interaction with mobile devices, the driving experience continues to get safer, more fun and more productive.

MARKETS IN MOTION
While China has been the growth driver in recent years, the so-called “Next 15” markets—which include countries like Brazil, Russia, and India as well as Colombia, Turkey, Malaysia, Mexico, and Indonesia—means global competition is likely to heat up in 2013. Rising per-capita incomes and the availability of vehicles that are both affordable and tailored to address local mobility problems will ensure that car sales increase in these markets.

China is investing more money in intermodal transport systems to better address the needs of ever-expanding megacities. The investment is worthwhile for overpopulated cities and gives commuters a variety of mobility choices. For example, within such a system, a person could take a train into the city, then take a public electric car to their workplace and leave the car there for the next person who needs it. For large smog-plagued cities, electric cars will become increasingly popular, while vehicles with engines that run on ethanol are likely to sell better in Brazil with its large sugar-cane crops.

Globally, the industry outlook is mixed. Over-capacity in Europe will keep sales at a sluggish pace while China could have short-term challenges with demand. Overlay Japanese automakers dealing with a strong yen, and the picture begins to suggest that most brands will feel some sort of financial impact. If the fourth quarter of 2012 is any indication, many automakers are also ready to sacrifice their premium with higher incentives to reach their revenue targets. From a branding perspective, which automakers decide to defer to old habits and which ones can leverage the power of their brands is the question many should be asking.


"In a highly competitive market that provides consumers with many alternatives, the brands that can use this data to engage with the right customers and create online and offline branded experiences at the right time will strengthen customer retention and sustain consistent growth."



MARKET LEADERSHIP
Consumer access to information has helped level pricing variations in the industry while permanently altering the traditional purchasing funnel. But utilizing Big Data can help brands connect with the right customers by harnessing volumes of proprietary data and consumer insights with social media trends and other data sources. In a highly competitive market that provides consumers with many alternatives, the brands that can use this data to engage with the right customers and create online and offline branded experiences at the right time will strengthen customer retention and sustain consistent growth.

In emerging markets, a new group of customers will be purchasing vehicles for the first time in their lives. These cars will sell in the $3,000 range and pose significant challenges for global brands entering these markets. To capitalize on the opportunity, Nissan is resurrecting the Datsun brand while Volkswagen is appreciating the difficulty in stretching its brand values to connect with these new customers. Creating the right experiences and remaining profitable in the short term will test the commitment of the brands that decide to enter these high growth environments.

SMARTER CARS
Consumers in established markets will also be looking for “smarter,” connected cars, allowing them to check traffic jams or the weather, or make appointments or order food utilizing speech recognition technology. As of now, smartphone integration and voice-activated multimedia functions are relevant for one out of two motorists, but given the demand for digital services providing congestion and photo radar alerts, for instance, and the growing interest in synchronized mobility, connected cars will eventually become the new norm. Audi customers, for example, have the option of turning their vehicles into moving hotspots. Passengers traveling in equipped Audi Connect vehicles can connect up to 8 mobile devices, while vehicles with LTE technology can deliver data transfer rates that are equivalent to broadband speeds at home.

To make vehicles more connected, automakers will have to embed more and more brands in automobiles that previously had no presence there. Those partnerships will mainly include social networks, mobile communication brands, and application service providers. At the hardware level, multimedia screens will display smartphone and operating system brands. For automakers, this is a great opportunity to expand their own value proposition with vehicle-borne internet services.


"The trend toward greater fuel economy will be sustained, but many automakers will also woo buyers with extra power, luxury, and convenience features."



BOOSTING THE ALLURE OF CLEANER CARS
In mature markets, public perception of electric vehicle (EV) momentum seems to have stalled. At the start of the decade EVs showed so much promise. The battle between the Chevy Volt and Nissan LEAF instigated a passionate response to using cleaner technology. But since then the EV market continues to sort out infrastructure issues, work out the kinks of first generation products and deal with consumer affordability. Hybrid plug-ins have become the more pragmatic solution in filling the void created. But with Tesla launching its S model and Nissan LEAF going into full production in the US there is an opportunity for one, if not both automakers, to command EV leadership. The price of oil will continue to remain high and products will continue to improve, but a lot of consumer education is required to reduce range anxiety and deepen understanding of why a car buyer should pay a premium for an EV.

THINKING LONG-TERM IN 2013
The trend toward greater fuel economy will be sustained, but many automakers will also woo buyers with extra power, luxury, and convenience features. In the domain of concept cars, anticipated new models debuting this year include the Acura ILX and NSX, the Lexus LF-LC, the Lincoln MKZ, Ford’s new Fusion and Mercedes’ revamped E Class. As the year unfolds, automotive debuts to watch out for include the Škoda Octavia and the new Porsche Macan. Smart will debut the new Fortwo, Nissan the revised Qashqai, and Porsche's 911 Spyder.

With anticipated growth in emerging markets, plenty of challenges in Europe, and much to be optimistic about in North America, 2013 should be an interesting, and probably good, year for the auto industry overall. Brands that have a strong vision, are tuned into consumer needs, and figure out the right ways to utilize technology for marketing and to enhance product offerings have a rich opportunity to not only strengthen their positions for 2013, but for the rest of the decade.

FYIQ