The study also found that autonomous vehicles would produce positive gains for Australian automotive dealers. Much of this would follow a transition from revenue from the sale of vehicles to revenue from charging for the use of vehicles.
The KPMG Autonomous Vehicles Readiness Index is designed to show how countries are preparing for autonomous vehicles (AVs) and which ones are likely to make an easy transition.
It also uncovers numerous opportunities for dealerships and a motoring community that will be even more mobile than today.
Commenting on the report, KPMG director of motor industry services, Steven Bragg, told GoAutoNews Premium that there was a lot more to the research than simply a list of competent countries.
He said that though Australia ranked 14th on the index – sandwiched between France and Spain – in effect the relatively low score was based more on our lack of policy initiatives from government.
“We’re actually better than 14th,” Mr Bragg said. “We’re closer to Canada – in seventh position – because our countries are similar, our people are similar and there are also similarities in the way we are governed and being both members of the Commonwealth,” he said.
“But though all those factors are aligned, Australia has fallen short in government policy on autonomous vehicles and electric vehicles and energy proposals.”
However, Mr Bragg said he saw progress. He pointed to the ACT government and its plans to have an all-electric government fleet by 2021.
“That shows to me that there is progress and I think this will be one of the catalysts in Australia for a rapid change to the way we view and accept AVs,” he said,
“The change will be faster and more dramatic that we may realise now. I’m saying that within 30 years we will have a sophisticated AV service in Australia that will affect everyone, including dealers.”
Mr Bragg said one huge opportunity for dealers was recognising a transition from car sales transactions to car usage transactions.
He said there was substantially more profit in leasing or renting for usage of a vehicle than in a single sales transaction, particularly as the outlook was for greater car use in 10-30 years time than today.
AUTONOMOUS VEHICLE RAMIFICATIONS
- Dealers can be providers of AVs to fleets and manage sales, service and spare parts.
- Dealers can participate by leasing out its own vehicles.
- Dealers can be more profitable with the lease-rent plans than on single sales transactions because AVs will cover up to three times the distance of today’s vehicles because they are shared.
- Dealers should look at the truck dealer model as an example of dealing with fleets and use that as a basis for its AV model.
- AVs will cover up to three times the distances as cars today.
- AVs will be available for lease-rent based on usage requiring no capital outlay.
- AVs suit all users regardless of age or disability.
- AVs have the potential to be used for long distances and could compete on price and convenience with airlines.
- 5G connectivity will be the turning point for faster AV service expansion and use.
- Governments may add AV services to their transport services model for citizens.
- AVs could use high-speed roadways between major cities, such as Melbourne and Sydney, making them more efficient and convenient than airlines offering door-to-door services.
- AVs could travel at up to three times the speed of conventional vehicles with improved infrastructure.
- Limited liability legislation from the aviation (and other) industry could apply to AV services in the event of death, injury.
- AVs will mean redeployment for drivers of taxis, buses, trains, limousines, etc.
“With AVs, economic data from the US (including the Federal Reserve of St Louis and the International Transit Forum) expects the average distance travelled by a vehicle will double or triple, bringing with it greater efficiencies and lower costs,” he said.
“The reasons for increased usage include the ability for all people – regardless of age or disabilities – to travel quickly, efficiently and economically. As we age and become too old to drive safely we will embrace AVs, as will people too young to drive.
“As more AVs will be in use, they cover more distances. Most may not be purchased but leased, either by individuals or fleets, including governments and even dealerships themselves may offer an AV fleet to their customers.
“So the dealers have an opportunity to shift from a single sales transaction model to a lease or rent model based on a cents per kilometre rate charged on the usage of the AV.”
Mr Bragg said it was not something that dealers should be afraid of, rather it offered many opportunities.
“AVs actually means more cars on the road, more cars in the service department, it means more parts and even though they are likely to be electric vehicles which will have extended service intervals, the cars are travelling up to three times as much,” he said.
“The dealer may actually get the car into the service department more often. It’s a big change to the existing dealership model of today but it doesn’t mean the loss of opportunity and for dealers to have a successful business.”
Mr Bragg said he does not expect the changes to come this decade.
“I see this happening between the next 10 and 30 years. This is when the real pick up starts to happen,” he said.
“In the next five-to-10 years there will be more and more of these types of vehicles on the roads but the real take up comes later.
“For many people, the 30-year outlook may be perfect timing to when they may not want to drive anymore and don’t want the hassle of owning a car. I’m a perfect example.”
Mr Bragg said there was likely to be fewer vehicle purchases by individuals.
“It is likely we would pay for the use of a fleet vehicle supplied by a mobility service – such as a fleet company, a government agency or a dealership – rather than own a car. Wealthy individuals will own their personal AV, similar to today’s luxury and ultra-luxury buyers.
“But that’s not unprecedented. If you look today at the operation of a truck dealership that already typically only sells to small, medium and large fleets and have set prices for vehicles sold to those fleets.
BY THE NUMBERS: BUY OR RENT
Annual revenue for the automotive industry (US, 2016)
Sales: 17.0 million units at average $US30,000 = $US510 billion annual industry.
Rent: 3.9 trillion miles at US60.8 cents per mile = $US2.37 trillion annual industry.
That represents more than four times the size in terms of sales than the current automotive industry.
Rent (AVs) at twice the use of cars today: 7.8 trillion miles at US30 cents per mile = $US2.34 trillion industry (same size but more likely to be the model adopted which is more than four times the current industry size).
Annual revenue for the automotive industry (Australia, 2016)
Sales: 1.1 million units at average $A35,000 = $A38.5 billion industry.
Rent: 249.5 billion km driven (ABS, June 2016) at A60.8c per km = $A151.7 billion (also about four times the current industry size)
Data from KPMG, ABS, NADA and Federal Reserve of St Louis
“Truck dealerships operate quite profitably, even though they are on a slightly different model to a car dealership.
“So in the next decade we will see a shift from primarily dealer-to-private sales,to primarily dealer-to-business sales. It will be a business-to-business transaction where the dealer will be dealing with a person who is a lot more sophisticated than an individual, with less finance and insurance because they will have their own funding through their business.
“The dealer will still be able to set their price and the margins, with the margin more evenly weighted out of the front end rather than the back end.
“A lot of the margin will come through something like a maintenance contract where the dealer would have a fully-maintained lease for that fleet.
“So the dealer would offer: ‘For every car we sell, we provide the car and the service and all the parts and we make sure there is some up-time component to the sale contract to keep the cars on the road’.
“It’s been done before and truck dealers live with this every day of their lives. Car dealers will have to evolve into that model.”
Mr Bragg said dealers should now start to look at how they are going to work with these fleets.
“It is not a complete change to their business and it won’t happen overnight but dealers should still start to prepare themselves to have another department – like a fleet department for ride-share companies – so it becomes another form of revenue. One thing we can be sure of is that dealers are resilient.
“Dealers need to think about how they’re going to approach these ride-share and mobility businesses and how they are going to supply them with vehicles, service and parts. And if required, supply finance.
“It’s all about being proactive – that’s why everyone’s now out there consolidating because they want to be of a scale that they can interact professionally and deal with big corporates.
“When you’re a family-owned dealership with three showrooms in one or two suburbs it will be hard to deal with multi-national fleet mobility service operators.
“They will set the terms. If you’re a regionally large dealership group or a nation-wide dealer group, you can supply the vehicle, the service point, and the parts required. Then you can transact on an even playing field. However, if you’re too small, you get dictated to.
“These buyers will say to the smaller dealerships that this is the price we will pay. Bigger groups will be able to offer a price, the service points and a guarantee for parts within 24 hours to continue servicing the mobility services’ customers.”
Mr Bragg said he also does not see much rationalisation of dealerships because “it is vital that you will still need service points”.
“No-one is quite sure what the new dealer model will look like though. I see delivery centres, like warehouses, as being central to a dealership group.
“A local dealer will have to be more about servicing and supplying parts than operating a sales showroom. There may be some cars on display, but not a lot.
“The inventory would be on cheaper real estate, in the outer suburbs, with a warehouse for delivery and people who would bring the cars to the buyer when required, either to the customer’s house or business.
“The service centres will be scattered so they can be serviced closer to where the vehicles are based or being used.”
Mr Bragg said any change will bring fear and breeds concerns and scares people “but in the end, hopefully, it’s a good change”.
By Neil Dowling