The global response to climate change and the emergence of innovative new car start-ups means the automotive sector will need to transform rapidly or risk being left behind, investors warn.
US electric car company Tesla has been making waves globally with its guerilla marketing tactics, outsmarting traditional automotive companies and enthralling consumers. European carmakers like BMW, Daimler, and VW in Germany – the birthplace of the automobile – and their counterparts worldwide are scrambling to catch up.
A global network of more than 250 institutional investors, representing assets worth over $24 trillion, has now published a guide with specific threats facing the automotive sector, empowering investors to help traditional car manufacturers turn things around before it is too late.
The report says the move towards a low-carbon economy, and the regulations, changing demand patterns and new innovations that come with it, will impose significant challenges for established automotive companies.
Just this month, German lawmakers called for a European ban on fossil-fuel powered cars by 2030. “Good for Germany!” was Tesla CEO Elon Musk’s response on Twitter. But investors hope the news also made it to the board rooms of traditional car companies.
Good for Germany! https://t.co/SMdOL9GcTl
— Elon Musk (@elonmusk) October 10, 2016
“Established automotive companies are highly exposed to competition from new entrants responding to growing consumer demand for cleaner vehicles and smart transport services,” said Emma Herd, who represents investors in Australia, New Zealand and across Asia.
The VW emission scandal – dubbed ‘Dieselgate’ – has dealt a heavy blow to German manufacturers’ claim to global technological leadership, but the damage may not be limited to Germany. “The emissions scandal is a worst-case scenario for the global trust in carmakers,” said Christian Hochfeld, head of new mobility think tank Agora Verkehrswende.
Herd said that consumer demand is already driving a shift to lower emission fleets in Japan, India, China and South Korea.
Google, Apple and Uber
In the report, investors urge automotive companies to become more holistic mobility service providers by going beyond just producing cars in the traditional sense. Car makers will have to rethink their business models and also take self-driving vehicles and car sharing into account or risk losing market share to not just Tesla, but also potential new competitors in this space such as Google, Apple and Uber.
“Several automotive companies have already recognised they must increase capital expenditure in sustainable driving technology and product pipelines,” warned Stephanie Pfeifer, CEO of the European investor network IIGCC.
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