Neil Barrell, Partner in Grant Thornton's Business Consulting Operations Team, explores the possible effects the recent emissions scandal will have on the automotive industry.
The recent emissions scandal is bound to have wide-spread effects throughout the automotive industry.
As the main sponsor of The Manufacturer’s Annual Leadership Conference (TMALC) 2015, Grant Thornton’s Business Consulting Team took the opportunity to gather a group of influential leaders within the industry to a closed room discussion surrounding the recent scandal.
This discussion has provided a platform for me to expand on my own thoughts surrounding the scandal.
The trust bubble has burst
How did consumers feel towards the industry before the scandal, and how do they feel now?
The truth of it is that things haven’t changed as much as you might think. When buying a vehicle the opinion of many is that the performance statistics advertised are not those which they experience while driving the car.
The majority of people buy the best car that they can afford, with the money they have and are more interested in fuel consumption than they are with levels of emission. There was already an inherent lack of trust within the industry and the recent scandal has done nothing but increase this.
The consensus around the table was that it will take the negative involvement of a few more major players in the automotive industry to really push a significant change in consumer behaviour. However, if there was any sort of trust bubble to be found here before the scandal, it has most certainly burst.
What will change?
The scale and significance of the scandal will undoubtedly bring about a change in the automotive industry. Governments will be forced to act, so a change in policy to the way in which emissions are tested is the most likely outcome.
Currently, the ways in which this is done vary from country to country and cannot be said to be reflective of real world use. Industry will be disappointed if they think they will have any say on this change or support with implementing it from the Government.
Cities have the ability to push through change much quicker than government which opens the door to an interesting development.
Currently in the UK, buses make up a large proportion of total emissions, the Government has recently launched a scheme to put more low emissions buses onto UK roads. This is currently being run as a competition, which illustrates the main issue at this point in time – price.
A window of opportunity
The key drivers to speed up low emissions technology are regulation and consumer demand. What is the major inhibitor to consumers buying low emissions vehicles today? Price.
The technology to solve this issue currently exists, however it will take large investments from the big players in the industry to get it off the ground. There are so many technologies out there that no one will ever know about; if these low emissions technologies are going to make it to market, this needs to be a collective effort.
The table was in agreement that the issue here is industrialisation, not research and development. This scandal has provided the industry with a window of opportunity for the development of low emissions technologies. However, as it stands no one has taken the bait.