Global Automotive Consumer Study Exploring Consumers .

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2014Global Automotive Consumer StudyExploring consumers’ mobility choicesand transportation decisions

2Deloitte 2014 Global Automotive Consumer Study

IntroductionForces are changing the mobility landscape and affording consumers more choices than ever beforein meeting their transportation needs. For automotive companies, these shifting consumer demandsresult in a number of complex questions that may ultimately impact their products and how theyengage their customers.To explore consumers’ mobility choices and transportation decisions, Deloitte fielded a survey in 19countries. In total, more than 23,000 individuals representing a broad range of cross generational—Baby Boomers, Gen X and Gen Y—automotive consumers responded to the survey. This broad anddiverse consumer demographic, both across countries and Gen Y, allowed for in-depth analysisthrough multiple lenses, including generational, socio-economic, gender, and many others.The objectives of the study centered on understanding the factors influencing consumers’ mobilitydecisions as new transportation models that provide access to transportation (e.g., car-sharing, etc.)emerge. We also analyzed the different tradeoffs consumers are willing to pay for to own a vehicle,and examined how preferences for powertrains, technology (inside and outside of the vehicle), andlifestyle needs impact consumers’ choice in the purchase or lease decision. The study also sought toassess the customer experience and the factors influencing the final vehicle purchase decision.The findings of the study outlined in the follow pages represent the analysis of the over 2,000 U.S.consumers who responded to this global survey. These findings form the foundation for an informeddialogue between automakers, dealers, and non-automotive companies working within the industryabout the factors that will increasingly impact how consumers around the world choose to get fromone place to another.

4Deloitte 2014 Global Automotive Consumer Study

ContentsAbout the Global Automotive Consumer Study1Why Conduct a Global Automotive Consumer Study?3Gen Y Market Potential5Decision Criteria6Driver Profiles7Vehicle Loyalty8Lifestyle9Alternative Powertrains11Vehicle Technology15Autonomous Vehicles17The Customer Experience18Deloitte 2014 Global Automotive Consumer Study5

About the Global AutomotiveConsumer StudyThe Global Automotive Consumer Study focuses on "the changing nature of mobility" and howmobility affects various aspects of the automobile buying and ownership experience. Within themobility theme, the study examines how alternative powertrains, connected vehicle technologyand automation, and the sales channel experience influences the transportation choices ofautomotive consumers.Connectedvehicle technologyand automationAlternativepowertrainsKey study themesGlobal AutomotiveConsumer StudyMobility and theevolution oftransportation1Deloitte 2014 Global Automotive Consumer StudyConsumer salesand serviceexperience

The Global Automotive Consumer Studyis based on a survey of over 23,000 consumers in 19countries.The key findings and insights in this publication are based on U.S. responses to the survey.Participating countriesUnited KingdomUnited StatesOver 2,000U.S. respondents34%BabyBoomerCzech erNetherlands Germany34%Gen YJapanKoreaChinaIndiaBrazilArgentinaSouth AfricaAustralia20%Gen XDeloitte 2014 Global Automotive Consumer Study2

Why Conduct a Global Automotive Consumer Study?As these powerful and dynamic forces continue to take shape, consumer mobilitypreferences are rapidly evolving.Hyper-urbanizationIn 2006, the world reached a critical midpoint;over half of the world’s population was living ina city. The trend is expected to accelerate, withapproximately 70% of the world’s populationexpected to live in cities by 2050 (90% in NorthAmerica)1. Overcrowding, the realities of traffic, andnew capabilities enabled by technology are all leadingto more collaborative approaches to transport: forexample, the “sharing economy,” driverless cars, andimproved public transportation.Generational viewsIndividuals today have a number of transportationoptions, and increasingly their transportationdecisions are differing across Gen Y. Some tendto gravitate toward traditional vehicle ownershipmodels, while others are highly interested in modelsthat provide access to mobility, allow them to remainconnected (and productive), and reduce costs. Thesediffering views and expectations of mobility, alongwith disruptions of traditional ownership models, willlikely change how OEMs engage their customers.Connected technologyInnovations in V2X connectivity, mobile phones, apps, and smart card technology are disrupting theautomotive industry. Moreover, automotive consumers will increasingly expect customer experiences that gobeyond the sales or service transaction and leverage technology to integrate with their connected lifestyles—both inside and outside of the vehicle. The formerly clear lines—between humans and machines, betweenownership and non-ownership, between goods and services—will blur as a result of connectivity and theinformation generated and used interchangeably by people and machines.1Urban and Rural Areas. United Nations, 2007. ublications/pdf/urbanization/2007 urban rural chart.pdf3Deloitte 2014 Global Automotive Consumer Study

Convergence of theprivate and public sectorsSustainability andenvironmental concernsThe mass adoption and use of new transportationsystems (e.g., public transportation, electric anddriverless cars vehicles, supporting infrastructure,etc.) is going to require increased public-privatecollaborations. Government will neither be able tofully fund nor take primary responsibility for for therequirements supporting tomorrow's transportationsystems. Moreover, the sheer complexity oftransportation systems that work for everyone arguesthat many players will have to be involved. Theresulting improved systems will likely offer consumersbetter transportation options that are more efficient,cost effective, and environmentally friendly.In 2012, new Corporate Average Fuel Economystandards were released in the U.S. that requireautomakers to raise the average fuel efficiency ofnew cars and trucks to 54.5 MPG by 2025. At thesame time, U.S. consumer interest in large SUVs andtrucks remains high (CAFE). These factors are fuelingthe development of disruptive innovations withinthe vehicle—particularly advancements in alternativepowertrains. As a result, by 2025, consumers inthe U.S. may have the ability to choose from a mixof proven powertrain options that best meet theirlifestyle needs—including more efficient internalcombustion engines, electric vehicles (EVs), plug-inhybrids, and vehicles powered by natural gas.Deloitte 2014 Global Automotive Consumer Study4

Gen Y Market PotentialOver three-quartersof Gen Y consumers plan to purchase or lease a vehiclewithin the next five yearsWithin one year 23%1 to less than 3 years 38%3 to less than 5 years 19%5 years or longer 12%80MTotal U.S. Gen Y population18.4M64Mbuy within a yearplan to buy within 5 years48.8M48.8Mplanbuywithinyearsbuyin tolessthanthree3 years18.4Mplan to buy within a year5Deloitte 2014 Global Automotive Consumer Study

Decision CriteriaAffordability and high operational and maintenance cost are top reasonsacross Gen Y for not owning a vehicle. In addition, Gen Y consumers generally feel that theirlifestyle needs can be met by walking or public transportation.Top three reasons Gen Y doesn't buyBut are theywilling to buy?80%Affordability80%75%Operational/Maintenance Costsinterestedvs.67%Lifestyle needs met bywalking/public transit20%not interestedPercentage % of respondents that agreed with the following statements(in current models)Top three things that would get them into a vehicle Cheaper More fuel efficient More affordablepayment optionsVehicle purchaseDeloitte 2014 Global Automotive Consumer Study6

Driver ProfilesGen Y enjoys driving,provided the cost is low and it's convenient.Eco-friendlyLow costConvenienceUtilityLuxuryTechnologyLove to driveI make green choicesin my life. Whengoing somewhere, Iwant to do so in aneco-friendly manner,even if that meansmore time andmoney.My total cost whengoing somewhereneeds to be low,and I will choose atransportation optionthat is cheapest.When goingsomewhere, I wantto do so in the fastestand easiest way andam willing to use anytransportation optionto achieve this.I have things todo and gettingsomewhere needsto fit the demandsof my lifestyle.My transportationoption must have thefunctionality to meetthese demands (e.g.,I require a truck tohaul my equipment/tools).I value luxuryand want to benoticed when I gosomewhere. I feel asense of pride drivinga luxury vehicle andam willing to paymore for the featuresand the brand name.Connectedtechnology isimportant tome when goingsomewhere.To do this, mytransportationchoice needs to beintegrated with myelectronic devices,and it needs toaccess, consume, andcreate information.I look forward todriving becausegetting there is halfthe fun.How would you describe yourself as a commuter?Driver Profile Generational ComparisonRankingGen Y1Other generations7Deloitte 2014 Global Automotive Consumer Study234567

Vehicle Loyaltybut are64%of Gen Y consumerslove their cars3Xmore likely to abandon theirvehicles if costs increase.Other generations10%"I would be willing to give updriving my car even if I had to paymore to get where I need to go."Gen Y29%Deloitte 2014 Global Automotive Consumer Study8

LifestyleFactors that may influenceconsumers' decision to abandon vehicle ownershipLifestyle is the primary reasonHow much do you agree with the each of following statements?Prefer living in a neighborhood that haseverything within walking distance.67%Willing to relocate closer to workto reduce my commute.47%Willing to use car-sharing, car-pooling,or similar services if they werereadily available and convenient.42%Gen Y9Other generationsDeloitte 2014 Global Automotive Consumer Study 12%55%22%28% 25% 14%

Gen Y consumers are moreinterested in alternative modes of transportation,particularly if they are safe and enabled by technology.Percentage of Gen Y respondents that agree with the following statement:47%Like using a smartphoneapp to plan transport39%57%Travel by bus, train,taxi so that they canmulti-taskWorry about safety,security or privacy whenride-sharingGen Y39%Would try a ridesharing app, if it wasrecommended by afriend or familymember34%Would be interested inusing a website to renttheir car to strangersfor moneyDeloitte 2014 Global Automotive Consumer Study10

Alternative PowertrainsMore than half of Gen Y would prefer to be driving an alternative powertrainTraditional Gasoline Engines1%Alternative59%s 59%ainrtrwePo4five years from nowof Gen Y consumers seethemselves driving an alternativeengine in 5 years.Hybrid electric 27%Plug-in hybrid 8%Battery-powered electric 7%Compressed natural gas 7%Diesel 6%Fuel cell 4%11 Deloitte 2014 Global Automotive Consumer Study

Gen Y iswilling to pay morePerspectivefor an alternative powertrain.g toNot willinling to65% Wilpay 35%pay more6.4 years*37%are willing to pay 2,000 or more.but cost isstill a primary motivation53%53%say “My motivation to purchase/lease an alternativepowertrain would be driven more by my desire to savemoney on fuel rather than to save the environment.”of Gen Y would prefer to drive a traditional vehicle if itcould provide comparable fuel efficiency to vehicles withalternative powertrains.Time it wouldtake to recoup anincremental 2,000in the purchase priceof a new alternativepowertrain vehicleversus a newtraditional gasolinevehicle throughincreased fuelefficiency.* Source: Calculated by DeloitteResearch, using data from U.S.Department of TransportationFederal Highway Administration, U.S.Department of Energy. 2013 FordFusion used for comparative analysis.Deloitte 2014 Global Automotive Consumer Study12

Majority of Gen Y feels therearen't enough alternative powertrain optionsin the market, and 2:1 prefer a broad range of powertrain options in each vehicle model12%DisagreeManufacturers don’t offer enoughalternative powertrains in vehiclesI would actually want to drive36%Neutral52%AgreeAlternative Powertrain Preference9% Disagree26%Neutral65%Agree29%25%DisagreeGen Y has a significant preferencefor range of engine optionsvs. specialized line of vehicles.“I would prefer that manufacturersoffer a range of engine options foreach model that they produce.”13 Deloitte 2014 Global Automotive Consumer Study37%Neutral38%Agree“I would prefer that manufacturersoffer a specialized line of vehiclesthat only have alternative engines.”

Gen Y ismore supportive of government incentivesto switch to alternative powertrainsI would support more governmentprograms that reward consumers whoswitch to or own vehicles withalternative fuel engines and/or highfuel efficiency engines.I would support more governmentstandards that require manufacturersto produce vehicles that havebetter fuel efficiency.Gen Y61%59%58%50% 8%Other generationsPercentage of respondents that agreed with the following statementsDeloitte 2014 Global Automotive Consumer Study14

Vehicle TechnologyGen Y consumers believethere are significant benefits from new vehicle technologies, including vehicles that:Greatest Benefits*Other Benefits**% of Respondents indicating they expect significantbenefits from these automotive technologies79%Don't crash66%Are highlyfuel efficient*% of Respondents indicating they expectsignificant benefits from these automotive technologiesvs.45%46%DrivethemselvesAre fullyconnectedGen Y wants:- Technology that recognizes the presence of other vehicles on the road- Technology that will let them know when they exceed the speed limit- In-vehicle technologies that would automatically block them from engaging indangerous driving situations15 Deloitte 2014 Global Automotive Consumer Study

Gen Y wants.Percent of respondents indicating they expect significant benefits from theseautomotive technologies.52%63%72%Technology thatrecognizes the presence ofother vehicles on the roadTechnology that willlet them know when theyexceed the speed limitIn-vehicle technologythat makes them feelsafe and secure59%Technologiesthat block them fromengaging in dangerousdriving situations52%57%46%To connect theirsmartphone to use all itsapplications from thevehicle’s dashboard interfaceEasier customization ofa vehicle’s technologyafter purchase or leaseBut they aren't willing to pay much, with onlyTechnologies that helpkeep them connected tofriends and family27% willing to pay over 2,500Gen Y consumers’ willingness to pay79%21%Willing to payNOT willing to pay27%021%20 2,500 or more13%40 1,000 50012%60 2506%21%27%80 100100I wouldn’t pay moreDeloitte 2014 Global Automotive Consumer Study16

Autonomous VehiclesIn general, U.S. consumers today findhigher levels of automationless desirableBut GenY is far more comfortable withautonomous vehicles than other generations*% of Respondents indicating they would find the followinglevels of autonomy desirable73%61%75%53%AdvancedBasic46%47%35%Limited Self-DrivingGen Y%31%U.S. federal government definitions forautonomous (driverless) vehicles Basic: Allows the vehicle to assist thedriver by performing specific tasks likeanti-lock braking (prevent from skidding)and/or traction control (to prevent loss ofgrip with the road). Advanced: Combines at least twofunctions such as adaptive cruisecontrol and lane centering technologyin unison to relieve the driver of controlof those functions. Limited Self-Driving: Allows thevehicle to take over all driving functionsunder certain traffic and environmentalconditions. If conditions changed, thevehicle would recognize this and the driverwould then be expected to be available totake back control of the vehicle. Full Self-Driving: Allows the vehicleto take over all driving functions for anentire trip. The driver would simply needto provide an address and the vehiclewould take over and require no otherinvolvement from the driver.Full Self-DrivingOther generations17 Deloitte 2014 Global Automotive Consumer StudySource: Based on U.S. Department of Transportation's NationalHighway Traffic Safety Administration (NHTSA) definitions

The Customer ExperienceResearch is keyThe majority of Gen Y consumers spend more than 10 hours researching and considers3 or more brands before they purchase or lease a vehicle.Time spent researching possible vehiclesLess than 4 hours17%52% More than 10 hours4-10 hours31%Number of brands considered when purchasing or leasing79%consider 3 or more21%consider 2 or less27%17%22%15%15%5 64%1234Number of brands consideredDeloitte 2014 Global Automotive Consumer Study18

Influencing the purchase decisionGen Y trusts independent car reviews and family and friends the most.Car reviews onindependent websitesFamily and friendsManufacturer websites70%59%66%44%53%35%News articles/media reviews45%Salesperson atthe dealership40%Social networking sitesGen Y34%27%32%11% 21%Other generationsPercent of respondents indicating this source is a significant influence on the purchase decision19 Deloitte 2014 Global Automotive Consumer Study

9 10outofGen Y consumers want an extremelyefficient purchase processMaximum time per phase (average for Gen Y consumers)40min33minGetting infofrom dealerships41minWaiting totest drive a vehicle41minProcessingfinancingProcessing paperworkand registration47minPerforming simplemaintenance serviceDeloitte 2014 Global Automotive Consumer Study20

Gen Y consumers have a more positive image ofbut the majority of Americans would prefer to skip thenegotiation process.I would prefer to purchasea vehicle without negotiatingwith a salesperson54%Automotive salespeople treatme fairly and with respect50%I have a positive attitudetowards automotive dealers41%Gen Y57%39%22%Other generations21 Deloitte 2014 Global Automotive Consumer Studyautomotive dealerships

Service impacts vehicle sales2/3The cost and quality of the service bundle influences overGen Y consumers'purchase decision.When choosing a vehicle to purchase or lease, how important are each of the following attributes?66%71%confidence in the dealer'sability to repairfree routinemaintenanceNearly half of Gen Y consumers arewilling to pay for services that make their lives easier.44%would pay to have a dealerpick up to service vehicle &drop-off a loanerPercentage of respondents that agreed with the following statementsDeloitte 2014 Global Automotive Consumer Study22

Notes Vehicles23 Deloitte 2014 Global Automotive Consumer Study

Notes VehiclesDeloitte 2014 Global Automotive Consumer Study24

25 Deloitte 2014 Global Automotive Consumer Study

ContactsContributorsCraig GiffiU.S. Automotive Industry LeaderDeloitte LLPcgiffi@deloitte.comMichelle DrewSenior Automotive Sector SpecialistDeloitte Services LPmidrew@deloitte.comSteve SchmithU.S. Automotive Marketing LeaderDeloitte Services LPsschmith@deloitte.comJoe VitaleGlobal Automotive Industry LeaderDeloitte Touche Tohmatsu Limitedjvitale@deloitte.comCandan ErengucSenior ManagerDeloitte Consulting LLPcerenguc@deloitte.comBharath GangulaManagerDeloitte Services LPbgangula@deloitte.comMasa HasegawaPrincipalDeloitte Consulting LLPmahasegawa@deloitte.comAcknowledgementsWe would like to thank the following professionals who have contributed to the Global Automotive ConsumerStudy and this publication. Matthew Josephson, senior consultant, Deloitte Consulting LLP; Kaitlyn Peale,consultant, Deloitte Consulting LLP; Sam Hyde, manager, Deloitte Consulting LLP; Srinivasa Reddy Tummalapalli,senior analyst, Deloitte Support Services India Pvt. Ltd.; Sandeepan Mondal, senior analyst, Deloitte SupportServices India Pvt. Ltd.; Karen Ambari, senior manager, Deloitte Services LP.About De

3 to less than 5 years 19% 5 years or longer 12% 48.8M buy in less than three years 18.4M buy within a year 80M Total U.S. Gen Y population 18.4M plan to buy within a year 48.8M plan to buy within .

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