Winning in the European automotive industry: A micromarket approach

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The European automotive ecosystem is evolving rapidly. Mobility solutions continue to gain ground, as do digitalized and personalized customer experiences. And passenger-car electrification is accelerating in Europe: more than 65 percent of new cars sold are expected to be fully electric by 2030, largely driven by customer preferences, regulations, and government subsidies.

But these trends can unfold in local markets at very different rates. This has implications for companies across the entire automotive ecosystem, including how they evaluate current and future market opportunities and define market entry and penetration strategies; optimize service networks on service locations, demand coverage, and offerings; and tailor marketing and channel strategy to local demographics and customer segments.

For these reasons, thoroughly understanding micromarkets—that is, characteristics of and trends in local geographic areas, such as districts or postcodes—can be highly beneficial for automotive-ecosystem players. For example, our experience shows that some OEMs have seen 25 percent revenue growth or $150 million to $250 million in incremental revenue growth as a result of using micromarket insights.

Below, we explore a few local-level insights that a micromarket approach reveals in the United Kingdom and Germany and the implications of such insights for European automotive players.

Battery electric vehicle sales in the United Kingdom are expected to come disproportionately from just a few districts

The United Kingdom is expected to see a significant shift toward battery electric vehicles (BEVs) in the coming decade. Our research shows that a large share of the BEV sales in the area will come from localized markets, with the top ten districts expected to account for nearly 40 percent of all BEV sales in 2030.1 These top districts represent less than 5 percent of the total population,2 indicating that BEV adoption will be particularly high in specific local pockets.

In these top ten districts, nearly 80 percent of cars sold will be a BEV, making these areas key markets for automotive players looking to succeed in the electric-vehicle (EV) space. But even within districts, the distribution of BEV sales can vary significantly (Exhibit 1). For example, in the district of Sandwell, more than 92 percent of cars sold will be BEVs. When breaking down the district into its different postcode areas, it becomes clear that BEV sales are primarily driven by a concentrated area across a middle belt of Sandwell, with a medium level of sales coming from the area north of the belt. Today, Sandwell has between 20 and 30 public charging stations installed3; additional charging stations will likely be needed as BEV sales continue to rise.

Battery electric vehicle sale predictions vary dramatically not only across districts but also within them.

BEV sales can differ significantly across German regions—even those with similar demographics

In Germany, the regions Bernkastel-Wittlich, in Rhineland-Palatinate, and Bad Kissingen, in Bavaria, have many similarities: they have comparable populations, population density, number of vehicles in operation, current EV penetration, and resident purchasing power. At a glance, a BEV player might think it should treat the markets equally.

However, micromarket insights reveal that BEV sales in similar regions can differ to a large degree (Exhibit 2). In 2022, Bad Kissingen’s share of BEV sales was 12 percentage points higher than Bernkastel-Wittlich (30 percent compared with 18 percent, respectively). More residents in Bad Kissingen purchase vehicles from BEV-focused OEM brands, which account for more than one-third of all BEV sales. Meanwhile, customers in Bernkastel-Wittlich more often purchase cars from OEM brands that offer both electric and internal-combustion-engine (ICE) vehicles, and only one in eight BEV sales comes from a BEV-focused OEM brand.4 The sales difference may be explained by a difference in either customer preference or offerings from dealerships in the respective areas. Both explanations can have implications for OEMs, aftermarket players and dealers looking to expand into areas that have proven interest in EV adoption.

Despite similar demographics, battery electric vehicle sales are higher in Bad Kissingen than in Bernkastel-Wittlich.

In Cornwall and Leeds, differences in car characteristics, such as powertrain type and vehicle age, likely mean that customers expect different aftermarket offerings

The sales of aftermarket parts and services can be analyzed on a city, region, or postcode level to assess which areas have high sales of aftermarket parts and which micromarkets are the most lucrative. However, it’s also important to understand what is driving aftermarket spending and what type of offerings car owners and fleet operators—and by extension the manufacturers or dealerships who serve them—need.

For example, Cornwall and Leeds are both among the ten largest markets for aftermarket spending on car parts in the United Kingdom. In addition, they have similar market sizes and number of registered vehicles, and residents have comparable disposable income.5 However, less than 3 percent of vehicles in Cornwall are non-ICE powertrains, while Leeds’ share is roughly four times higher (12 percent). Moreover, more than 70 percent of vehicles in Cornwall are eight years or older, while the reverse is seen in Leeds, where more than 50 percent of vehicles are seven years or newer (Exhibit 3). Understanding these characteristics helps aftermarket providers determine what type of services and products to offer in each market. For example, car owners in Leeds may only need minor aftermarket services today but will likely have increased need for larger-ticket services, such as battery replacements, down the line. Conversely, Cornwall’s high share of older ICE vehicles may mean customers need services such as exhaust system repairs—and that they could be looking to purchase new cars soon.

Despite the similarities between Leeds and Cornwall, different trends in current vehicle ownership will affect aftermarket spending and needs.

Micromarket insights can help players capture opportunities across the mobility ecosystem

Micromarket insights can help automotive players—and, in fact, players across industries—optimize their networks and fit offerings to cater to local demand. Aftermarket providers can use such micromarket insights to optimize their store networks in cities or adapt their offerings according to the types of parts sold in respective areas to better serve customers. For OEMs and dealers, understanding, for example, car age in different localities can indicate how many customers are likely to demand new cars.

As BEVs and other trends continue to develop and unfold across regions, micromarket insights that allow automotive players in Europe to sharpen and tailor their strategies down to the postcode level can be a competitive advantage.

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