Theriseofone,thefallofmany

TheGreatAutomotiveReckoning

May2025

AutomotiveReckoning|One

Contents

TheGreatAutomotiveReckoning3

Ataleoftwospirals5

Hypothesis16

Scaleandscopeeconomiesarecreating‘haves’and‘have-nots’

Hypothesis212

The‘haves’aretransformingthecarintoaconsumableproduct

Hypothesis318

Thecarisbecomingasymbolofanewconsumptionlifestyle

Theriseofone,thefallofmany22

Contactus25

Theriseofone,thefallofmany|TheGreatAutomotiveReckoning

TheGreatAutomotiveReckoning

Theautomotivesectorisonthebrinkofabrutalreckoning,andnotallitsplayerswillsurvive

Fuelledbyaggressivescaleand

scopeeconomiesandthe

relentlessabilitytooutpaceandoutpricethecompetition,asingledominantforceisrisingin

automotivemarketsacrossthe

world.Meanwhile,thesector’s

legacyautomakers,once

untouchable,arestaringdownanextinctionevent.Thispoint-of-

viewunpacksthreefundamentalhypothesesdefiningthisnew

reality.

First,scaleandscopeeconomieshavebecomethe

ultimatecompetitiveadvantage.Wieldingshared

architecturesandcentralisedsupplychains,challengerautomakersareunleashingcostefficienciesand

continuousinnovationthathaveenabledthemto

compressplatformcyclesfromwhatusedtobeeightto10yearstoamatterofmeremonths.

Witheveryoneoftheiriterationsintroducingcore

technologicalimprovementstohardwareandsoftware,legacyautomakers,trappedintheircomplexsupply

networksandrigidengineeringprocesses,arefalling

furtherbehind.Thisiscreatingadeepdividebetween

the‘haves’–challengerautomakersadeptatharnessingspeed,cost,andinnovation–andthe‘have-nots’,the

legacyautomakersclingingtoanoutdatedmodelthatnolongerworks.

Second,theautomobileisbecomingaconsumable

product.The‘haves’aredrivingpricestothefloorwhile

3

simultaneouslypushingtheboundariesofhardware

andsoftware,makingcarsmoreaffordableandyet

moreadvanced.Equippedwithcutting-edge

technologicalfeatures,thecarisbecomingafashion

statement,anentertainmenthub,andaplaceofrefuge–allinone.IngridlockedSoutheastAsianmegacities

withnotorioustrafficjams,acarisnolongersimplyameanstogetsomewhere–itisbecominganextensionofalivingspace.

Third,atanaffordablepricepoint,thevehicleceasestobeperceivedasalong-terminvestment.Instead,it

becomesarapidlyevolving,disposableproduct–

upgradedandreplacedjustlikethelatestsmartphoneuponexpirationofhardware-dependentfeaturesor

batterylife.Durabilityandqualitybecomelessofa

considerationinthepurchasedecision,andfrequentvehicleturnoversandownershipofmultiplecars

becometherealitiesofanewconsumptionlifestyle.

Theriseofone,thefallofmany|TheGreatAutomotiveReckoning

Thislifestylereinventionalsoextendstothewaycars

areboughtandsold.Unlikelegacyautomakerswho

primarilyrelyontraditionalshowroomslocatedontheoutskirtsofcitycentresorinindustrialareas,challengerautomakersareembeddinginnovativeexperience

conceptsinhighfootfall,centrallylocatedshopping

mallsandurbancentres,allowingconsumerstointeractwithvehiclesthesamewaytheyshopforsmartphonesorfashion.

Webelievethatthesethreehypothesesaremutually

reinforcingandwillplayoutinataleoftwospirals.On theonehand,thereisthevirtuousspiralforthe‘haves’,andontheother,adeathspiralforthe‘have-nots’.The‘haves’willcontinuescaling,innovating,andcrushing

costsuntilthemarketistheirs.The‘have-nots’willnotsurvivethisshift;thequestionisnolongeriftheywillfall,butwhen.

4

TheGreatAutomotiveReckoninghasbegun.

Theriseofone,thefallofmany|TheGreatAutomotiveReckoning

Ataleoftwospirals

Scaleandscopeeconomiesarecreatingadeepdividebetweenthe‘haves’andthe‘have-nots’.Thisisaself-reinforcingcycle,drivenbyavirtuousspiralforthe‘haves’andadeathspiralforthe‘have-nots’.

Thosewhofailtoadaptwillnotonlystruggle–theywillsoonceasetoexist.

★

First-moveradvantageinelectricvehicle(EV)production

1

Costefficienciesandbreakneckinnovation

3

Lowpricesandhightechnologicaldifferentiation

Carbecomesasymbolofanewconsumptionlifestyle

》

4

$

Death

spiralof

the

‘have-nots,

$

Virtuous

spiralof

the

‘haves,

Scaleandscope2economies

★

1

Highsunkcostsandentrenchedlegacy

internalcombustionengine(ICE)production

Noscaleand

Costinefficienciesandslowpaceofinnovation

3

Highpricesandoutdatedtechnologies

Carisnolongerperceivedasalong-termasset

4

scopeeconomies2

Marketsharedeclines

Marketshareincreases

5

5

5

Theriseofone,thefallofmany|TheGreatAutomotiveReckoning

HYPOTHESIS1

Scaleandscopeeconomiesarecreating‘haves’and‘have-nots’

Scaleandscopeeconomieshavealwaysbeenasourceofcompetitiveadvantageintheautomotivesector,butchallengerautomakersarenowtakingthemtothe

extremeandweaponisingtheminawarofattritionagainstlegacyautomakers.Leadingchallenger

automakersinChina,forexample,nowprocureor

produceupto90%oftheirparts,includingbatteries,motors,andsemiconductors,atgigafactorieswithintheirhomemarkets.

TakeBYD,forinstance,whichmanufacturesnearly

everythingin-house,withtheexceptionofglassand

tyres1.OfthepartsfittedtoitsBYDSeal,almostallaremadein-housebyBYDoritsChinesesuppliers.In

contrast,legacyautomakerVolkswagenmakesonly

aboutone-thirdofthepartsforitsID.3compactEV

hatchback2.Accordingly,onthebackofvertical

integrationandscaleeconomies,theBYDSealcosts

about30%lesstoassemblethantheVolkswagenID.33(seeFigure1).

1“HowChineseEVsareshakinguptheglobalautoindustry”.ThirdBridge.November2024.

2“WhoIsBYD?China’smostsuccessfulEVmaker”.GreenCars.5September2024.

3“HowChinabecametheworld’slargestcarexporter”.TheNewYorkTimes.29November2024.

Figure1:AcomparisonoftheproductioncostsbetweentheBYDSealandVolkswagenID.3

PricesareinUSD

$8,000|

$0|

$4,000|

Battery

Body,chassis,andwheels

Electronics

Othercomponents

Interior

Distributionandotherservices

Factory

Labour

29%lower

38%

17%

23%

17%

63%

62%

77%

BYDSeal

VolkswagenID.3

Note:Modelscomparedarefrom2021andofsimilarsizeandfunction.

Source:UBS

6

BYDis,ofcourse,currentlyunrivalledamongstitspeersintermsofitscostofgoodssold(COGS)structure.

BasedonDeloitte’sanalysis,BYDpossessesbyfarthelowestCOGSperunitamongstallChineseautomakers(seeFigure2).WhencomparedtoEuropean

automakers,BYD’sCOGSperunitisnearlyhalfor47%lowerthanthatofitscompetitors(seeFigure3).

Thebottomlineisthatbyleveragingradicalmass

consolidationandverticalintegration,challenger

automakerssuchasBYDbenefitfromlowercosts,fewerbottlenecks,andshorterleadtimes-scaleeconomiesthatlegacyautomakerssimplycannotreplicateunder

theiroutdatedsupplier-dependentmodelsandrigidproductionsystemsthattheyremainreluctantto

abandonasaresultofhighsunkcosts.

Theriseofone,thefallofmany|TheGreatAutomotiveReckoning

Figure2:AcomparisonofCOGSperunitbetween

BYDandotherChineseautomakers

PricesareinUSD

42,045

39,610

37,825

35,714

36,364

34,416

28,571

24,513

16,600

BYDSeresXpengZeekrLiAutoTeslaVolvo-BEVNIOPolestar

7

Source:Deloitteanalysis

Theriseofone,thefallofmany|TheGreatAutomotiveReckoning

Figure3:AcomparisonofCOGSperunitbetween

BYDandEuropeanautomakers

11.3

3.2

3.2

5.5

3.0

1.6

2.5

2.2

0.5

1.9

1.7

0.3

2.0

1.3

0.1

3.0

3.9

0.6

16.6

PricesareinUSD‘000

R&Dasthereallethalcompetitiveadvantage

Productioncostsaside,however,itisimportanttonotethattheautomotivesectorfundamentallycompeteson

31.1

researchanddevelopment(R&D).Thereallethal

competitiveadvantageofthescaleandscope

economieswieldedbychallengerautomakers,

47%

lower

therefore,liesintheirabilitytospreadthiscapital

Battery

ElectricmotorandtransmissionBodyandchassis

expenditureoveramuchlargerbase–andthereby,drivedownaverageR&Dcostperunit–evenastheycontinuechannellingbillionsofdollarseachyearintodevelopingandproducingtechnologicallysuperior

vehicles.

Electronics

Interior

Otherbillofmaterials(BOM)Directlabour

DepreciationandamortisationOtheroverheads

Thisarithmeticworksbecauseofthesheerscalein

termsofthenumberofvehiclesproducedbychallengerautomakers.BYD,forinstance,producedabout1.78

millionbatteryelectricvehicles(BEVs)in2024,makingitthelargestEVproduceraheadofTesla4.AcomparisonoftheirrespectiveR&DexpensesrevealsthatBYD’s

EuropeanautomakersBYD

totalR&Dexpensesforpassengercarshavebeenincreasingeveryyearintheperiodbetween2021

8

Source:Deloitteanalysis

4“BYDpullsaheadofTeslatobecomelargestEVmaker”.Statista.3January2025.

and2023,bothintermsofabsolutenumbersand

percentageofrevenue(seeFigure4).However,despiteoutspendingTeslaontotalR&Dexpensein2023,BYD’sR&Dexpenseperunitcontinuestoremainabout30%lowerthanthatofTesla,suggestingsignificant

economiesofscale(seeFigure5).

Whileitischallengingtocomparechallenger

automakers’R&Dperunitcostswiththatoflegacy

automakers,aslegacyautomakersmustdistributetheirR&Dspendingacrossadiverserangeofdifferentfuel

typesandvehiclemodelswithinmulti-brandportfolios-includingICEvehicle,hybridelectricvehicle(HEV),and

plug-inhybridelectricvehicle(PHEV)models-itisnotdifficulttoenvisionthatthisdifferencewouldbeevenmorestark.

Thereareseveralreasonsforthis.Firstly,fromascaleperspective,legacyautomakersareseverelyhamperedintheirabilitytoaccelerateR&DspendingonEVsgiventheirsmallerscaleproduction.

Theriseofone,thefallofmany|TheGreatAutomotiveReckoning

Figure4:AcomparisonoftotalR&Dexpense

betweenBYDandTeslaforpassengercars

7.2%

PricesareinUSDbillion5.5%

4.75

4.12

4.5%

5.0%

3.6%

2.58

3.064.3%

2.03

0.63

202120222023

BYD’stotalR&Dexpense

BYD’sR&Dexpenseasapercentageofrevenue

Tesla’stotalR&Dexpense

Tesla’sR&Dexpenseasapercentageofrevenue

Source:Deloitteanalysis

Figure5:AcomparisonofR&DexpenseperunitbetweenBYDandTeslaforpassengercars

PricesareinUSD’000

2.75

2.28

2.33

1.58

1.16

1.16

202120222023

9

BYDTesla

Source:Deloitteanalysis

Theriseofone,thefallofmany|TheGreatAutomotiveReckoning

Secondly,fromascopeperspective,legacyautomakers

arealsounabletocompetewithchallengerautomakers,wholeveragesharedplatforms,simplifiedpowertrains,andmodularvehiclearchitecturesacrossentireone-

brandportfolios–andthereby,possessagreaterbaseoverwhichtospreadR&Dcosts.

Finally,fromanengineeringperspective,challenger

automakersalsofacelessofachallengethanlegacy

automakers,whomustgrapplewithcomplexICE

powertrainsandmechanicalcomponentssuchas

gearboxes.Instead,challengerautomakerscanfocus

theirR&Dfirepoweronhardware,software,anddesignaspects;forthesedomains,costsforsubsequent

iterationsalsotendtodecreasesignificantlyafterthe

firstversion,allowingthemtoinnovateevenmorecost-effectivelyandatlightningspeed.

Thedividebetweenthe’haves,and’have-nots,

Thereinliesthedividebetweenthe‘haves’andthe

‘have-nots’:scaleandscopeeconomieshavemade

continuousR&Dandinnovationarealityforchallengerautomakers.

Currently,leadingautomakerssuchasBYDarerunningone-to-two-yearplatformcycles–astarkcontrasttothelengthy,eight-to-10-yearcyclesoflegacyautomakers.

Evenaswespeak,thiscontinuestobecompressedintonine-monthtimelines,wherebothhardwareand

softwarearebeingrefinedatbreakneckspeed(seeFigure6).

Forexample,BYD’se-Platform3.0comeswithaneight-in-oneelectricpowertrainthatreducesvolumeand

weightdramatically,andlowerscostsbynearly20%

fromitspredecessore-Platform2.0generation

introducedamerethreeyearsprior5.ItslatestSupere-Platform,launchedmostrecentlyinMarch2025,isnowcapableofenablingitsEVstotravel400kmonafive-

minutecharge–thesameamountoftimeitwouldtake

5“BYDtolaunchnext-genPHEVandBEVplatformstomakefurtheroffensiveagainstpetrolcars,reportsays”.CnEVPost.11March2024.

10

Figure6:Acomparisonoftheevolutionof

VolkswagenGroup’sMQBplatformwithBYD’se-Platform

2010

e-Platform1.0

(e6)

MQB

(GolfMk7)

2012

BYD

MQBAx

VolkswagenGroup

2016

(Taigo)

2018

e-Platform2.0

2019

(Han)

●

MQBEvo

(GolfMk8)

2021

2024 2025

e-Platform3.0

(Dolphin/Atto3)

e-Platform3.0Evo

(Sealion7)Supere-Platform

SSP

(Upcoming-toreplaceMQB)

2029

(HanL)

Theriseofone,thefallofmany|TheGreatAutomotiveReckoning

torefillanICEvehiclewithpetrol6.

Sucharelentlesscycleofiterationisnotonlymaking

challengerautomakersfasterandcheaper,butcreatinganinsurmountabledividebetweenthemasthe‘haves’andlegacyautomakersasthe‘have-nots’.Witheach

platformcycle,the‘haves’getbiggerandfaster.Astheyreinvesttheirfirst-movercostadvantages,aswellas

scaleandscopeeconomiesintoR&Dandlowerprices,thecheaper,better,andmorequicklytheyproduce,andthemoremarketsharetheyseize,creatingaself-

reinforcingvirtuousspiral.

Meanwhile,legacyautomakersremainshackledin

painfullyslowandlengthyplatformcycles,trappedinadeathspiralofthe‘have-nots’tryingfruitlesslytorecoupsunkcostsonoutdatedtechnologies,astheyare

outpaced,outpriced,andultimately,obliterated.

11

6“BYDunveilsnewsuper-chargingEVtech,tobuildchargingnetworkinChina”.ChannelNewsAsia.18March2025.

Theriseofone,thefallofmany|TheGreatAutomotiveReckoning

HYPOTHESIS2

The‘haves’aretransformingthecarintoaconsumableproduct

Figure7:PriceofBYDDolphinasamultiplieroftheiPhonePro16andMacBookProM4Maxinmajorregionalmarkets

Havingbreachedcriticalmass,the‘haves’areenteringaself-reinforcingcycleofdominance.Astheyproduce

6.2

MacBookProM4Max

19.9

andsellmorecars,thelowertheircostsbecome,andthemoretheycanaffordtoinnovate.Theyalsogathermoredata,whichfeedsintobetterdesign,improvedperformance,andfasterinnovation.

Indonesia

iPhonePro16

Thisconstantrefinementmakestheirvehicleseven

6.5

MacBookProM4Max

20.0

iPhonePro16

moreattractive,enablingthemtomaintainabsolute

Malaysia

pricingpower,capturemoremarketshare,andreducepricestoasingle-digitmultiplierofthatofa

smartphone.

4.0

MacBookProM4Max

12.5

iPhonePro16

Currently,pricesoftheentry-levelchallengerBYD

Thailand

Dolphinmodelarealreadyatmultipliersofbetween4.0and6.5fora16-inchMacBookProM4Max,and

Notes:

?InIndonesia,thepricesofaBYDDolphin,16-inchMacBookProM4Max,andiPhone16ProareIDR369,000,000,IDR59,999,000,andIDR18,499,000respectively.

?InMalaysia,thepricesofaBYDDolphin,16-inchMacBookProM4Max,andiPhone16ProareMYR100,000,MYR15,299,andMYR4,999respectively.

?InThailand,thepricesofaBYDDolphin,16-inchMacBookProM4Max,andiPhone16ProareTHB499,900,THB124,900,andTHB39,900respectively.

?Singaporehasbeenexcludedfromthisanalysisasitisananomalyintheautomotivemarketduetoitshighvehicletaxcomponent.

between12.5and20.0foraniPhone16Proinmajor

SoutheastAsianmarkets.Putsimply,thepriceofacarisnowequivalenttoonlythatofaboutfourtosixlaptops,or12to20smartphones(seeFigure7).

12

Evenmoreimpressiveisthefactthattheentry-levelBYDDolphinisequippedwithsuperiorfeatures,despite

beingatarelativelylowerpricepointthancomparableHEVmodelsproducedbylegacyautomakers.For

example,theBYDDolphinisequippedwithapanoramicsunroof,12.8-inchintelligentrotatingtouchscreen,andsixspeakers–exceedingthatoftheHondaCity

HatchbackRSe:HEVthatcomesonlywithan8-inchdisplayaudioandfourspeakers7.

Differentiationisabouthardwareandsoftware

Indeed,onedefiningcharacteristicofchallenger

automakersistheprevalenceofpremiumhardwareandsoftwarefeatures,evenintheirentry-levelmodel

lineups.InChina,forexample,sunroofs,whichare

traditionallyavailableonlyinhigh-endmodelsproducedbylegacyautomakers,havebecomeastandardfeatureinBYD’sentry-levelmodels,suchastheDolphinand

Seagull(seeFigure8).

7“BYDDolphinvs.HondaCityHatchbackcomparison”.PCautoMY.Accessedon22April2025.

Theriseofone,thefallofmany|TheGreatAutomotiveReckoning

Figure8:AnoverviewofBYD’svehiclemodel

lineupinChina

PricesareinCNY.Vehiclelengthsareinmm.

Price

DenzaN9

High-endmodels

Bao8DenzaZ9GT

400,000

DenzaD9

DenzaZ9

350,000

Xia

300,000

OceanMid

toLargeMPV

Bao5

DenzaN7TangL

250,000

SongLEV

Sealion07EVSeal

OceanMidto

LargeSUVTang

Han

200,000

Frigate07

SongSeal06GT

Entry-levelmodels

PLUSSongLDM-i

Mid-tier

SongPro

150,000

models

YuanPLUS

Sealion05DM-i

Dolphin

QinLSeal06

YuanUP

QinPLUSDestroyer05

100,000

Seagull

50,000

3,5003,7003,9004,1004,3004,5004,7004,9005,1005,300

Vehiclelength

13

Source:TengYiResearchInstitute(YicheResearchInstitute)

Theriseofone,thefallofmany|TheGreatAutomotiveReckoning

Similarly,challengerautomakersarealsoproviding

superior,high-endsoundsystemsinmodelscostingafractionofthatoflegacyautomakers.Forexample,theMarkLevinsonsoundsystemisahigh-endoptionwith18speakersthatisavailableonlyasanadditional

upgradeforhigh-endLexusmodels,suchastheLexusES8.Incontrast,thelower-pricedchallengerNIOET7

modelcomesready-equippedwith23speakersand

DolbyAtmossoftwarecapableofdeliveringimmersive,cinematic-likevisualandaudioexperiences9.

Intermsofsoftware,twooutofthreenewEVssoldin2025–evenmodelspricedbelowCNY100,000(USD13,914)–areexpectedtopossessatleastbasiclevel2self-drivingcapabilities10.Evenaswespeak,sometwo-dozenchallengersarealsolookingtoequiptheir

modelswithadvancedAIchatbotsdevelopedbyDeepSeek11.

Thereinliesourproposition:aspricescontinuetofall,thebasisofdifferentiationisincreasinglyshiftingto

hardwareandsoftware–notjustoneofthetwo,but

bothworkingintandem.Infact,challengerautomakersalreadyfullyownthisspace.Theyareinnovatingat

breakneckandunprecedentedspeeds,withtheresultthatthetechnologiesinsidethecarareevolvingfasterthanwehaveeverwitnessedbefore.

Witheachiteration,challengerautomakersare

deliveringsmarter,lighter,andhigher-performing

drivetrainsandhardwarematerials,complementedbysmartphone-likeover-the-air(OTA)updatesthatkeepthecarsonthecuttingedgeevenaftertheyleavethefactoryfloor(seeFigure9).

8“MarkLevinsoninLexus”.MarkLevinson.Accessedon14April2025.

9“NIOET7comesstandardwithDolbyAtmos”.Nio.16November2021.

10“15millionnewChineseEVstohaveself-drivingfeaturesthisyear”.SouthChinaMorningPost.2February2025.

11“WhatisChina’sDeepSeekandwhyisitfreakingouttheAIworld?”.TheStraitsTimes.28January2025.

14

Figure9:Challengersareadoptingsmartphone-

likedevelopmentcycles

Car

Smartphone

Morethan

fiveyears

Onetotwoyears

Pushbutton,

tactilefocus

Touchcontrol+voicerecognition

Radio/band

T-BOX,C-V2Xinteractive

systems;shiftingto

intelligentcarsandroad

networkcooperation

Chassisdesign,

distributed

electricalsystems

AI+chips,optics,

audio,radiofrequency(RF),

etc.

121110

NumberofOTAupdates

peryear(2023)

10988

6

433

1

PastCurrent

Newproduct

developmentcycle

Human-machineinteraction

Connectivityevolution

Coretechnologyevolution

6monthstoone

year

Pushbutton→

Touchcontrol→AI+

voiceinteraction→

Visualinteraction

Mobileinternet→Sensorsandinternet

Chips,optics,audio,

RF,software

algorithms,system

integration,etc.

Frequencyof

system/OTA

updates

System/OTAupdatefrequency

iOS

1-6updates/year

Android

ZeekrXpengTeslaLiNIOAITOLynkBYDGMToyotaFordVW

0-12updates/year

Source:Deloitteanalysis

Theriseofone,thefallofmany|TheGreatAutomotiveReckoning

Anentertainmenthubandaplaceofrefuge

Onthebackofgreateraccessibilityandaffordability,

consumersaredemandingcustomisationand

personalisation-andchallengerautomakersare

delivering.Carsareceasingtobemeretoolsfor

transportationandbecomingintegraltoconsumer

lifestyles;theyhavetransformedfrommeremodesof

transportationintopersonalspacesandextensionsofaconsumer’sidentity.

Pictureacarwhoseexteriorcolourcanbechangedtomatchaconsumer’soutfit,andwhoseinteriorcanbepersonalisedforcomfortandstyle.Designisbecomingasimportantasperformance-atrendalreadyevidenttodayinthesleekandfuturisticaestheticofchallengermodelsthatareostensiblyvisuallysimilartothatof

15

luxurysupercars-andcarswillserveasacanvasforconsumers’self-expression.

Theriseofone,thefallofmany|TheGreatAutomotiveReckoning

Beyondaesthetics,theroleofthecarasaplaceof

refugeisalsotakingcentrestage.ThisisalreadyarealityinmarketssuchasJapan–whereconsumersrentcarsnotbecausetheyneedamodeoftransportation,but

becausetheydesireaprivateindoorspacetotakenapsinoruseasaworkspace12–andisgainingmomentuminmanySoutheastAsianmarkets,wheretraffic

congestionisadailyreality.Increasingly,consumersareembracingthecarasamobilelivingspaceandchoosingtospendmoretimeintheirparkedvehicles–for

example,duringmealbreaks,towaitouttraffic,tocatchuponwork,ortosimplyenjoyasaplaceofrefuge.

Withchallengermodelsequippedwithhigh-definition

infotainmentconsolescreens,high-qualitysound

systems,immersivelighting,temperaturecontrol

features,andevenin-vehiclebedsandcooktops,thecarisnowalsoassumingtheroleofapersonalised

entertainmenthub.

This,inturn,isputtingthecarindirectcompetitionwithothersourcesofentertainmentandconsumable

products.Forexample,ratherthanconsumemovies

andmusicontheirsmartphonesorevenathomeorincinemas,consumersmaychoosetodosointhe

comfortoftheircars.SuchlifestylechangesarepossibleonlywithEVs,asprolongedin-vehicleexperiences

wouldnotbepracticalwiththeemissionsofexhaustfumesinICEvehicles(seeFigure10).

Sufficeittosaythatwhilelegacyautomakersbuiltcarstolast,challengerautomakersbuildthemtobedesired.Legacyautomakerswhoclingontotheirslowcyclesandoutdatedplaybooksarerunningoutoftimetoact–andwillsoonfindthemselveshaemorrhagingmarketshareinthedeathspiralofthe‘have-nots’.

12“PeopleinJapanarerentingcarsbutnotdrivingthem”.TheVerge.6July2019.

16

Theriseofone,thefallofmany|TheGreatAutomotiveReckoning

Figure10:Challengerautomakersarereimaginingthecarasaplaceofrefuge

b)In-cartables,

functioningas

multi-purpose

surfacesfordining,reading,work

and/orstudyactivities

a)In-carbeds,

including‘double

bed’modelsthat

enableseatstobeconvertedintoaflatsurface

d)Mobilehome

concepts,equippedwithbuilt-infridges,sofas,andmobile

powersourcesforoutdooradventuresandcamping

enthusiasts

c)In-carcinemas,

supportedby

immersivesurroundsoundsystems,high-definition

infotainmentconsolescreens,ambient

lighting,andoptimaltemperaturesettings

17

Theriseofone,thefallofmany|TheGreatAutomotiveReckoning

HvpnT-FeIS2

Thecarisbecomingasymbolofanewconsumptionlifestyle

Theunprecedentedabilitytodeliverconstanthardwareandsoftwareimprovementsisenablingchallenger

automakerstocreatecarsthatarenotjust’good,,butfundamentallyunbeatable:cheaper,smarter,andmoreaccessiblethananythingwehaveeverseenbefore.Theresultisthatcarswillceasebeingassetsorlong-term

investments-instead,theywillbecomedisposableconsumerproducts.

Historically,carswereconsideredsignificant

investments,oftenkeptforadecadeormore.However,withcarsatanaccessiblepricepoint,theneedto

committoasinglevehicleforanextendedperiod

diminishes.Consumerswillinsteadpurchasenew

vehiclesasfrequentlyastheyupgradetheir

smartphonesuponexpirationofhardware-dependentfeaturesandbatterylife.

Anewconsumptionlifestyle

Ascarsbecomeincreasinglyaffordable,theimportance

ofdurabilityanddepreciationinthebuyingdecision

alsodiminishes.Toillustratethispoint,considerthe

depreciationofaluxurycarsuchasthePorsche

CayenneE-HybridthatretailsforCNY918,000in

China13.Assuminga25%averagefirst-yeardepreciationrate,thisisequivalenttoCNY229,500-morethan

enoughtopurchaseabrandnewXPengG6retailingforCNY176,80014.

Atsuchpricelevels,consumerexpectationsfor

durabilityandqualitywilldecline;evenifacar,suseful

lifespanisonlyayear,itisstillmorecost-effectiveto

replaceityearlythaninvestinalong-termasset.The

focus,therefore,willshiftawayfromlong-termreliabilityandtowardsprice,immediatefunctionality,andthe

latesttechnological