The U.K. experience with mobility and transportation changes could be a window into Canada’s future.
Change and disruption is coming; it’s real and very apparent. If you hang around the transportation space in the U.K. for only a brief period of time, that’s the impression which will quickly form.
In early July, I spent a week with OEMs, electrification specialists, big fleets, and government officials. I also moderated a panel on the Future of Automotive Retail at the TaaS Technology Conference.
What I realized is this: the mood is the same everywhere. Vehicle electrification in the U.K. needs to happen now to meet its international pollution reduction obligations and air quality concerns, as well as needing a level of preparation for autonomous vehicle to roll out in the not-too-distant future.
London is taking the lead by upping its congestion zone charges to around $20 Canadian dollars, and ensuring the only waiver is for electric vehicles. There’s no toll booths — a camera monitors your car and you get a bill in the mail.
They have also introduced the Ultra Low Emission Zone (ULEZ), where gas cars older than 14 years and diesels older than four years get slugged with another $20 charge, and that’s on top of the congestion zone charge.
It’s close to $180 a day if you drive in with a non-compliant bus or truck. Also very important, the ULEZ will expand to include most of London’s suburbs from 2021, and similar schemes will be introduced in other major centres like Birmingham and Manchester.
On the public sentiment and consumer side, I heard anecdotally people describe diesel SUVs as “big and dirty,” while large London buses are “killing our kids,” and electric cars as being “a good investment.”
Obviously, some people aren’t happy — particularly those who had a diesel car that is just a little older than the ULEZ mandate and have seen their residual values plummet. However, the general sentiment is that these are all appropriate steps to clean up the poor air quality and fight climate change.
On the dealer side, there’s rapid consolidation of the network, driven by poor dealer profitability from a huge reliance on fleets, and a slowing economy due to the self-inflicted wound that is Brexit.
Both dealers and OEMs are also dealing with big shifts in demand away from diesels, and a boom in electric and hybrid model sales, creating all sorts of supply imbalance issues.
There’s also a very noticeable increase in new businesses making car sharing, ride hailing and carpooling easier, as well as a significant increase in the use of MaaS apps like CityMapper, which has had more than 3 million downloads in greater London alone.
It’s simple — the U.K. is a window into the future of Canada’s transportation. There’s no stretch of the imagination to see future Canadian governments imposing congestion and low/no emission charges in big cities, impose pollution-based road taxes, and continue their support of electric vehicles.
So why I am I telling you all this?
The Canadian market has very few diesel passenger cars, its cities are less polluted, it has much less fleet penetration, and most dealers are doing quite nicely, thank you.
It’s simple — the U.K. is a window into the future of Canada’s transportation. There’s no stretch of the imagination to see future Canadian governments imposing congestion and low/no emission charges in big cities, impose pollution-based road taxes, and continue their support of electric vehicles.
It’s also not a stretch to see Canada fall into a recession for other reasons — we’ve already seen Alberta suffer as the demand for it’s high cost oil dries up, and the unpredictability of the administration to the south of us could impact Canada suddenly and severely.
So, with the U.K. experience in mind, Canadian automotive dealers need to take this as another data point to show that dramatic change is coming to transportation, and future automotive retail will be right in the firing line.
I strongly encourage dealers to start thinking carefully about what the future holds, explore new options such as car sharing and subscription, and how electric vehicles could impact the fixed ops bottom line.
Stretch out the timelines of your business and take critical measurements. Modelling some cash flow projections out 15 years could prove very enlightening as you play around with demand changes.
Ask questions like: Is that huge facility renovation that your OEM is pushing for right for your store? What are the critical components of future mobility I need to consider in succession planning? How is my profitability impacted with less fixed ops revenue from electric cars?
As Mary Barra, CEO of General Motors, said recently: “We’ll experience more change in the next 10 years than we experienced in the last 50 years.” That very much includes dealerships.
