We are proud to partner with Cox Automotive for a third consecutive year in delivering our comprehensive analysis and outlook for the sector via the Insight Report 2020. When we launched last year’s report, we had no idea how much the world would change in the subsequent 12 months. Indeed, few people predicted the level of agility and adaptation required by organisations across all sectors in response to COVID-19. 

As evolutions in the automotive market around technology, digitisation and electrification have all accelerated in recent months to meet the required changes sparked by COVID-19, the picture we paint in this year’s Insight Report looks somewhat different to the one we explored last year. Nevertheless, among the uncertainty, there remain some consistent threads: the advancement of electric vehicles and autonomous vehicles; and the passion and drive of those working in the automotive sector. Change may be taking place more quickly than expected by many individuals and brands, but retail chain companies are reacting with positivity, optimism, and a clear eye to the future.  

In a year of change, we anticipate further consolidation in both the automotive upstream and the downstream subsegments. Increasingly, we are seeing the OEMs undergo acquisition or enter joint ventures to reduce costs and, in turn, generate profits. The need for the OEMs to consolidate in order to reduce cost and gain the economies of scale achieved by shared electric vehicle platforms will continue as a trend throughout 2021 and 2022. Furthermore, while sustainability remains firmly on the agenda, the OEMs must continue to invest in electric vehicles as the fines from increased EU emissions legislation impact on profit. 

In the downstream, the automotive retail market is coming under pressure from a change in business model. In 2020, there has been increased commentary and global brand adoption of the agency model. Prior to COVID-19, the consolidation of the dealer network in the downstream market was widespread, though has slowed over the lockdown period in the UK. However, we are optimistic that this will increase in 2021 and 2022, with several dealer groups publicly indicating that they are open to a strategically positioned acquisition.

As we come to the final quarter of 2020, we look forward to 2021 and the changes it may bring as Brexit and COVID-19 continue to disrupt the automotive markets. The persistent uncertainties surrounding Brexit are unlikely to dissipate quickly as the automotive sector in the UK and Europe navigates the changes that lie ahead. At Grant Thornton, we believe planning and preparation are central to success, helping us to adapt, act quickly, and continue to support customers in all trading environments. Although we face disruption, it provides a positive catalyst for the industry to refresh its relationship with the customer; for dealers and manufacturers to realign their expectations; and for suppliers throughout the vehicle life cycle to assess opportunities for integration and collaboration. 

As resilience continues to be tested, I hope you find this third edition of the Cox Automotive and Grant Thornton Insight Report a valuable foundation on which to develop your plans for 2021 and beyond.

Oliver Bridge

Head of UK Automotive, Grant Thornton UK LLP