As CEO of Marshall Motor Holdings plc, Daksh Gupta is uniquely placed to assess the far-reaching changes taking place in the automotive sector as manufacturers rush to bring out new hybrid and fully electric vehicles.
Marshalls are one of the UK’s largest automotive retail groups, partnering 19 car manufacturers and, in the case of nine of them, delivering between 5-10% of their UK volume.
“We’re a very significant partner and that gives me a privileged position of being able to see what the new products look like that are coming in,” says Daksh, who has been at the helm of the company since 2008.
The electrification revolution within the European market is tied inextricably to the EU’s regulations on C02 emissions, which require manufacturers to meet a phased series of emissions targets or face punitive fines. From Jan 1 this year, the limit is 95 grams of CO2 per kilometre for new cars, with more stringent targets to follow.
“The challenge will really come in 2025 because that target of 95 grams will move down further,” says Daksh. “At that point, manufacturers won’t be able to hit the target unless they are selling a significant amount of battery electric vehicles, so this is something that is absolutely going to happen.
“I think people will be surprised at the rate of take-up. I was in Norway recently, where 60% of the vehicles they sell are some form of alternatively fuelled vehicle, either battery electric vehicle or hybrid.
“In Norway, they have significant support from the government to buy electric vehicles, so you can park anywhere for free with electric vehicles, use bus lanes, pay no road tax or tax on your purchase.
“So, a Tesla which would typically be about £100,000 here goes for 63,000 euros there. It’s heavily incentivised by the Norwegian government and I think certainly the UK government needs to do more if they’re going to get the take up from electric vehicles.”
One of the biggest challenges in the electric vehicle market has been overcoming customer ‘range anxiety’, but Daksh predicts the issue will recede as technology advances.
“If you look at the new Ford Mustang E that’s coming out, that vehicle has a range of 370 miles, which is just amazing,” says Daksh.
“If you look at the Volkswagen ID, the vehicle comes with three battery options and the top battery will do close to 500 miles. If you think about it, most people’s cars don’t do 300 miles without refuelling, so I think that deals with range anxiety.
“The other barrier is around charging time. If you look at rapid charging, you can charge vehicles at 80% within 20 minutes, which I think is workable.
“The key time people need to get down to is 14 minutes because, apparently, that is the average time someone spends in a petrol station – filling up, buying a coffee, a sandwich or whatever.”
The higher cost of electric vehicles is also an obstacle, but Daksh believes advances in technology and greater take-up will lead to cheaper prices.
“As technology moves on, the ranges will get further and the production cost of batteries will go down. I was recently reading somewhere that Volkswagen are going to make profit on the sale of their electric vehicles which, despite development costs of 66 billion euros.
“This is where scale makes a big difference and, as the take-up for this gets better, the production costs come down.”
The big question for a company like Marshalls is what impact electrification will have on the traditional dealership model for selling cars in the UK.
Daksh believes that a reduction in the number of dealerships is inevitable, but that large, established groups such as Marshalls will prosper.
“Manufacturers have invested heavily and are going to need to recoup that money. The way they will do that is to try and reduce the cost of distribution of supply chains, so what you will see over time – and I think this will accelerate reasonably quickly – is a rationalisation of dealer points and the number of dealer points.
“Ford are already talking about reducing their network size quite significantly, and I commend them for doing that because what that will do is protect the viability of the remaining dealers.
“By reducing the numbers of dealers – and invariably it will be the smaller ones that will go – it will basically mean the remaining ones will see a higher turnover per site.”
An alternative possibility is that manufacturers will try to recoup investments costs by moving to new online retail models.
Daksh foresees some potentially disruptive trends but is certain the dealership model is here to stay.
“The internet’s been around for 20-25 years and we’re still here,” he says. “Cars aren’t click-to-buy products that you would purchase from Amazon. They are the second most important purchase and the second most expensive purchase you’ll make.
“Would you buy your house on Rightmove and click to buy without seeing it? Never.
“I read recently that the average mileage is now around 11,000 miles a year in the UK and the average speed is around 20mph. If you work that back, it means you spend around 550 hours a year in your car, so would you risk getting that wrong?
“Buying a vehicle is an emotional purchase. The online proposition undoubtedly has a part to play but, from my perspective, customers still want to touch and feel and have access to guidance to about what they’re going to buy.”