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Announcer

Welcome to the EY Advanced Manufacturing and Mobility Business Minute podcast series, where EY professionals explore the critical business issues impacting our industry today.

Moderator

Here with us for this episode of the Business Minute is Gaurav Batra, EY Global Advanced Manufacturing and Mobility Analyst Team Leader, and Akshi Goel, EY Global Advanced Manufacturing and Mobility Analyst. Today's topic is the newly released EY Mobility Lens Consumer Index 2022 study. First released in 2020, this global EY research program has tracked consumer mobility patterns and buying intentions since the start of the pandemic. Today, we are going to discuss some key findings of the latest research and discuss the implications on the overall mobility ecosystem. So, let's get started. Gaurav and Akshi, thanks for joining us today to share what we learned on this from this latest iteration of the Mobility Consumer Index (MCI) research.

Gaurav Batra

Thank you for having us.

Moderator

As I mentioned in my intro, the consumer research started in 2020. What's new about this third iteration of the EY Mobility Lens Consumer Index this time around?

Batra

I am really excited to see how the MCI study has continued to grow and shape over the years. In fact, this year's survey has expanded from 13 markets originally to 18, and now covers about 13,000 consumers across the Americas, Europe and Asia-Pacific. As a part of this study, we wanted to continue to monitor the attitudes and behaviors toward mobility travel and modal choices — with more of a post-COVID-19 perspective — and really looking for how permanent these choices have become. For example, the shift in the behavior toward work travel, working from home or the modal choice around whether to use public and shared modes of transportation. We also continue to look at the consumer's car-buying intent and more importantly, the shift toward the adoption of electric vehicles, and the role digital is playing in the entire car-buying journey.

Moderator

Let's discuss some of the key findings. What are some of the headline findings that emerged from the mobility consumer research?

Batra

Sure. There are six broad themes that emerged from the latest study. We have covered some of them in the first thought-leadership piece. The first one we call as the mobility shift ahead. Essentially, what we mean here is, as we suspected, some of the shifts in mobility patterns as a result of the pandemic are no longer temporary. They are sort of becoming permanent in nature. So, let me share some examples while also keeping in mind that these are from a global perspective. To start with, both the work and nonwork journeys have declined by 11% and 8% respectively from the pre-pandemic levels — which essentially means that people are traveling less, both for work and leisure. If we look at just the work travel, we see the public transportation and the personal car journeys have declined the most. They have come down by 15% and 11% respectively from the pre-pandemic levels. In fact, the work from home phenomenon — which obviously grew during the pandemic — and looks like it's setting as a permanent fixture of work-life around the world. Almost 31% of the surveyed work from home at least three to four times a week, which has increased from 17% pre-COVID-19. We also notice that safety, hygiene and the risk of infection are topping the list of consumers’ concerns — with about 65% of them saying it is very or extremely important. So, we believe that these concerns will continue to drive mobility decisions into the future. Both the original equipment manufacturers (OEMs) and the public policy officials will need to take a note of these actions as they design mobility solutions. For example, pre-pandemic, public transportation’s focus was on ease of use and in particular, on the ease of payment. While the ease of payment solutions are abound, that is no longer the top priority for consumers who utilize public transportation. In fact, consumers prioritize safety, hygiene and things like low risk of infection. Given the mismatch in priorities, we feel public transportation system is, ironically, best at delivering what consumers care less about and worst at delivering what they care most about — which is essentially safety, hygiene and risk. These are the areas they need to think about if they want to get their ridership back. I will take a pause here and maybe request Akshi to walk us through the next two themes.

Akshi Goel

Sure, Gaurav. The second major trend we saw emerge from the analysis is what we are calling as the “Buying boom beckons.” What we found out for this theme is that around 5% of the consumers surveyed intend to buy a car in the next 24 months — which is an increase of 12 percentage points from our 2020 study. Interestingly, almost two-thirds of these car buyers intend to buy in the next 12 months, which reflects a strong demand even in the near term. Now, if we talk about different markets, China is expecting to lead the car-buying activity with nearly three-fourths of its consumers indicating that they are planning to buy a car. It's followed by the Indian and Mexican markets. Even if you talk about the laggard countries in terms of intent to purchase, they are reflecting our double-digit growth, such as Sweden at 27% and Japan at 20%. Bottom line: Demand for new vehicles is upbeat around the world. Talking about the third theme, which surfaced in this year's study, is what we are calling as the “Electric car is the star.” In our previous editions, those who intended to buy a car, their preference toward considering an electric vehicle or a hybrid vehicle was tepid at best. Now, starting this study, we are witnessing that it has changed significantly in favor of the electric power train. EY latest survey showed that 52% of those who intend to buy a car in the next 24 months prefer either a fully electric, plug-in hybrid or a hybrid vehicle — which is an increase of 11 percentage points from the 2021 study and 22 percentage points from the 2020 study. Now, these trends are really driven by the heightened interest toward fully electric cars. The preference of the same has jumped almost threefold in the last two years — from 7% in 2020 to 20% in 2022 — which is also reflective of a growing consumer confidence in the electric vehicle technology. We believe that these results indicate that we may have reached a tipping point, while winning consumers over to at least consider an electric vehicle as their next vehicle.

Moderator

Yeah, let's dig a little deeper into each of these trends. You said that journeys in general are down and have not returned to the pre-pandemic levels. What do you think some of the implications of this trend are going to be?

Goel

We are observing that despite lifts and official travel restrictions in many countries, consumers this year are still choosing to travel a little less than they did before the pandemic. Travel appears to have become a discretionary activity. Specifically, if we talk about work travel, commuting appears to be in a secular decline as a result of hybrid working. Almost two-thirds of those we surveyed work from home at least once a week, which is significantly less than pre-COVID-19 levels. How much more work-related travel will recover is really a moot point. Now, if we talk about the shift in modal choices, public transport journeys witnessed most decline owing to the heightened safety concerns — which we also discussed just now. We are witnessing that when consumers do choose to travel, they prefer to do in their personal cars. So, the shift in behavior which we are witnessing will have significant ramifications for the public transportation. For that, governments around the world will need to regain consumer trust that public transportation is safe, and it does not pose a threat to their health and safety. Finally, if we talk about the shared mobility, which includes cab, taxi, car sharing and rentals, it witnessed a decline of 4% as compared with the pre-COVID-19 level. However, it faced a steep decline — specifically in the North American market — for around 11%. What could really explain this is the consumer dissatisfaction, not just with the hygiene or risk to infection in shared mobility modes, but also due to the rise in cost of rides and limited vehicle availability. Now interestingly, car rental is the only mode of transport that witnessed an increase as compared with the pre-COVID-19 levels — which was around 5% for the work travel. We believe that this is largely due to the perceived low-hygiene risk associated with car rentals.

Moderator

One of the headlines you identified was strong consumer demand for new vehicles. But given all the other external factors occurring, how do you think this demand will play out in the marketplace?

Batra

While from the demand side, we see a solid picture — with about 45% consumers surveyed intending to buy a car. However, supply, as we know, is probably going to be another matter. Globally, the supply chains continue to be severely impacted by the delays and shortages — especially in the semiconductor market — and are now being further rocked by the geopolitical fallout led by the Russia-Ukraine conflict. So, with everything that we see going around us, the economic and the logistical disruption continues to spread. We think the hardest challenges for the OEMs and dealers in the coming months — and even now — are around supplying enough cars to meet the rising demand.

Moderator

Alright. Let's talk about electric vehicles (EVs) and the theme, “Electric cars becoming stars.” You said that we may have reached the tipping point with now, more than half of all consumers looking to purchase a vehicle or considering an EV. What's driving the interest in EVs and what does that mean for the industry?

Batra

We are seeing some very interesting themes and developments emerging in the EV space. Firstly, the consumer confidence in the EV technology has increased significantly. We had 20% of car-buying respondents planning to buy a fully electric car, as compared with 7% in the 2020 study. The second major driver for EV interest is the environmental concerns. In fact, our study found that the environmental concerns continue to be the top reason for respondents who are looking to buy an EV and that stood at 38%. What is also evident is that the potential EV buyers are environmentally conscious and are more likely to use sustainable-transportation options. For instance, 64% of the EV buyers strongly agree or agree that they care about the overall wellbeing of the environment and would be open to using transportation modes that are environment-friendly. In fact, 60% of the EV buyers strongly agree or agree that if they were to buy a car, they would buy an electric vehicle to reduce the overall environmental impact. We also believe the concerns around high ownership cost of EVs have taken a back seat and it has come down in the list of key concerns. In fact, 90% of all EV buyers are willing to pay a premium to buy an EV over a comparable internal combustion engine (ICE) vehicle. What this all means is that the EV demand and sales continue to rise faster than expected. This is boosted by the rising consumer confidence in the technology, as well as by fears over significantly higher gas prices and the rising penalties that we are seeing on the ICE vehicles. We saw the global market share for fully electric and plug-in hybrid vehicles — combined — rose to 10% in 2021, and sales of EVs in many key markets in Q1 this year hit record figures. Also, the fact that more than 20 countries have set up electrification targets or ICE bans for cars and under the United Nations Climate Change Conference of the Parties 26 (COP 26), about 60 countries, including the EU, have made net zero pledges till 2050. All of these will further accelerate the EV adoption.

Moderator

Another interesting trend that the MCI survey showed was strong preference from the consumers toward individual car use. What does this trend say about the future for shared mobility and public transport?

Goel

From the trends that we are observing, the shift in consumer preferences for modal choices could really stay longer than anticipated. The car is getting cemented as the safest and most convenient mode of choice — even as the immediate pandemic risk declines across countries. Public transport is losing out to the car, and this is despite widespread government efforts to get their population to return and use the existing public transportation. The MCI survey shows that safety, hygiene and risk to infection continues to be one of the top priorities for consumers. But for our cities, a lot depends on whether and how quickly people really lose their fear of public transport; and are willing once again to board buses, trams, trains and other forms of public transport. Really, a permanent decline in the popularity of public transport would be a major headache for city planners everywhere. To further emphasize the serious challenges facing city governments around the world, when it comes to getting consumers back on the public transportation, the MCI survey also identified that there is a stark satisfaction gap for consumers when it comes to public transport. Now, moving on to shared mobility — which was one of the pre-pandemic success stories when it comes to more sustainable urban travel in particular — has largely gone into reverse, with a 4% decline in journeys. Car rental is the only form of shared mobility which is witnessing positive journeys, as compared with the pre-COVID-19 levels. However, for the growth may be constrained due to fleet shortages, which are hitting availability and pushing up prices for the consumers everywhere. Some of the shared mobility providers have responded to these falling demands by diversifying into last-mile deliveries — a sector which has flourished during the pandemic — and also supported by our recent EY research estimates that last-mile demand is booming and will result in delivery of 36% more delivery vehicles on the street of the top global 100 cities by 2030.

Moderator

The MCI survey seems to show some post-COVID-19 consumer mobility trends are becoming more and more permanent. Demand for new vehicles is strong. These all seem like great indicators for the automotive industry, but can the industry keep up?

Batra

I think the hybrid and home-working appears to have become ingrained in many markets. So, commuting seems likely to become a weekly, rather than a daily activity. Meanwhile, digital lifestyles have become established and are having a similar dampening effect on nonwork travel as well. However, the car remains the preferred mode for most consumers. The EV is rapidly emerging as the mainstream new car choice for most buyers. As production ramps up, EVs will not remain immune to many of the same supply constraints that plague the ICE market, as well as some that are equally intractable on their own, particularly around the battery, raw materials and volumes. Trading of the tension between the supply, and profitability of old ICE technologies versus the new EV and hybrids will remain a serious challenge as the transitions accelerate. While the pandemic has crystallized consumer behavior around the preference for EVs — combined with a more conscious travel choice and generally lower levels of mobility — for the auto industry, I think it has created a whole new dilemma around supply.

Moderator

Great! You guys have shared some really interesting findings on the MCI research. Is there more to come?

Batra

There is, as a matter of fact. The MCI research — which is obviously rich in data — and similar to what we did last fall, we are in the process of developing two more pieces of thoughtware. Our next piece, to release over the next coming weeks, will take a deeper look at consumers’ thinking around EVs. Following that, we will also release the second edition of our annual study called the “EV Country Readiness Index.” In this study, we evaluate 14 countries across three categories — supply, demand and regulatory — and really assess their readiness toward the transition toward electric mobility. Hopefully, this analysis will offer our readers a detailed global perspective on where the transition to EV stands and what countries must do to accelerate their adoption. Finally, we will follow up those pieces with a thoughtware on the consumer digital retail experience. We will share what we have learned about the consumers’ buying behavior, as they increasingly go digital during the buying process. So, stay tuned for plenty of new content coming in the weeks and the months ahead.

Moderator

Great! We look forward to having you back to share more insights about the mobility consumer in the near future. Gaurav and Akshi, thanks for joining us today and sharing your valuable insights with our audience. We look forward to having you back soon.

Batra

Thank you for having us today.

Goel

Thank you for having us.

Announcer

Thanks for listening to today's EY Advanced Manufacturing and Mobility Business Minute podcast. We hope you found it engaging and informative. To listen to other business minute podcasts, you can find them at ey.com/AMMpodcasts.

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