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KPMG recently published the 21st annual Global Automotive Executive Survey (GAES).
The GAES findings show that the main trends for the future of the automotive sector continue to be sustainability and flexibility, with an added focus on health and safety as a result of COVID-19. KPMG predicts that the impacts of the current pandemic will lead to major changes in global demand for the automotive sector, as well as changing the opportunity landscape for car makers. At the same time, there are early signs of a possible shift towards using the WLTP as a standard for CO2 tax calculations in Belgium.

The current crisis has created a new level of uncertainty among consumers, and the health risks associated with the pandemic will impact consumer behavior accordingly. The GAES 2020 reveals that the wider context of the COVID-19 crisis is likely to particularly influence how executive mobility decisions are assessed in light of other priorities, such as health, sustainability, flexibility, and financial considerations.

In 2019, global car production and sales already experienced negative growth. In combination with the uncertain impact of the current COVID-19 crisis, GAES 2020 shows that we can expect to observe cost savings, remediations, and an increasing number of mergers and acquisitions in the automotive sector. Although the sector previously focused primarily on technology, it will now have to shift its focus to place greater emphasis on survival and operations.

Sustainability

Sustainable mobility already seemed to have reached the turning point where consumers began to adapt their behaviour. Most executives surveyed in Western Europe consider sustainability to be the most important differentiating factor when it comes to decisions about mobility 

Sustainability table

For the first time in the survey's history, executives expect that by 2030 the majority of cars will no longer be powered by an internal combustion engine. Hybrid, electric and fuel cell engines and connectivity have been the main motorization solutions and trends in the sector since 2017. While KPMG’s GAES 2020 indicates that these trends are likely to continue, it will be interesting to see whether sustainability remains of key importance to consumers if buyers become more cost-conscious.

Sustainability key importance

Flexibility/Mobility as a Service

As a result of COVID-19, KPMG’s Automotive Institute expects many people to initially avoid public transport in the short-to-medium term, during which time consumers may be willing to spend more money on private mobility options, such as a personal or company car, for a greater sense of safety from the virus.

However, KPMG does not currently believe that people will completely turn away from flexible mobility solutions. Recent incentives such as the introduction of a 'mobility budget' and flexible remuneration packages had already started to have an effect on employee mobility choices in Belgium prior to COVID-19, and at present, we expect this trend to continue in the long-term.

The study also confirms the growing importance of 'mobility-as-a-service'. Consumers increasingly regard cars – among other mobility solutions - as services rather than goods. In this light, consumers are not only paying attention to the engine and fuel in the cars they use, but also expect to see a shift towards more sustainable and flexible mobility offerings.

Similarly, consumers are increasingly making automotive decisions based on total cost of ownership. This means that actions such as buying a car or entering into long-term leasing contracts are more likely to be postponed, while flexible contract models with low up-front costs become more attractive.

While COVID-19 has accelerated the decline of the traditional car market, the increasing popularity of sustainable cars seems unstoppable.

Frank Vancamp
Head of Automotive

Remote working

Meanwhile, the Covid-19 pandemic has put many companies under pressure to introduce or expand remote working and invest in secure IT solutions.

This new way of working could lead to a change in mentality, leading to an increase in remote working arrangements, changing the need for many employees to use or own a car. We can imagine that employees would prefer not to be taxed on a full benefit in kind while mainly working from home. Employees are therefore more likely to opt for more flexible and cheaper mobility solutions.

Worldwide Harmonised Light Vehicles Test Procedure (WLTP)

KPMG is also paying attention to how emerging developments Belgian tax landscape may affect automotive manufacturers and consumers. This includes the possibility that using the WLTP as a standard for CO2 tax calculations may lead to a mechanical increase in the overall tax burden.

As from 1 January 2021, only the WLTP will still be mandatory for carmakers. NEDC (2.0) is also still possible, but no longer mandatory. The CO2 emissions standard that serves as the basis for the calculation of all CO2-related taxes will therefore be determined by the WLTP instead of the NEDC (2.0). Based on FEBIAC's analysis, CO2 emissions according to the WLTP are on average 20% higher than the former 'NEDC' emissions. If the current law is not changed, a complete switch to WLTP will lead to a mechanical increase of all taxes that depend on those emissions, such as benefits in kind and tax deductions.

It remains to be seen how the Belgian legislation will deal with the new CO2 emissions standard after 31 December 2020. Meanwhile, it’s worth noting that some regions have already announced changes to their car taxes, which could suggest that we can similarly expect a number of changes to Belgian taxes in the coming months and years.