US$200bn global profit pool could nearly double by 2030E
Based on our market-by-market analysis across our global analyst team, by 2030E, we expect c50% of all B2C car transactions globally to be conducted online versus 2% today. We think this will reduce c$50bn of costs from the automotive distribution ecosystem (1-2% of global Gross Merchandise Value), leading to structurally higher margins for car dealers and OEMs. Combining this benefit with top line growth, we think the US$200bn (2019) automotive distribution global profit pool could nearly double by 2030E. We have seen (1) new OEM EV start-ups with online-led distribution models gain share and achieve high margins; (2) Incumbent OEMs respond by adopting an agency model for new car distribution; (3) New online only car dealers emerge attracting significant capital; (4) Incumbent dealers and online marketplaces re-invent their business models to enable online transactions. Within just a few years, it will be possible for consumers to purchase almost any car online. UBS Evidence Lab data suggests consumers across five markets are ready for the transition. 20% of respondents said they had already purchased a car online, versus 60% who said they were willing to do so.
Stock selection and valuation discipline remains important
While the potential upside is large, investors need to remain disciplined on valuation and stock selection for four reasons:
(1) car distribution will not be a case of winner takes all, in our opinion. OEMs, traditional dealers, and new entrants will compete, with no single player gaining more than a c5% national share organically;
(2) for OEMs, cost savings could be competed away by lower consumer prices;
(3) a fast shift to an EV car park could lead to lower car ownership and fewer used car transactions; and
(4) OEMs could look to take direct control of used car distribution, limiting supply to independent dealers, but creating life-cycle benefits for OEMs.
What’s in our report
We pool insights across auto, retail, and internet analysts globally to assess how online car retailing could transform the current landscape. We look at four scenarios over the next 10 years, and include 9 case studies from five continents. The analysis is supported by survey data from UBS Evidence Lab covering five markets
