How the Shifting American and British Economies Influence Car Purchases.
Buying a car is no light decision – the average car purchase in the United Kingdom is nearly £34,000 and the average price in the United States is over $36,000. Despite strong annual registrations for ride sharing programs, and that global car sales are expected to drop this year, the desire to own vehicles — at least from a socioeconomic perspective — is alive and well. Before making the important decision of which car to buy, there are many factors that potential buyers consider before signing on the dotted line, whether it is car design, mileage, or brand reputation.
On top of those considerations, consumers’ personal tastes, utility needs, and financial solvency all influence the global trade of automobiles. In an age of viral digital information, the growth of the sharing economy, and shifting geopolitical climates, what will become of the current automotive landscape? How have events like Brexit and the U.S.-China trade war impacted consumer decisions and trust in the automobile industry?
To find out, we analysed automobile purchase, trade, and production data from around the world and surveyed more than 1,000 people from the U.S. and the U.K. Some insights include:
- Despite market uncertainty brought on by the Trump administration in the U.S., nearly 44 percent of Americans are optimistic about their country’s automotive industry. However, turbulence in the U.K. around Brexit is weighing heavily on Brits’ perception of the automotive industry, with just 26 percent reporting positive sentiments.
- Auto industry outlook was more favourable among individuals with concrete plans to buy a car across both locales surveyed. Nearly 80 percent of those looking to buy a car read online reviews in preparation of their purchase, compared to nearly 50 percent who read online articles.
- Consumers named car manufacturer brand reputation as one of the top qualities they looked for when choosing a car, second only to price, fuel efficiency, and safety. Now more than ever before, social proof is essential to gaining the trust of potential customers, especially in this uncertain climate – and peer recommendations in the form of online reviews can go a long way in helping customers make an informed decision. According to our study, car purchases are no exception. Read on to learn more.
A global breakdown
Despite ongoing trade challenges, research suggests that the global market is expected to remain relatively stable in 2019, with North America trailing behind Asia and Europe as a top car producer. Currently, North America only produces 16.7 percent of passenger cars — and it looks like it might stay that way. Growth in the U.S. auto industry remains healthy for now, but the volatile stock market and rising interest rates are a likely threat.
Though North America is one of the smallest volume producers globally, its politics may have a disproportionately large impact on the European auto industry. While Europe currently produces a quarter of global passenger cars, U.S. President Trump’s proposed 25 percent tariff on car imports may have a serious impact on the global economy.
Asia, on the other hand, accounts for more than half of the total passenger car production volume. This could be because Asian producers like Toyota and Hyundai have wisely established themselves as trustworthy international brands, all while managing to keep hold of their own national loyalties. This is evidenced by the popularity of Asia-produced vehicles in North America (39 percent of imports to the U.S. are Japanese), and by the fact that Asian consumers tend to avoid buying American cars. Buick proved to be an exception as the only U.S. auto manufacturer among China’s top 10 automobiles in 2017.
The effect of Trump on American auto trade
There’s no question that the U.S. saw a general uptick in car imports and exports over the last decade, but there was a significant decline in 2018. The drop-off was a bit steeper for U.S. exports than imports, which could be partially attributable to the recent international aversion to U.S. automotive brands. That said, these fluctuations also align to some key political events.
Exports increased slightly around the time President Donald Trump took office in 2017, but 2018 was mired by several events that may have impacted the auto trade, including GM’s plant closures, the U.S.-China trade war, and the “new NAFTA,” which could mean tighter restrictions on Canadian, Mexican, and American auto producers in the future.
To sum up the recent decline in American auto trade, from 2017 to 2018 exports decreased by over $50 billion, and imports dropped by over $20 billion.
Across the pond from the United States, Europe produces about a quarter of all passenger cars on the planet. Interestingly, while Germany was a clear front runner in both passenger vehicle production and new passenger car registrations, the U.K. had a disproportionately large number of new passenger car registrations (1.3 million) compared to its humble passenger vehicle production figures (about one third of Germany’s production).
Despite the strong figures for new passenger car registrations, the U.K. saw an overall decline in both areas of automotive trade from 2017 to 2018. In part, the decline in registrations may be connected to the U.K. experiencing a steep drop in young drivers over the last few decades. At the same time, household debt has skyrocketed. The introduction of ride-sharing services like Uber and DriveNow may have also contributed to the drop in new car users, at least as far as U.K. urban areas go.
Brexit and the British auto trade
While car exports have been on the rise in the last decade, these numbers may soon be declining due to Brexit. In January of 2018, Julian Knight, a member of Parliament, warned that Britain faces “a period of economic uncertainty, especially for exporters, as we negotiate our future relationship with the European Union and start to pursue our own independent trade policy.”
Years of Brexit concerns, starting when it was first announced in 2016, and recent negotiations haven’t exactly boosted British car exports. More recently, concerns over petrol costs and customs delays brought car assembly to a screeching halt during the summer of 2018.
As Britain moves closer to leaving the EU, U.K. car production and diesel sales have dropped dramatically. In response, several car manufacturers have reacted by laying off employees. What was supposed to be mostly “good” for British trade and commerce seems to be having the opposite effect, at least for the moment.
Auto industry consumer insights
Hope in uncertain times
Despite the changing political climates, trade wars, and other uncertainties that may impact the global auto market, some American and British consumers still hold a positive outlook. Our survey showed about 44 percent of Americans and 26 percent of Brits felt positively toward their nation’s respective automotive industries.
In fact, about 31 percent of Americans and 18 percent of Brits planned to purchase a car within the next year. There was a general sense of open-mindedness among respondents when it came to buying a car, with only 1 percent of Americans and 4 percent of Brits saying they’d never purchase one. In general, Americans planned to buy cars slightly sooner than Brits, but significant portions of both nationalities thought carefully about making such a big purchase.
Those who were planning to buy cars sooner were more likely to have positive views about the automotive industry than those who were delaying or completely avoiding a car purchase. And for those who were planning a car purchase, online reviews were an integral part of their decision.
Automobile companies like Ford and Toyota spend billions of dollars on ads every year, it’s possible that more focus should be put on other channels. These days consumers won’t make even a trivial purchase without reading the product reviews, and large purchases like cars are no exception to this new step in the buying journey.
Our data revealed that around three-quarters of consumers surveyed read online reviews about automobiles and compared car values online before buying. Nearly half of respondents read online articles, and more than a third asked their friends or relatives for advice.
Online reviews are the most prominent way that consumers research their purchases, and they tend to resonate with young people in particular. While millennials might not be buying homes as much as older generations, they are buying cars. When shopping for their vehicle, they relied more heavily on reviews than other generations. Nearly 80 percent of millennials rated online reviews as important, compared to around 74 percent each of Gen Xers and baby boomers.
Top car qualities
When consumers are finally ready to purchase an automobile, four factors contribute the most to their decision. For the majority (almost 95 percent), price ruled all, followed by fuel efficiency and safety. Nearly 9 in 10 respondents said the auto manufacturer’s reputation was also important when choosing a car. Slightly less (87 percent) felt the same way about maintenance costs over time.
What wasn’t as important as reputation? Consumers felt that depreciation rates, engine power, technology or special features, space, and a warranty weren’t as essential.
Brand trust carries a lot of weight, with 89 percent of consumers said that auto manufacturer’s reputation was important to them. However, our survey suggests brand loyalty is a precious opportunity for differentiation because it’s not always easily won. More than half of baby boomers, Gen Xers, and millennials said they planned to buy a different car brand than what they were currently driving. Millennials were the most likely to plan a brand switch, at 62 percent, while baby boomers were the most loyal to their current car brand.
There may not be widespread brand loyalty, but what about loyalty to one’s own region? About 60 percent of U.K. residents planned to buy a European car, while around 55 percent of Americans were set on buying an American car. At the same time, more Americans wanted to buy a European car than U.K. residents were keen to buy an American-made car.
Given the current economic uncertainty, cultivating a trustworthy brand reputation is one area that car manufacturers can confidently control. When customers can read and provide authentic company reviews, they can feel more confident in their purchases and know their experiences and opinions help others do the same.
Although city life and public transportation are under revival for the younger generations, there’s still plenty of demand for cars around the globe. The World Economic Forum projects that the number of vehicles on our planet will double by 2040, ultimately putting 2 billion cars on the road. In other words, the automobile industry is alive and well – and standing out as a trustworthy brand is more important now than ever, especially to capture the loyalty of younger consumers. One of the most important ways that customers of all ages will find cars they can rely on is through online reviews.
Although no one can predict or control the events that shape our economies, car companies can take back some control over their reputations and show potential customers the information they need to choose a car with confidence. As our survey results show, this can be accomplished by displaying certified customer reviews on their sites.
At Trustpilot, we believe your customers can be among your most powerful advocates. That’s why we built a free review platform where customers can openly share their experiences, and companies can use these insights for improvement and innovation. Check out our blog to learn how we can help you build trust with new customers, learn from their experiences with your brand, and improve the way your company connects with the world.
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