CO2 standards for cars from 2020 make a new sales strategy unavoidable

In the EU, from 2020, an average maximum level of 95 grams CO2 per kilometer will apply across the whole of each car manufacturer's fleet. By 2030, emissions will have to be reduced again by another 35 percent. Currently, the average car sold on the German market still releases more than 127 grams per kilometer, according to the management consultancy Horváth & Partners. From 2021, there will be the threat of painful fines plus damage to reputation. To meet the limits while still remaining profitable, Horváth & Partners believe that manufacturers urgently need to take a new approach to sales. They need to find the best mix of electric, plug-in hybrid and combustion engine vehicles. Too many companies still do not have the necessary control systems in place to achieve this.

"If German car manufacturers do not manage to comply with the new limits by 2021 at the latest, then their margins will quickly be devoured by fines running into billions. Add to that the reputational damage, which can lead to painful falls in turnover," says Dr. Dietmar Voggenreiter, automotive expert at Horváth & Partners. This expert believes that the limits cannot be achieved even by comparatively clean combustion engines. CO2 emissions of 95 grams per kilometer translate into gas consumption of 4.1 liters, or 3.6 liters of diesel. "This simply cannot be achieved using combustion engines. To manage demand, the sales of battery-powered and plug-in hybrids need to be promoted, including price reductions that hurt," says Voggenreiter. "The potential market for environmental cars is still limited, however, as for many customers an electric or hybrid car has simply not been an option so far. At the same time, powerful combustion engines need to see their prices increased, to divert customers to vehicle types with lower emissions."

German manufacturers are also facing severe cuts even without the fines
German car manufacturers in particular, with their high share of premium vehicles, are at risk of falling sales, this expert believes, even without the fines. The margins on vehicles using alternative energy sources, whose sales need to be increased, are significantly lower than on conventional models, thanks to higher costs for development and materials. What is strategically desirable, lower sales of especially expensive, large combustion engine vehicles such as SUVs and limousines will also reduce margins. "The new CO2 limits could cut car manufacturers' results to shreds, unless they counteract them with smart sales strategies," says Horváth's automotive expert Dietmar Voggenreiter.

Maximize profits through smart strategies
"In the past, sales could focus purely on turnover figures plus the total profits that they could achieve from those," says Ralf Gaydoul, partner and head of the competence center automotive at Horváth & Partners. "From 2020, the bottom line has to include the correct balance of CO2". That sounds easier than it is. Firstly, each manufacturer has to figure out an optimum sales mix for themselves, and translate that into detailed sales targets for each individual type of vehicle, down to the level of each dealership. The actual sales of the different types also need to be tracked with an eye to their respective CO2 levels, more or less in real time, and at a global level. If it looks like threshold values will be exceeded, then sales and marketing activities need to try and counteract this as quickly as possible.

"For sales and controlling, managing the sales numbers and CO2 thresholds is a completely new challenge, to which German manufacturers need to find the answer immediately, if they want to have their sales organization restructured in time," says automotive expert Dietmar Voggenreiter from Horváth & Partners.