Chapter 1
Mobility shift ahead
Hybrid and remote working have changed travel patterns.
Both work- and nonwork-related travel remain below pre-COVID-19 levels, down 11% and 8%, respectively, from 2021 expectation. This pattern looks set to remain at least in the medium term. Although offices are reopening, the new norms of flexible and remote working are impacting work travel. And increasingly digital lifestyles — at first imposed on consumers by the pandemic — now appear to have become active choices for many, and are a persistent factor in reducing non-work travel.
Monthly work journeys by the two most popular modes — public transport and the car — are down 15% and 11%, respectively. Car rental is the only mode of transport that shows an increase on pre-COVID-19 levels of work-related travel, up 5% in 2022.
How much more work-related travel will recover is a moot point; commuting appears to be in secular decline as a result of hybrid working. Almost two-thirds of those surveyed work from home at least once a week, up from less than half pre-COVID-19. And 31% do so at least three or four times a week, up from 17% pre-COVID-19.
The overall travel picture is less of a bounce back and more of a steady recovery. Travel for both work and non-work purposes remains down 9% on average, compared to pre-pandemic levels.
Despite lifts in official travel restrictions in many countries, consumers in 2022 are still choosing to travel less than they did before the pandemic. Travel appears to have become a discretionary activity, but when consumers do choose to travel, they prefer to do so in their personal car. Sixty-three percent say that constant access to a personal car is important to them, up from 57% in 2021.
Hygiene factor here to stay
When it comes to choosing modes of transport, hygiene and the perceived risk of infection remain top of the list of consumer concerns — 65% say it is very or extremely important — little changed from the 67% reported in 2021. Having encouraged their populations to stay at home and stay safe, governments and transport authorities may have inadvertently created a new and potentially limiting narrative around transport safety in consumers’ minds. On a sliding scale where the private car is regarded as the safest and most hygienic mode, public transport is represented as the least and shared mobility, such as taxis and ride-sharing options, occupy the middle ground.
Public transport ‘‘satisfaction gap’’
If the car — especially the EV — is the “winner” in the minds of consumers, then public transport is surely the loser. Work journeys by public transport are down 15% globally compared to pre-COVID-19 levels and it’s a trend across all three major regions — Asia-Pacific, Europe and the North America. Work travel by public transport fell by a hefty 35% in Australia, 30% in Canada and 29% in Italy. Of the 18 countries in the survey, only one — India — reported a small increase in public transport usage, up 1%.
While hybrid working may result in a secular decline in public transport use, the MCI research suggests that a “satisfaction gap” is currently the defining problem for consumers. This satisfaction gap places public transport in the unfortunate position of being best at delivering what consumers care least about and worst at delivering what they care most about.
For example, consumers place the greatest importance on the perceived hygiene risk of using public transport, but their level of satisfaction with how that hygiene risk is managed is very low. Conversely, while levels of satisfaction with the ease of paying for public transport is very high (thanks to the widespread adoption of contactless payments) consumers do not regard ease of payment as a deciding factor.
With sustainable transport a key plank in climate change initiatives, overcoming the satisfaction gap is emerging as a major challenge for city transport authorities. A carrot and stick approach may yield results, with 46% of consumers saying that free public transport would reduce their usage of private cars, and 38% saying that urban traffic charges would also lead then to take fewer journeys by car.
Many city transport authorities — under severe financial pressure after many months of dramatically reduced passenger revenues — may be tempted by the revenue-boosting potential of road usage fees, which also offer the prospect of a hedge against falling incomes from vehicle and fuel taxes as EVs become more prevalent.
Shared mobility shake-up
Shared mobility (ride-sharing, car-sharing and car rental) — one of the pre-pandemic success stories when it comes to more sustainable urban travel in particular — has largely gone into reverse. Globally it has declined 4% on pre-COVID-19 levels, but in North America, shared mobility is down a hefty 11%. Consumer dissatisfaction with the hygiene of shared mobility emerges as a key factor, but satisfaction levels with the cost of travel and availability are also low. And with fuel prices up sharply — gas in the US is now 60% more expensive than in pre-COVID-19 times — those costs are likely to rise even further. Availability may also continue to suffer; reports from protesting ride-share drivers in the US suggest that some of them may leave the platform altogether as the cost of fuel continues to eat into their earnings.
Some shared mobility providers have responded to falling demand by diversifying into last-mile deliveries, a sector that has flourished during the pandemic. Recent EY research estimates that booming last-mile demand will result in 36% more delivery vehicles on the streets of the top 100 global cities by 2030.
Car rental is the only form of shared mobility to have grown on pre-pandemic levels, up 5% for work-related and 2% for nonwork-related travel, thanks largely to its perceived low hygiene risk. Further growth may be constrained by ongoing fleet shortages (largely due to stalled semi-conductor production globally), which are hitting availability and pushing up prices for consumers.
Chapter 2
Buying boom beckons
Consumers’ desire to own their own car continued to increase.
That mobility shift is translating into a boom in demand for cars, whether they have ICE or EV drivetrains. The number of consumers planning to buy a car is rising fast. Forty-five percent of consumers say they intend to buy a car within the next 24 months, up 12% from the 2020 survey. Almost two-thirds of them (63%) intend to buy in the next 12 months. The majority will be new cars: 32% of all those intending to buy will choose a new car, compared to 12% who intend to buy used.
The second year of the pandemic has seen a continued rise in consumers’ desire to own their own vehicle, with 63% in the 2022 survey saying that constant access to a personal car is very important to them (up from 57% last year) and 60% stating that their safety or well-being is best served by a personal vehicle (up from 52%). Only 16% say they would be open to car rental or subscription services as an alternative to buying.
Demand for cars is expected to be highest in China, India and Mexico (where 75%, 75% and 66%, respectively, say they are ”extremely likely” or “somewhat likely” to buy), while Sweden, Singapore and Japan — 33%, 27% and 20%, respectively — will show the lowest level of demand.
City dwellers are expected to account for most purchases in China and India, while in Europe those in rural and small towns will be more active buyers — perhaps indicative of the wider availability of public and shared mobility options in European cities.
Electric cars are the stars
But consumer confidence in EVs is rising fast and within that overall demand boom EVs are set to be the stars of the show. For the first time, over half of consumers — 52% — who intend to buy a car in the next 24 months say they will choose an EV or hybrid vehicle. That’s up 11% from 2021 and 22% in 2020. This growing consumer confidence in EV technology is also reflected by the jump in preference for fully electric vehicles, up from 7% in 2020 to 20% in 2022. The popularity of “stopgap” hybrid and plug-in hybrids also increased but at a much lower pace.
As the preference for EVs grows, the motivations for choosing one are shifting. Green “early adopters,” whose main drivers are environmental, are now being joined by mainstream buyers with more prosaic financial concerns. The “pull” effect — the desire to be seen helping the environment by buying an EV — is now closely followed by the “push” of fears that congestion and pollution charging may hit the owners of ICE vehicles harder in the wallet. Environmental concerns are also a lower priority for second-time EV buyers than for those considering their first EV purchase.
Consumers are becoming more comfortable with the EVs themselves, but charging infrastructure remains a barrier. Access to, and speed of, charging is emerging as the key inhibitor for would-be buyers, as other established concerns over high initial costs and range anxiety show evidence of subsiding.
Consumer appetite for EVs is expected to be highest in Italy, Spain and Norway in Europe, and China, South Korea and Singapore in Asia-Pacific. While sentiment in North America is expected to lag the rest of the world, with below-average intention to buy EVs in the US, Canada and Mexico.
Chapter 3
Can the industry keep up?
Supply chains have been hit by delays, shortages, and economic and logistical disruption.
Ever since the start of the pandemic, the mobility sector has faced two overarching questions: Is this a blip? And if it isn’t, which of the changes in travel behavior will be temporary and which will be permanent?
There is still a good deal of uncertainty but some candidates for secular change are now emerging. Hybrid and home working appear to have become engrained in many markets, so commuting seems likely to become a weekly rather than daily activity. Meanwhile, digital lifestyles have become established and are having a similar dampening effect on non-work travel. However, the car remains the preferred mode for most consumers, and the EV is rapidly emerging as the mainstream new car choice of most buyers.
But if the demand picture is solidifying, supply is another matter. Global auto supply chains have already been hit by delays and shortages especially in the semiconductor market and are now being further rocked by the geopolitical fallout of the war in Ukraine and the economic and logistical disruption that continues to spread. The hardest challenges for OEMs and dealers in the coming months may be around supplying enough cars to meet the rising demand.
Spiraling gas prices and a dearth of microchips were blamed for recently reported steep drops in Q1 car sales in the US — down 26% year on year1 — and in the UK where fleet sales fell 34% in the same period.2 Some manufacturers have taken to contingency measures, such as reconfiguring design to use fewer chips or even shipping new cars with only a stopgap basic chipset installed to make their limited supplies go further.
EV sales continue to rise faster than expected, boosted by rising consumer confidence in the technology as well as by fears over gas prices and road pricing. The EY Mobility Lens Forecaster predicts EV sales will dominate sales of all other drivetrains by 2033 — five years sooner than previously anticipated.
But as production rises, 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 and all their own — particularly around battery raw materials and volumes. Trading off the tension between the supply and profitability of old ICE technologies vs. new EV and hybrids will remain a serious challenge as the transition accelerates.
So, while the pandemic has crystalized consumer behavior around a preference for EVs combined with more conscious travel choices — and generally lower levels of mobility — for the auto industry, it has created a whole new dilemma around supply. Hard choices about whether to prioritize EV and hybrid drivetrains, or premium models over more affordable — but lower margin — vehicles may have to be made.
Making progress in 2022 may not only be about asking the consumer “What kind of cars do you want to buy?”, but also about the industry asking itself “And what should we do if we can’t make enough of them?”
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Summary
Consumers are continuing to travel less than in pre-COVID-19 times, but their preference for the car – and electric vehicles in particular – is growing stronger. For the auto industry, it has created a new dilemma around supply.
