Developing successful new cars is an enormous task.
Despite everything that goes into their creation, it’s the final piece at the end that can make all the difference.
Two things stand out from recent VFACTS reports, Australia’s official new-vehicle sales scorecard.
The first is the continued rise of EV sales.
Electric vehicles accounted for eight per cent of sales in April. That figure was 7.7 per cent last month. This is well up from 1.1 per cent compared with April last year.
The FCAI’s Tony Weber said last month: “If you take all forms of electrification, that number has increased from 9.5 per cent to 15.4 per cent, and we know that this number would have been larger had the industry not faced global supply challenges.”
The second stand-out is the growing number of new vehicles sourced from China.
May’s VFACTS data shows that year-to-date sales of vehicles from China have increased 78.6 per cent with 17,958 vehicles sold in last month. Japan remains Australia’s largest source of new vehicles (28,350). Thailand is our second largest (20,624) and Korea fourth (15,196).
Both of these trends are interesting.
Many of the car brands behind these growing numbers are relatively new. They’re doing a great job earning new shares of the local new-car market. And they’re offering new choices to Australian buyers.
But previous new-market entrants show there’s a good chance these fast-rising brands are carrying with them an in-built constraint: the ability to reach the “final 5%”, or the level of product finish and performance the market expects from new-vehicle brands.
This final 5% comprises many things:
Consistently accurate fit and finish.
Excellent NVH (noise, vibration, harshness) performance across all engine speeds and vehicle speeds on different road surfaces.
Interior components that don’t fade in Australia’s intense UV sunlight.
Vehicles that don’t fail long after their new-car warranties expire.
And a lot more.
This 5% is more than the way the doors sound when they’re opened and closed, and the way the car “feels” when it’s idling and driven. It’s a long list.
This last 5% is far greater than the sum of these parts. It’s the “whole” effect it creates in a new car.
Each of them needs to be done correctly and they all need to be integrated within the vehicle.
Solving this final 5% is difficult.
Get it wrong, and the “majors” these brands are competing against – the marques that have largely mastered this final 5% – will ultimately outclass them.
Sure, early adopters and brand-fans often accept or overlook the product shortfalls of new market entrants, but the main section of the buyer bell curve often won’t – especially over the long run.
And it’s in the long run that it shows. It can show in warranty rates and in-market service campaigns. It can show in lower residual values and media commentary, both of which influence consumer word-of-mouth marketing. And keep in mind each of these things can trigger new problem dominoes.
Get it right, and a newer brand can cement its place in one of the world’s most competitive but valuable new-car markets.
This need to achieve the “final 5%” isn’t new. It exists everywhere.
F1 drivers and MotoGP riders will tell you it’s the most difficult part of setting a fast lap time. Most competitors on the grid can deliver the first 95%; the final 5% takes deep experience and skill. Some need it just to qualify for the grid when the field is ultra-competitive.
A book author will tell you the final 5% comes from the “one more draft” that can get a manuscript published.
It’s a marathon runner’s difficult push in the final two kilometres, the surge that gets them on the podium.
It’s a music band’s rehearsal discipline that sells albums and gets audiences returning.
In the car-making world, this 5% is essential. Customers expect it.
Delivering the final 5% can mean better product attributes and less reliance on marketing and discount-based offers to attract buyers.
Just those two outcomes can mean potentially higher profits, lower in-market costs, and stronger brand effects.
And their pay-offs can be substantial when you multiply them across many years.
If you’re a carmaker, it’s worth the effort to get this right. It can become your brand’s most valuable investment.
Engineering Director, Premcar Pty Ltd
About Premcar – Premcar Pty Ltd is a leading Australian vehicle engineering business that specialises in the automotive, defence and aerospace industries. For more than 25 years, global car-makers have made Premcar their go-to partner for the complete design, engineering and manufacture of niche-model new cars, full-scale new-vehicle development programs, and electric vehicle (EV) conversions and manufacturing. As the name behind more than 200,000 new cars and 55,000 new-vehicle engines, Premcar’s body of work is extensive and has delivered technical and sales success for major car brands from Europe, the USA, Japan, China and Australia. Visit premcar.au.
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