July/August 2021

BY Tom Verner, MD, The Momentum Group T he global automotive industry is on the brink of a seismic change perhaps not witnessed since the introduction of the internal combustion engine. In November, Prime Minister Boris Johnson dramatically fast-forwarded the ban on new petrol, diesel and hybrid vehicles to 2030, but the drive towards electrification has been just one area of change for an industry which is a backbone of our economy and society. Autonomous technology has gone from science fiction to science fact and the race is on to introduce driverless cars. Out-innovate At the very top of the industry vast sums of money are being spent on research and development work. For example, in 2018, Elon Musk’s Tesla car company invested around $1.5billion in R&D work, dwarfing the spends of other automotive manufacturers as they sought to out- innovate the competition. Today, Tesla is the biggest EV company on the planet, and as other governments around the world move towards outright bans on petrol, diesel and hybrid vehicles, the sales of EVs are about to really hit the fast lane. It is not just at the top of the industry where sweeping changes are expected though. It is at all levels, and, in my opinion, it will be those within the industry who embrace this change and look to innovation who will be the big winners. COVID-19 has changed how we shop and interact with other people and even though vaccines are being rolled out, it is likely this new normal of social distancing will be here to stay in some shape or form. At garage and retail level, this impacts on everything from conducting test drives to limiting the number of people allowed in on the premises. Innovation is the key to working through these issues. Procedures such as contactless test drives where customers book a time in advance, and the dealer has the car sanitised and ready to be driven when they arrive, will require innovative thinking to make them work. Virtual test drives are also becoming more popular as the customer doesn’t have to leave his or her own home. With potentially fewer customers coming to showrooms the demand on digital sales platforms is set to increase dramatically as will the development of smartphone apps which have the potential to change the face of car buying from the initial shopping experience right through to purchase and booking in for repairs and services. Overhaul With the economic uncertainties at present, more people are becoming nervous of making big investment buys. This is leading to some dealers conducting a complete overhaul of their sales platforms to offer packages such as short-term leases. At times of great transformation, it is often those companies who invest in research and development work who are better placed to embrace the changes which come along and succeed. There is no doubt that change on a large scale can be intimidating but it should be pointed out that the government is steadfast in its support through tax relief for companies who invest in R&D. R&D Tax Credits, including the small or medium sized enterprise (SME) scheme, support businesses to invest in research and development and are a core part of the government’s support for innovation. Companies investing in the development of new products or processes or indeed the development of the services they offer are qualified to make a claim. Those companies, who make a successful claim, can opt to either receive a cash payment and/or a reduction in their Corporation Tax. Bounce Back In March, the Chancellor, Rishi Sunak, announced a record increase in public investment in R&D – committing to reaching £22 billion per year by 2024 to 2025. A successful R&D Tax Credit claim can be worth tens of thousands of pounds for a business and is a firm foundation for companies to conduct 14 AFTERMARKET JULY/AUGUST 2021 BUSINESS www.aftermarketonline.net SEISMIC CHANGE The automotive industry is on brink of seismic change, and R&D Tax Credits could smooth the journey