The Evolution of the Used Car Industry

The Need for a Circular Approach

To unlock untapped profit opportunities, the used car industry must adopt a circu-lar approach across multiple life cycles. By incorporating multi- cycle management principles, businesses can unlock potential profits and make strategic shifts to seize sustainability-driven opportunities. This involves establishing used car leas-ing as a standard practice, integrating a '4R factory' for refurbishment, remanufac-turing, recycling, and remarketing, and designing an integrated operating model that leverages the strengths of OEMs, Captives, Fleet Providers and other (digital) service providers.

Key Shifts in the Used Car Market

• Electrification of Used Cars: Despite customer concerns, over 60% of used car sales in the EU5 are expected to be electric by 2035. This shift requires adjustments in product offerings and the development of new internal ca-pabilities. While prices for internal combustion engine vehicles have re-mained stable, electric vehicle prices are declining, necessitating careful management of residual values.
• Shift to Usage-Based Models: Usage-based offerings are projected to grow significantly for both new and used cars until 2035. This growth is driven by customer demand for flexibility and concerns about resale value, highlight-ing the need for usage-based offerings and end-of-cycle capabilities.
• Increasing Regulatory Pressure: With rising regulatory pressures, such as the new EU Battery Law and the proposed ELV Directive, maintaining con-trol and oversight over returned vehicles is crucial.

Impact on the Value Chain

The shift towards electric used cars necessitates a rethinking of the entire used car value chain to address changing customer needs, profitability pressures, and op-erational uncertainties. Transitioning from a traditional sales and aftersales ap-proach to a circular, multi-cycle strategy enables businesses to unlock greater val-ue across the vehicle lifecycle, aligning profitability with sustainability and long-term customer engagement.

Key Insights and Strategic Focus

The used car market is shifting from a traditional second-lifecycle focus to a multi-lifecycle strategy. This approach emphasizes extending vehicle usage through leas-ing and comprehensive lifecycle management. The strategic focus is now on opti-mizing both vehicle and customer lifetime value, aligning with sustainability im-peratives and regulatory requirements. Key measures include maximizing vehicle and customer lifetime value, integrating value chain capabilities, securing vehicle ownership, and elevating customer experience.

Bold Plays to Win

To succeed in a disruptive used car market, leaders must adapt their sales ap-proach by making leasing the new norm, strengthening remarketing and circulari-ty integration, and designing an integrated operating model. These strategies are essential for fulfilling regulatory requirements, maximizing vehicle lifetime value, and leveraging core capabilities.

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