The insurance of large firms to capture the anxiety market: who benefits from the figure?

The growing anxiety of those involved in the automotive industry generates a demand for certainty such that any study is now sure to find its audience. To separate the wheat from the chaff in the statistical abundance thus generated, we propose a Sherlock Holmes method which consists in asking not who benefits from the crime but who benefits from the figures and let us try to apply it to two studies recently mentioned by Autoactu.com

 The current phase in the life of the global and European automotive industry is generating very heavy uncertainties for all the players. These uncertainties are not only the usual ones in this industry, which concern both the dynamism of automobile demand in general (what economists call "demand from the industry") and that of the demand addressed to each of the players (which economists call "demand from the firm") for each of its models.
 This time, they also concern technologies and, more broadly, the very nature of the products and services that could be developed and sold in the future. In 2021, the powertrain mix as it will be structured over the next 15 to 20 years, the issues of autonomy and the relative importance of artificial intelligence, and the so-called 'servicing' issues that would be involved in a change in consumption patterns that would lead customers to buy mobility services rather than cars, are all at stake.
 
Given the crucial nature of these uncertainties for the firms in place, for the employees and their representatives, for the territories hosting the activities and for the public authorities in general, it is understandable that strong demands for clarification are emerging. Indeed, both sides are supposed to be prepared for the future in one or other of these three areas. Knowing a little more about what these areas will be made of is therefore a very understandable question in order to prioritise and/or size investments and, in fine, to place one's action in one or other of the possible hypotheses in relation to these uncertainties.
 
The concern of everyone is not to make a bet that no one else would make because, even if it were based on excellent arguments, it would be a losing bet. Conversely, trying to know what the future will be in order to form one's own strategy is either to seek to confirm the dominant model and do nothing to prevent it from happening or to scare oneself with a frightening model in order to try to make things happen differently. 
In either case, the demand for forecasts or forecasts is anything but innocent and the corresponding supply is likely to be truncated as well. It is therefore advisable to treat prospective studies or reports with this in mind and to read them with a critical eye that is less sensitive to the batteries of figures shamelessly announced for 2025, 2030 or 2040 without great precautions or methodological details than to the implicitly stated intentions, which are most often quite clear.
 
To put it another way, one must read these works and ask oneself, like Sherlock Holmes, who benefits from the crime of producing figures? The first concerns a study commissioned by a lobbyist; it is the IHS-Markit/Transport and Environment (T&E) study presented last week. The second is the study published by KPMG France on its own initiative following international comparison work carried out internally; it seeks to generate requests for studies and advice that will complement it.
 
In the first case, things are relatively clear and quite explicitly stated: T&E buys the right to use the Excel that IHS has developed on the production of each manufacturer by model, by site and by GMP over the next 10 years. The resulting report was made public in the second half of June, whereas the "announcements" on which the IHS work is based date from April.
 
We can see that, for Renault for example, even on the basis of these announcements, that in two months, the "forecast" - which T&E is careful to put in the conditional tense - is weakened. It should be added that, despite the undeniable expertise and quality of its networks of informants, IHS' forecasting work cannot address three key issues:
 
 -Do existing data and announcements to date provide a fair picture of what the manufacturers' product policies for their various brands will actually be over the next ten years?
-Will the decisions to allocate different models to different European assembly sites be as IHS predicts?
- Are the volumes sold by brand, model and GMP by each manufacturer in 2025 and/or 2030 that IHS has put in its Excels the right ones and, incidentally, what methodology was used to determine them?
Once you have that in mind, the figures presented by the "T&E study" seem rather illusory: basically, no one knows anything about it and what is said about the degree of preparation of each manufacturer for forced electrification on the basis of production figures and "scores" is a matter of appreciation and/or interpretation. T&E is a lobby and the publication of a study is basically an opportunity to say the same thing as usual in a slightly different way and to occupy the media space.
 
Since things are not going fast enough in this area and the plug-in hybrid is taking on a role that this technology should not have, according to T&E, it is necessary to attack the manufacturers who use it most willingly: Daimler and Toyota obtain the most catastrophic scores in terms of 'electric ambition', while the very Chinese Volvo outclasses all the others.
 
Similarly, since a battle is taking shape around voluntary commitments and deadlines to be set for the period after 2021, T&E intends that the EU should no longer be satisfied with the -37.5% for cars by 2030: with the IHS figures, VW could, says T&E, sell credits to all the others, who could then continue to electrify too little... CQFD.
It could also be argued that VW's rivals will have no desire to help the European leader to outperform them further in the following years and will go out of their way not to put themselves in that position. In short, just because you show off the figures doesn't mean you stop making political and strategic bets. This does not make statistical work irrelevant, but only encourages us not to endow it with a magical scientificity that it does not have.
The KPMG case is a little different and probably even more interesting because it is more ambitious - and therefore also more fragile -, less cautious and 'pro domo': as KPMG does not work for anyone precisely, the firm works for itself and tries to show all its potential 'clients' the interest they would have in calling on KPMG in order to take advantage of all the opportunities and/or avoid dying.
 
To ensure that all clients are equally concerned, the three 'revolutions' that these firms have been promising for at least 10 years are put on an equal footing: the end of diesel and petrol engines and the rise of alternatives; the advent of the autonomous vehicle; and servitization (which KPMG has associated with the advent of MaaS and 'MaaC' - Mobility as a Commodity). 
 
The interest here is to 'cast a wide net'. Within the framework defined by such a broad picture of the future, everyone - in both the public and private spheres - can find their place, as they are sometimes threatened with death and sometimes with access to billions of euros of turnover generating thousands of jobs.
 
The general message is nevertheless that of KPMG France and concerns the departments that work with manufacturers and equipment suppliers, transport and NTIC companies and local authorities. For this reason, it is as clear as it is vague: everything is going to change and it is urgent to act and to get help to do so: the old ones risk a lot; the new ones may miss huge opportunities; the public authorities have everything to lose by intervening too much but must absolutely be present. The volumes of business and jobs involved are enormous.
 
 Obviously, the scope of the issues addressed and the lightness of the statistical and methodological elements cited (1) severely limit the scope of the discussion of the "results" disseminated. Nevertheless, three elements seem highly problematic to us.
 
- The monetary references given to enable us to assess the extent of the changes are in terms of turnover. Insofar as the turnover of some companies is very often integrated into that of the client company, this leads to the same growth being taken into account several times over and, since this evidence is taught from the first year of all economics training courses in the world, we cannot fail to see in this treatment a desire to overvalue the extent of the changes announced.
- The approach announced is defined as reasoning in terms of the sector. Apart from the fact that, statistically, this requires us to move from turnover to added value, KPMG France should not act as if the logic and growth or decline upstream had anything to do with what happens downstream. The French sector cannot include subcontractors and equipment manufacturers and distributors and repairers indiscriminately: if assembly disappears, the former die, the latter do not. In this sense, it is not a sector.
- Treating the three revolutions in the same way as the battery electric vehicle (BEV) and the hydrogen sector is perfectly understandable if the aim is not to lose any potential customers. Nevertheless, in either case, in 2021, the probability of seeing one or other of the three revolutions or the emergence of BEVs or fuel cell vehicles (FCVs) in terms of propulsion is very unequal and not taking this into account severely limits the credibility of the proposal.
 
Thus, the fact that the anguish of the various players allows us to see an increase in the number of studies intended to shed light on our future is undeniably a blessing: the number of studies intended to better understand what is happening is increasing and our ability to grasp the change is growing.
This does not, however, change the nature of what is happening: we are in a phase of major change where the reality of the changes depends largely on what we believe they will be and makes them intrinsically unpredictable, while at the same time putting prospective productions in a very ambiguous position: supposedly outside the phenomena they deal with, they are actually part of them.
 
21/06/2021
 
(1) Nine times out of ten, the tables or figures produced are referred to as "GSG", which stands for Global Strategy Group and refers to the KPMG department in charge of this type of work. 
 
 

The weekly column by Bernard Jullien is also on www.autoactu.com.

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