future of captives deloitte


Future of captives

What will be the core businesses for automotive captives in 2030?

The business model of the captive industry is on the verge of fundamental change. How can captives react to all these challenges and what will be a captive's successful business model in 2030?

Transformation paths towards the future of captives

Our analysis shows that the environment in which automotive captives compete will undergo fundamental changes until 2030. Respectively, the core businesses of captives, meaning asset-based financing business, will have to be complemented by service-based business on a global basis. This comes with a fundamental shift of mindset from focusing on one-time sale of assets towards focusing on recurring revenue over the full customer and vehicle lifetime. Due to their unique competencies, captives are well positioned to become a key enabler of this transition from asset-focus to customer-centricity and service-orientation. Two of the most uncertain and most impactful variables are:

1. Ownership of the vehicle assets

We expect global annual vehicle sales to grow by more than 30 percent until 2030. Most of this growth will come from emerging markets where current credit and leasing penetration rates have substantial growth potential. In parallel, the vehicles themselves will change drastically due to the emergence of autonomous driving and e-mobility. But will the captives be able to grasp this enormous growth potential? Their further growth in the asset-based business could be either hindered by financial regulation, emergence of strong competition, or even their own original equipment manufacturers shying away from the implied residual value risk.

2. Structure of the mobility provider landscape

The mobility services landscape today is rapidly evolving and the key question is if a small number of players will be able to gain a global dominance. In any case, the complexity and diversity of these services is intense. Captives will need to focus on deciding where they want to focus their limited resources on and strategic cooperation to reduce the depth of own value creation become paramount. Our financial simulations indicate that the developments throughout the major global regions will be very diverse and changing rapidly. Constant measurement of the probabilities indicating which of the scenarios is most plausible is highly important.

To be able to face this uncertainty with confidence and strategic foresight we have built our financial model being very customizable. We are able to simulate individual futures per captive based on the status quo, requirements, and strategic ambitions, as well as current financial figures. Using our artificial intelligence tools we can provide constant analysis of the market environment on a qualitative and quantitative basis. This enables decision-makers of captives to guide and steer their organizations towards a promising future in 2030 and beyond. 

Watch the video: The Future of Captives in 2030