Are you a great car lover, are you someone who really loves to drive or feels passionate about a style, type or brand? Or do you collect classic cars ?
Honestly, for me, a car is a tool to go to places I need to be or want to be. However, I have to admit I have an admiration for classic cars where design is concerned. But otherwise, I want to get from A-B with comfort, a maximum of safety and as little as possible. No, public transport is not an option for me as I do not live in the centre of a city and I have two dogs, this makes using public transport quite a hassle.
But I am very environmentally conscious and take some interest in technological developments, provided they have some use in saving the planet and making my life easier and less guilt ridden.
The car industry has always been a fairly safe option when making investment decisions, but this has changed in recent years. Apart from the Diesel scandal, many started to question the mere existence of a car. For them cars are the main contributor to carbon emissions, which is not correct.
But now post-pandemic the industry is forced to change, not only have they been hit very hard by lockdown measures, but consumers have become more environmentally sensitive and the industry faces rough times due to a supply shortage, which they inflicted in parts on themselfs.
Quick Health Check
The 16 largest car manufacturers´ turnover and earnings in Q1 2021 was higher than prior to the pandemic (EY) with considerable growth recorded in the US and Asia-Pacific. If this is sustainable will depend on more factors than just the current chip shortage.
In an exciting shift arising from the pandemic, consumers are turning toward sustainability — and they expect mobility players to expand their offerings in the electric vehicle (EV) segment. Automakers are also driving innovation with a commitment to sustainability across the value chain. This trend is likely to continue for the next few months.
The future of the traditional automotive industry is in question. Urbanization, changing consumer expectations, and emerging digital technologies are driving a wave of disruptive innovation. To succeed in this new world of mobility and smart manufacturing, established players will have to make transformative changes at unprecedented speed. New business models will require new cultures and practices: companies must think like a start-up, tap into new talent and engage the digital consumer.
Supply Chain Issues
The car industry is a useful microcosm for understanding the global supply chain crisis because virtually every pandemic-linked economic force has hit the industry — often all at once.
Car production ground almost to a complete halt in the spring of 2020, before rebounding faster than anyone thought possible at the time. The post-pandemic re-bounce left manufacturers short on chips, also known as semiconductors, simultaneously gobbled up by tech companies making laptops and other very-in-demand items.
A lack of computer chips is disturbing supply chains around the world. It has especially wreaked havoc on carmakers, many of whom have been forced to shut down plants for lack of chips integral to modern cars. The shortage is unlikely to end anytime soon as manufacturers around the globe not only rely too much on Asia to supply semiconductors, but especially the big manufacturers had adopted an order-supply by demand policy, that left them without stock to fall back to.
Another problem is the reliance on a few big players. The Taiwanese chip manufacturer TSMC controls 84% of the made-to-order chip market. Samsung and TSMC are the biggest manufacturers and have market dominance.
Politicians around the world call for more chip-producing factories locally. Intel made a pledge to have more manufacturing capacities in Europe and the US.
Onshoring or near-shoring production of supplies allows greater control over some circumstances. Around the US, Europe, and Asia, countries are attempting to expand capacity through increased investment and government support. India plans to build an independent semiconductor production facility. China aims to produce 70% of its chip needs domestically by 2025. The Biden Administration has made supply chain resiliency a top priority, and the CHIPS for America Act aims to incentivize semiconductor manufacturing and research.
The semiconductor shortfall is partly the result of a misestimation on the part of auto suppliers, with most of the auto industry using a just-in-time operating model or near-time sourcing for semiconductors. Car manufacturers cancelled their orders for automotive semiconductors early on in the pandemic as they were anticipating slow sales. When the auto market had a better-than-anticipated third quarter in 2020, manufacturers wanted to ramp up production levels to meet demand. However, it wasn’t as easy as flipping a switch.
This crisis is yet another instance in a growing list of breakdowns exposing a significant vulnerability in the auto supply chain ecosystem: manufacturers’ lack of visibility beyond the first couple of tiers in its supply chain. While the industry has developed a clear view of the big supply chain picture, manufacturers are unable to get ahead of the next disruption, whether that may be in semiconductors, steel, plastic, or other materials. A robust, agile supply chain requires companies to be continuously vigilant of the three R’s of supply chain management
Supply chains—despite concerns that they could be radically reconstructed not just as a result of COVID-19 but because of geopolitical tensions, microchip shortages, and even the blockage of the Suez Canal—are holding, though pressures suggest that change will come. For example, some vehicle lines that had been operating on 50 to 60 days’ supply are down to only ten to 15 days’ supply. Those supply pressures aren’t (yet) manifesting in notably higher prices for the consumer; rather, the squeeze is being felt across the supply chain, with customers getting more cars for less money than they did ten or even five years ago.
Zoom
The 16 largest car manufacturers´ turnover and earnings in Q1 2021 was higher than prior to the pandemic
The car industry is a useful microcosm for understanding the global supply chain crisis because virtually every pandemic-linked economic force has hit the industry — often all at once
Supply chains—despite concerns that they could be radically reconstructed not just as a result of COVID-19 but because of geopolitical tensions, microchip shortages, and even the blockage of the Suez Canal—are holding, though pressures suggest that change will come
Many local and federal governments have increased consumer incentives for EV purchases, often as part of stimulus programs designed to soften the economic impact of the pandemic
The consumer will increasingly doubt the actual benefit heavy subsidies will have on lowering carbon emissions
Airbnb-like services, with peer-to-peer rentals for autos, are catching on as new-car prices soar, and owning a car is less and less a question of prestige
With the rise of the sharing economy and subscription services, it was only a matter of time before the car industry would catch up and car subscriptions would arise
Emerging technologies associated with driverless vehicles provide an opportunity to virtually eradicate human error from our roads. But as the world moves towards a driverless future, there is still much apprehension and uncertainty about the impact of autonomous vehicle technology
During the pandemic, when dealerships around the world scrambled to meet in-person restrictions, the technology proved invaluable
Digitalization is also driving greater transparency in manufacturing
Investors in the auto industry will have the opportunity to determine which impact the industry will leave on saving the environment.
Tesla & Co
In 2019, electric mobility seemed poised to reach a tipping point. With more than two million electric vehicles (EVs) sold around the world, electric cars accounted for a record 2.5 % of the global light-vehicle (LV) market. Then the pandemic hit, endangering lives, shaking up supply chains and workforces, and shutting down factories. The economic slowdown has significantly disrupted the auto industry, causing rapid declines in LV sales.
The COVID-19 crisis has already prompted some changes in both emission regulations and incentives. For instance, many local and federal governments have increased consumer incentives for EV purchases, often as part of stimulus programs designed to soften the economic impact of the pandemic. In Germany, for example, purchase-price subsidies for new EVs can amount to more than $10,000 per vehicle. In China, the purchase-price subsidy currently ranges from 16,200 to 22,500 renminbi (approximately $2,350 to $3,265) by car, depending on its range.
In addition to instituting monetary subsidies for EV purchases, several governments are investing in charging infrastructure as part of their economic stimulus programs. They range from direct investments for public charging stations to subsidies for the installation of private charging stations at homes and workplaces.
Despite many governments, especially in Europe introducing measures to incentivize and promote green mobility sales might not grow as expected. The consumer will increasingly doubt the actual benefit heavy subsidies will have on lowering carbon emissions. The extra electricity needed to load batteries will raise questions because the extra electricity needed, will for years to come be produced by energy plants using coal. Until governments implement a more consequent policy to shut down coal-based power plants the zero carbon emission theory for e-cars can at best be called some sort of greenwashing.
The smooth supply and environmental problems with batteries are other issues. Lithium, cobalt, and graphite — all typical components used in the batteries, along with nickel, manganese, and aluminum — may face supply shortages as demand surges in the medium term. As a natural resource, there is only a limited amount available. Questionable mining practices, far from being ESG conform. This will raise consumer eyebrows once they take their standards of being a responsible consumer into consideration. Nobody has yet offered a sustainable solution for the disposal and recycling of car batteries, so something else needs to be tackled before EVs can be considered truly environment-friendly.
Changing customer preferences, among them the waning interest in owning physical products, have been accelerationg the shift to subscription-based offerings beyond software and digital services
Carsharing & Car Subscription
Airbnb-like services, with peer-to-peer rentals for autos, are catching on as new-car prices soar, and owning a car is less and less a question of prestige. Car ownership is losing its luster in many parts of the Western world.
A 2018 study found, most people who joined peer-to-peer car-sharing services were not replacing a vehicle, and nearly half were looking for alternative transportation because they didn’t own a car. Another 20 % joined to earn money by sharing their wheels.
Ownership for young people is no longer the status symbol or all-consuming aspiration it was just a generation ago. only 45% of Gen Z respondents think that owning a car is a necessity vs. 75 % amongst Baby Boomers.
Startups like Turo Inc., Getaround Inc. Blue SG in Singapore, or Didi Chuxing in China, are helping to lower transportation costs by offering various kinds of car-sharing schemes.
Car-sharing startups are beginning to look more like sales tools than the imminent threat to traditional car ownership. Fiat Chrysler Automobiles NV and Porsche are both experimenting with Turo, BMW and Daimler joined to form Share Now to see if they can up-sell customers or reach new buyers
With the rise of the sharing economy and subscription services, it was only a matter of time before the car industry would catch up and car subscriptions would arise.
Audi on Demand was launched back in 2014 as Audi Select. Other offerings included Care by Volvo, Porsche Drive, Lexus One, Pivotal by Jaguar, and Range Rover or Portfolio by Openroad for Luxury cars just to name a few.
Subscriptions share some characteristics with rentals and leasing, but the distinctions can be fuzzy. Basically, the consumer pays a monthly fee for a car, with most or all costs (except fuel) included: maintenance, repairs, roadside assistance, registration fees, insurance, and taxes. The commitment period varies from one to several months or in yearly increments from one to two years or more.
From the consumer’s perspective, car subscriptions are an attractive proposition when compared with car purchasing, offering convenience, flexibility, and minimal commitment.
The car subscription market has begun to gain traction with consumers and investors, so far, Europe remains the largest market by revenues and Venture capital continues to flow in. In 10 years’ time, car subscriptions could easily become a $30 billion to $40 billion market.
A study found that driverless cars had a higher crashrate compared to conventional cars- almost all accidents in the study were casued by human drivers unaccustomed to responding to a robotic-ultra-safe driving style
Selfdriving Cars
Emerging technologies associated with driverless vehicles provide an opportunity to virtually eradicate human error from our roads. But as the world moves towards a driverless future, there is still much apprehension and uncertainty about the impact of autonomous vehicle technology
In the not-too-distant future, fully autonomous vehicles will be the norm rather than the exception, redefining urban mobility as we know it — and they will be shared, connected and green. This trend poses immense opportunities, for manufacturers and investors alike.
As the quest for driverless vehicles rolls forward, stakeholders across multiple industries – from automotive manufacturing to insurance – need to address a number of questions:
- Issues with physical and financial safety
- In a real life situation who will take over control, the car or the driver ? When and how can the driver/ owner take over control if he desires to do so ?
- Has anybody thought about individuals’ driving styles and AI? This might not match
Driverless vehicles could signal a shift and disruption to industries, forcing businesses to diversify and consider new opportunities. While the work is underway to remove human error from our roads once and for all, there are several knock-on effects that go beyond the highway that will need just as much attention as the technology before we will see vehicles becoming truly driverless.
But whatever the future holds, it will almost certainly signal a massive shift in the nature of work and a huge disruption to the car industry at the same time opportunities are driving transactions in the supplier community as suppliers try to acquire capabilities, such as mapping, augmented-reality technologies, artificial intelligence, and deep learning.
As they move closer to reality, autonomous vehicles will not only play an integral role in the urban mobility ecosystem, but they will also support a number of new business models too
Digitalization
In fact, for the industry at large, the core autonomous, connectivity, electrification, and smart, shared-mobility (ACES) trends will continue to accelerate.
Since 2010, companies and funds outside the traditional automotive industry have invested more than $300 billion in ACES technologies, believing in an attractive future of mobility.
During the height of the pandemic in 2020, investments in smart and shared mobility, such as e-hailing, micro-mobility, and car-sharing, fell significantly from the second quarter to the third quarter.
Automakers will undergo a most dramatic transformation as their entire business models shift from vehicle ownership to mobility-as-a-service. There is a real risk that automakers will have no relationship with the customer in this new ecosystem if they focus entirely on the product
But investments in connectivity (which includes sectors such as infotainment and cybersecurity) actually increased, and investments in electrification barely dipped at all—and then rose dramatically from the third quarter to the fourth quarter of 2020.
Globally, EV manufacturers that offer online sales have seen particularly high demand, since lockdown measures meant to control the spread of COVID-19 have kept people at home. Tesla, the only car manufacturer that shifted to an online -sales model and was the only car manufacturer to increase sales in March 2020.
Consider car- and truck buying. Even before the pandemic, consumers could explore vehicles online to compare prices; experience virtual, 360-degree views of the vehicle; and visit carmaker websites to “build their own cars.” Those features were available even as in many countries, including much of the United States, the actual sales process itself was required to take place at car dealerships. During the pandemic, when dealerships around the world scrambled to meet in-person restrictions, the technology proved invaluable. Some dealers closed their sales floors to the public and engaged with customers over the phone, via videoconference, or by special appointment only. Potential buyers could also take advantage of sites and apps that helped them explore and arrange related services, such as financing and insurance, remotely and virtually as part of the car-buying process.
Digitalization is also driving greater transparency in manufacturing. Until recently, car manufacturers and tier-one suppliers had only limited insight into the processes and inventories of suppliers at lower tiers, including raw-material suppliers at tier four. Now, components are more routinely tracked across the supply chain. This, too, is an acceleration of a trend that began well in advance of the COVID-19 pandemic. In the case of Toyota, dramatic improvements in supply-chain visibility trace back to the Fukushima disaster in 2011, when the company discovered (and then rapidly adjusted for) constraints in key parts and materials that could be traced to the disaster’s effects on the production of microchips by lower-tiered suppliers. A decade later, along the automotive supply chain, the trend toward higher transparency is accelerating for OEMs and tier-one suppliers alike.
Now What ?
Developments in the car industry, technology, and environmental concerns have allowed new business models to flourish, creating new opportunities and challenges for incumbents, startups, and investors alike.
One of the drivers of change with an enormous impact on the car industry is disruption driven from outside the industry. Technology, media and entertainment organizations, start-ups, and even mobility companies are offering their own alternative visions for what consumers can expect inside a future mobility solution.
In fact, for the industry at large, we expect that the core autonomous, connectivity, electrification, and smart, shared-mobility rends will continue to accelerate—particularly in the case of electrification. Consumers will keep a close eye on developments and will avoid those who fail to fir their environmental standards and requirements.
Now, investors get the chance to align their values with their investment choices. It is ultimately about selecting carefully who of the industries protagonists deserve to work with their money. Investments in associated technologies could have the added benefit of accelerating the development of technologies for the betterment of the planet in general.
