2021 might be an thrilling yr for the automotive sector, as a consequence of an acceleration of the mobility transformation seen all through the final decade. The business was already scuffling with monumental challenges posed by the 4 pillars of the CASE transformation. The inherent monetary stress has been additional heightened by COVID-19, resulting in a precedence redefinition for carmakers. This implies prioritising areas with a faster payback interval like electrification and related automobile. In flip, different areas with a tougher enterprise case get pushed down the listing by way of funding focus, akin to shared mobility or autonomy from Stage 4 (L4) onward. Lastly, the transformation within the sector will even carry seen modifications to the automotive worth chain, particularly by way of gross sales and after-sales.
Mergers and acquisitions will intensify
The primary half of 2020 was a particularly difficult interval for the business and its restoration will take a number of years—however some might by no means get well from that. This extra stress will flip a number of corporations into nice bargains for acquisition. It is going to additionally unlock new prospects for mergers between corporations experiencing difficulties. By the identical token, the present setting will even imply bankruptcies—particularly for automotive suppliers who haven’t been fast sufficient to make the transition to electrification or to digitally remodel their worth chain.
EV development in Europe, China and US
2021 might be a terrific yr for electrical car (EV) market penetration. In Europe, the tempo of development will additional improve—not as a consequence of COVID-19, however principally due to the extremely stringent CO2 laws imposed by the EU. The Chinese language authorities will cut back incentives on New Power Autos (EVs, PHEVs and FCEVs) by 20% however, on the similar time, it can use different mechanisms like proscribing ICE registrations to verify EV gross sales penetration will preserve rising.
In US, there may be main expectation on what the brand new administration will do to spice up help for EVs. Little question this may result in a quicker development than in earlier years, however it can take greater than 12 months to introduce regulatory modifications throughout all states. Nevertheless, there’s a likelihood the present EV tax rebate scheme is additional expanded. As well as, the truth that EV supporters see an ally within the Biden administration will certainly present encouragement to additional speed up funding in electrification.
EV start-ups and EV open platforms come to life
The success of Tesla has impressed many different entrepreneurs to observe on the footsteps of Elon Musk. These new EV start-ups are already right here and have proven their merchandise however 2021 will mark the beginning of manufacturing for EV newcomers like Fisker, Lucid or Rivian. Different EV start-ups like Xpeng and Nio, which have been going through headwinds not so way back, are additionally now seeing seen gross sales development, which is a promising signal for his or her future.
This entrepreneurial rush to kind the following EV start-up was additionally seen by others as a possibility to start out providing open-source EV platforms. These would allow upcoming EV start-ups to simply develop a brand new automobile by merely adopting an ‘off-the-shelf’ platform. In 2019 Volkswagen had already introduced its MEB electrical platform could be obtainable to different corporations on an open supply mannequin. Nevertheless, Foxconn and Geely at the moment are additionally placing in the marketplace open supply EV platforms. Whereas on the long term the market received’t be sufficient for a number of EV platform suppliers, these initiatives will make it straightforward for brand new entrants to affix the EV race.
Autonomous drive: L3 on the street, L4 within the arms of tech
After a lot ready, 2021 will see the market deployment of L3 autonomy by a number of carmakers, like Daimler, Ford, GM, Honda, Toyota and Xpeng. The UN’s new regulation on automated lane retaining methods is now being rolled out to a minimum of 60 nations, therefore providing carmakers the regulatory readability wanted to lastly transfer ahead.
Nevertheless, L4 autonomy is a really totally different image. Other than Waymo’s robotaxi service in simply part of Phoenix’s metro space, no different firm is but providing a daily service past trials utilizing shadow drivers or teleoperation. Consequently, making L4 autonomy work with full security and reliability in the primary cities internationally is a Herculean enterprise that can take a minimum of most of this decade. This daunting prospect, added to the monetary stress triggered by the pandemic, will power carmakers to rely way more on expertise corporations to attain this long-term aim. The just lately solid partnerships between Daimler and Nvidia or Waymo are an excellent instance of that.
Micromobility and vehicles widen acquire over mass transit
The concern of an infection attributable to the pandemic noticed metropolis dwellers transfer from public transport to vehicles, bicycles, e-bikes and e-scooters. This development will proceed in 2021, not solely as a result of COVID-19 will nonetheless be fairly current, but in addition as a result of a number of commuters have turn into accustomed to the brand new alternate options. Those that purchased e-bikes to journey to work actually received’t return to public transport so simply. Shared micromobility corporations will even see an increase in exercise: the pandemic triggered a development in first-time customers and these and different new customers will preserve growing the possibilities of enterprise success for micromobility.
Related automobile shifts to high-value companies
Historically it has been tough for legacy carmakers to reveal the worth of related automobile companies to their clients—and, therefore, justify the month-to-month charge. Going previous related navigation or infotainment streaming, there wasn’t way more to entice customers. Precisely for that reason—and pushed by the successes of Tesla on this space—carmakers will more and more transition to related companies the place it’s simpler for customers to affiliate worth with worth. Digital operate upgrades might be certainly one of them. As well as, automobile connectivity will turn into an enabler to different companies like related subscription and leasing, the place it may be used to decrease month-to-month charges accordingly to car utilization patterns. Total, this transition might be essential to attain related automobile profitability and switch software program into the primary income generator on the long term.
The revolution in retail and after-sales is beginning now
Tesla was the primary carmaker to efficiently deploy on-line gross sales, whereas different gamers didn’t see a lot worth in it. Then got here the pandemic, together with dealership closures. This led to a significant elevated concentrate on on-line gross sales, with a number of carmakers like Daimler and Volvo defining targets to promote a considerable a part of their quantity on-line by 2025.
Nevertheless, the motivation lies even deeper than COVID-19. As premium carmakers lead the transition to EVs and autonomous drive, they’re additionally the primary to grasp this entails a considerable discount in aftersales income for his or her sellers. In the present day a Tesla doesn’t require common servicing intervals, which implies competitors will quickly observe the identical path. Therefore, 2020’s sharp EV penetration rise in Europe is triggering the beginning of a redefinition course of for retail and after-sales. A variety of this may culminate in old-style price chopping, however probably the most modern incumbents will remodel the way in which they promote vehicles and attend to their clients’ wants. This, in flip, will entail a a lot larger adoption of holistic digital options to work together with these clients and improve their stage of satisfaction.
Pedro Pacheco is Senior Analysis Director at Gartner.
