<img height="1" width="1" style="display:none;" alt="" src="https://px.ads.linkedin.com/collect/?pid=4958233&amp;fmt=gif">
 
RSS Feed

Mobility | Tony Whitehorn |
04 December 2020

During the autumn of 2020, motor manufacturers drew up their 2021 budgets and therefore looked to the trends and predictions for the coming year. 2020 has been a brutal year for many industries, including automotive, with margins and overall profitability under severe threat. A consecutive year of such an attack on the “bottom line” will be disastrous to many organisations’ futures and that of their stakeholders.

With factory utilisation being challenged and the revenue development being uncertain, the overarching theme of 2021 will be cost reduction. Therefore, forecasting the volume of the global industry and additionally each OEM’s share, as well as the nuances and trends, has never been as significant as it is for 2021. Organisations in the supply chain have little capacity in their reserves to sustain another financially challenging year. So, let’s look more closely at some of the upcoming challenges, their impact on those in the ecosystem and on end customers, and most importantly, what the OEMs can do about it?

TIMES OF UNCERTAINTY REQUIRE A RENEWED FOCUS

2020 will see a decline in the global passenger and commercial vehicle market of approximately 23% to 70 million units. The global 2021 automotive market is anticipated to grow to around 77 million, a 10% increase. However, these figures are littered with COVID caveats.

Whilst the total volume is important, the pandemic creates too many unknowns. For this reason, the nuances and developments within the industry will be of great significance next year. The automotive market is being challenged on many fronts; these developments can be categorised as C.A.S.E.:

  • Connectivity
  • Autonomous
  • Sharing
  • Electrification


The industry needs to prioritise its focus, as it does not have the resources to capitalise on all these areas simultaneously.

Autonomous and Sharing Not a Priority

Autonomous vehicles were in vogue and highly anticipated during 2016-2019. However, the investment involved to escalate the technologies required are significant. Many commentators would agree that a fully autonomous car is not going to be a day-to-day reality for another 30 years. And it will not be a priority for 2021.

In 2019, car sharing was starting to gather momentum. From fractional ownership to hourly/minute rental to ride sharing. Car ownership was gradually morphing into car usage as millennials questioned the necessity to own a depreciating asset that was being used only 4% of the time. The “cliff edge” of COVID meant that sharing became an anathema overnight. Whilst this will return eventually – and when it does it will escalate at an exponential rate – it will not be a priority until a vaccine is widely available and/or the threat of a pandemic re-occurrence has passed. Therefore, it does not look like it will happen anytime soon.

This leaves electrification and connectivity, both of which will be priorities in the auto industry for 2021.

IMPACTS OF THE 2021 AUTOMOTIVE TRENDS

Electrification 

The move to increase the supply of battery electric vehicles (BEV) is being driven by an almost global desire and need to tackle climate change. Over the past 10 years, legislation has focused on carbon emissions to tackle the environmental issues, with CO2 from the tail pipe being the main KPI. However, this drove the industry to gravitate demand towards diesel-powered vehicles in certain territories across the world.

Government Intervention

Whilst diesel vehicles have a lower CO2 output than their petrol counterparts, the nitrogen oxides (NOX) and particulates are usually higher. Hence, diesel engines are more detrimental to air quality and people’s health. In order to mitigate the diesel increase, regulatory intervention has been necessary to drive supply and demand towards BEVs.

These measures are penal in certain territories and will increase in 2021. Europe has set targets for 2020 of an average of 95g/km of CO2 for 90% of the vehicles, which will increase to 100% in 2021. Regulations in Canada, China, India, and many US states are escalating in 2021, employing a mixture of policies that tax more highly polluting vehicles and incentivise BEVs. However, despite such government actions, a dramatic increase in the demand for BEVs during 2021 is unlikely.

Costs for OEMs and Consumers

There are two significant reasons for the slow uptake in battery electric vehicles. Firstly, they are almost 30% more expensive to produce than their internal combustion engine (ICE) counterparts. To make these cars more accessible to the general public, motor manufacturers have had to reduce their margins substantially; some manufacturers are even taking a net loss on such cars in an effort to increase demand for BEVs.

Still, this leaves the BEV significantly more expensive than an ICE car, which means that OEMs are not keen to increase BEV production from a business perspective. However, as BEV production increases and economies of scale become a reality, price disparity with their ICE equivalent will eventually be reduced – the development of cheaper batteries will also be a contributing factor here. Yet, complete price parity is not anticipated until 2050.

Secondly, consumers are reticent about investing in BEVs because of range anxiety, charge times, charge availability, and – because of the factors shown above – their comparatively expensive price.

Impacts Across the Ecosystem

The impact to the industry is that OEMs will have to achieve the low carbon targets or suffer significant financial penalties. Thus, the margins made in 2020 will be further threatened in 2021. As a result, cost-cutting will escalate even further, factories will have to review their future, manufacturers will look to increase their joint venture developments in electrical technologies, and further manufacturer amalgamation will occur. Certain manufacturers will look at specific markets that have penal BEV targets in 2021 and will opt to vacate their presence, realising that there is no long-term business proposition (e.g. Mitsubishi in Europe).

OEMs will look to squeeze 1st-tier suppliers to cut costs, who in turn will put pressure on 2nd-tier suppliers. Any 1st- or 2nd-tier business overly reliant on one client will have little ability to rebuff such price reduction pressure from them. This will result in amalgamation or liquidation of some organisations and in a reduction of future technology investment by supply chain members.

Also, OEMs will aim to reduce dealer margins, resulting in price maintenance for the customer but in significant margin reduction for the dealer. Across various regions, this will mean a move away from the franchise business model and towards an agency structure. Commencing in 2021, this will fundamentally change the relationship with the dealer network.

The haggling process at the dealer will be removed as the margin will be too low to allow for this. In addition, greater price transparency and an increase in direct online sales could lead to the dealer becoming a handover facility. Dealers will look to increase their revenues via aftersales and used cars, and to supplement their new-car profit via multi-franchise facilities (many brands under one roof) instead of single-brand operations.

Connectivity

Digitisation has become key in every industry; automotive is no exception. More than 70% of all cars built in 2020 will have telematic capability and therefore the capacity to be connected to the OEM, dealer, other cars, smart cities, etc. This trend will further increase in 2021 with nearly every new car having this functionality.

Impacts on OEMs and Governments

OEMs will want to obtain data and, for example, predict car failures in order to reduce warranty costs. Governments will start to focus on compensating a decline in fuel tax due to the increasing electrification with a tax based on vehicle usage, which will require connected car technology.

Meeting Consumer Expectations

IoT is now everywhere and the car is just an extension of the consumer’s domain. The car will need to communicate with the customer’s personal digital device and have telemetry integrated into its architecture. The car will become less of a high-tech consumer environment but will become a portal for the consumer to connect with their own device. For instance, integrated navigation systems will decline, with geo-functional apps from the consumer’s phone connecting with the car instead. This trend will start to escalate in 2021.

Customer-Centricity

Customer-centricity will become the driver in the auto industry in 2021. Customers will demand seamless movement between car, bike, scooter, train, and any other form of transportation via their personal devices. They will integrate leisure activities into their mobility activities, thereby eroding the silos of various industries. Customers will want – no, expect – the ability to transact entirely online and require sales and service automation.

However, OEMs are hampered by legacy systems and are not agile enough to fulfil all these needs. They will have to concentrate on their core competency: making great cars. Instead of venturing into other domains, they should leverage the expertise of third parties in those areas instead.

CONCLUSION: THE WAY FORWARD FOR 2021

2021 will be a highly customer-centric year, and they will expect greater integration between their car and personal device. In light of this demand and the cost-conscious environment of 2021, the biggest return for “smart players” in the auto industry will be in the area of connectivity. Car manufacturers should collaborate with nimble partners, as it will enable them to accelerate connectivity by quickly leveraging success stories from other industry verticals. Finding ways to facilitate agile and flexible solutions will be essential to keep pace with customer expectations and dynamic, software-led OEMs such as Tesla.

Tony Whitehorn

Consultant

Tony has worked in the automotive industry for more than 35 years, holding senior positions with Renault, Toyota and Hyundai. He is passionate about helping businesses succeed through collaboration, embracing change and empowering their people. Tony helps our clients to assess their readiness, navigate the necessary changes and start to build on their vision of this future as it relates to mobility ecosystems. When he isn’t working, he loves playing and watching sport, volunteering with his church and spending time with his family.

 

From This Author

  • 09 November 2021

    hi there! I’m Tony Whitehorn

  • 11 May 2021

    Phygital in Automotive: Bridging the Gap Between Physical and Digital – Part 2

  • 20 April 2021

    Phygital in Automotive: Bridging the Gap Between Physical and Digital – Part 1

  • 19 December 2019

    MaaS technology – multiple extensions or a complete overhaul?

 

Archive

  • 28 November 2023

    Moving Towards Global AI Regulation, an Update

  • 24 November 2023

    Marketplace Models and the Future of Airline Retailing

  • 21 November 2023

    Unlearn Churn: How Predictive Analytics Can Improve Retail Customer Retention

  • 16 November 2023

    Hi, I’m Matt Cloke

  • 15 November 2023

    How Microbetting Is Creating a More Engaging Fan Experience

  • 09 November 2023

    Learning the ecosystem lessons

  • 03 November 2023

    10 Groundbreaking Edtech Trends Revolutionizing the Future of Education

  • 02 November 2023

    What’s Shaping the Future of Capital Markets? 6 Takeaways from OPTIC

  • 31 October 2023

    Using Tech to Maximize the Impact of Major Sporting Events

  • 30 October 2023

    How to Streamline Your Retail Operations Through Selective Stocking

  • 19 October 2023

    Why Retail Margins are Tightening (and How to Protect Yours)

  • 13 October 2023

    Why Ground Operations Need Digital Transformation to Cope with Demand

  • 11 October 2023

    MWC Las Vegas: 8 Key Takeaways in Telecommunications

  • 09 October 2023

    Going Green: 5 Ways to Enjoy Leisure Activities Responsibly

  • 06 October 2023

    How Airlines Can Win a New Generation of Passengers

  • 26 September 2023

    Who Wins Most from Healthcare’s AI Transformation?

  • 21 September 2023

    Why Loyalty Programs Matter More Than Ever in Retail

  • 20 September 2023

    What Businesses Need to Start Innovating

  • 14 September 2023

    The Spark That Drives Machine Learning to Shine

  • 08 September 2023

    Why Customer Experience is at the Heart of Supply Chain Management

  • 07 September 2023

    How Offer and Order Management Systems Are Expanding The Aviation Business Model

  • 25 August 2023

    Tuning Out the Noise: Picking the AI for Practical Business Impact

  • 24 August 2023

    Resetting the Status Quo – How Banks Can Overcome Payments Challenges

  • 17 August 2023

    Opening Lap: An Endava and Toyota Racing Development Q&A

  • 17 August 2023

    The AI Boost in Gaming: Gameplay, Narrative and Production

  • 08 August 2023

    How Healthtech Simplifies and Secures Payments Processing

  • 14 July 2023

    Streamlining Digital Media Supply Chains with Generative AI

  • 13 July 2023

    4 Areas for Financial Institutions to Consider When Starting Out with Real-Time Payments

  • 12 July 2023

    Regtech - Necessary evil or competitive edge?

  • 07 July 2023

    Prime and Thrive: 3 Steps to Build Your International Payments Model

  • 06 July 2023

    Real-time Fraud – Solving the Virtual Pocket-Picking Problem

  • 29 June 2023

    Salut! I’m Radu Orghidan

  • 14 June 2023

    Debunking the Myths on Generative AI: What Is the Reality Behind the Most Common AI Misconceptions?

  • 31 May 2023

    The Time Is Now to Start Thinking About Real-Time Payments

  • 25 May 2023

    An Anatomy of the Data-Driven Retail Supply Chain

  • 23 May 2023

    BNPL regulation to protect consumers and control third-party lenders

  • 16 May 2023

    Salut! I'm Adriana Calomfirescu

  • 15 May 2023

    Hi, I'm David Boast

  • 12 May 2023

    The Business Impact of Fan Engagement: How to Leverage Technology to Improve Loyalty

  • 09 May 2023

    Staying Relevant - Why Merchants should embrace alternative Payments methods

  • 02 May 2023

    How IoT is changing Insurance

  • 26 April 2023

    A Veteran Game Developer's Perspective on Tool Development

  • 24 April 2023

    How Digital Ecosystems Enhance the Healthcare Experience

  • 21 April 2023

    Green Machines How Tech can Help Companies Hit Net-Zero Targets

  • 20 April 2023

    The Role of People and Technology in the Future of Underwriting

  • 19 April 2023

    Media 2030: Why Advertisers And Publishers Are Racing To Find New Strategies

  • 18 April 2023

    Alright, I’m Adrian Sutherland

  • 14 April 2023

    How Synthetic Data Could Solve Patient Privacy Dilemma

  • 11 April 2023

    Payments Makes The World Go Round

  • 06 April 2023

    Higher Fidelity Good Outcomes Harnessing FCAs Consumer Duty

  • 05 April 2023

    AI in Pharma: How Machine Learning is Transforming Drug Development

  • 04 April 2023

    Hello! I’m Leane Collins

  • 31 March 2023

    The Dos and Donts of Carve Outs Private Equity

  • 30 March 2023

    Cage Of Reason: Fca's New Consumer Duty Heralds The Rise Of The 'Reasonable Insurer'

  • 28 March 2023

    A Legal View on the Ownership and Future of AI-Generated Works

  • 24 March 2023

    Championing Women In Tech

  • 23 March 2023

    5 Ways Capital Markets Companies Can Ensure Resilient Operations

  • 15 March 2023

    Buenas! I’m Leticia Chajchir

  • 14 March 2023

    4 Ways To Improve Customers’ E-commerce Search Experience

  • 28 February 2023

    4 Healthcare Innovations that Can Benefit People and Profit

  • 21 February 2023

    Hey, I'm Lewis Brown

  • 17 February 2023

    Top Considerations for Financial Services Providers entering th Cross-Border Payments Space

  • 13 February 2023

    Better Together Harnessing The Power Of Digital Ecosystems

  • 09 February 2023

    What to Include in a Customer Re-Engagement Content Library

  • 07 February 2023

    Supercharging Wealth Management with Hyper-Personalisation

  • 02 February 2023

    How Innovating the Insurance Customer Journey creates a Competitive Advantage

  • 30 January 2023

    G'Day, I'm David Marsh

  • 26 January 2023

    Empowering Underwriting and Unlocking Revenue with Legacy Insurance Data Sets

  • 24 January 2023

    Four Stakeholders who win the most when Healthcare innovates

  • 23 January 2023

    Journey to the Centre of the Cloud with AWS - Part 3

  • 20 January 2023

    Journey to the Centre of the Cloud with AWS - Part 2

  • 18 January 2023

    Journey to the Centre of the Cloud with AWS - Part 1

  • 17 January 2023

    The 4 Most Common Mistakes in Retail Site Design

  • 13 January 2023

    Boost and bolster your innovation. Three tips to help get it to the next level

  • 10 January 2023

    5 Questions in Smart Energy that will define the Net Zero Transition

  • 19 December 2022

    Looking ahead and helping our customers do the same

  • 16 December 2022

    Stepping forward - The State of Cross-Border Payments in Southeast Asia

  • 14 December 2022

    Tech and Tinsel - Another Holiday Q&A with some of our Execs

  • 13 December 2022

    Why should Payment Service Providers be thinking about adding an ISV?

  • 07 December 2022

    How AI and Automation are revolutionising microscopy

  • 07 December 2022

    Venturing into the Metaverse to build an Innovative Bridge to Our People

  • 05 December 2022

    An Australian Eye on the Global Effort to Improve Cross-Border Payments

  • 29 November 2022

    How Reverse Logistics are Turning E-commerce Green

  • 23 November 2022

    5 things we learned at World Aviation Festival 2022

  • 23 November 2022

    Cyber Security Incidents in Australia Highlight the Need for a Balance Between Risk and Innovation

  • 22 November 2022

    The Era of Ecosystems and the Rise of Open Insurance

  • 18 November 2022

    How Tech is changing Sports betting for the better

  • 16 November 2022

    4 Ways Insurers Can Leverage Technology to Differentiate Themselves

  • 16 November 2022

    The Future of Banking in the Nordics - Being Digital and Personal

  • 15 November 2022

    Staying Relevant in the Buoyant Cross-Border Payments Market

  • 15 November 2022

    3 Experts' Insights on the Complicated Relationship between Fintechs and Banks

  • 09 November 2022

    How can banks create a secure, optimised cloud-enabled architecture?

  • 08 November 2022

    Tech is Good for you: How Wearable Edge Devices Changed Healthcare

  • 01 November 2022

    How Microservices can upgrade the Customer Experience

  • 25 October 2022

    How Technology can help Monitor the Circular Economy

  • 18 October 2022

    Why it's Time for Banks to let go of Legacy IT

  • 11 October 2022

    Buy vs. Build in Banking: Which Option is Right for You?

  • 04 October 2022

    The Rise of Super Apps: How Banks can compete

  • 28 September 2022

    AI Art in Game Production – an XDS 2022 Table Discussion

  • 20 September 2022

    Payments Data Monetisation is Key to Driving Sustainable Growth

  • 13 September 2022

    Navigating the Healthcare Ecosystem

  • 30 August 2022

    hey y’all! I’m Ashley Grant

  • 23 August 2022

    5 Ways to Fix Your Data Spine in Banking

  • 16 August 2022

    De-risking Digitalisation

  • 09 August 2022

    hi, I’m Brian Estep

  • 02 August 2022

    hey! I’m Lia Rollman

  • 19 July 2022

    The New Ways of Issuing Cards

  • 12 July 2022

    Scores on the Door: Rating Autonomous Vehicles

  • 06 July 2022

    We’re in Nottingham – a Q&A on Endava’s New Delivery Centre in the UK

  • 06 July 2022

    Data-Driven Impact: Don’t Settle for Less

  • 06 July 2022

    hey, I’m Chris Hart

  • 28 June 2022

    Platforms: a Blessing or a Curse?

  • 23 June 2022

    A Payments View on Marketplaces – How to Be(come) Successful

  • 21 June 2022

    Intelligent Commercial Underwriting

  • 14 June 2022

    The Future of Supply Chain: What’s Next?

  • 31 May 2022

    The Future of Autonomous Vehicles in T&L

  • 27 May 2022

    Hello! I'm Hannah McCarthy

  • 24 May 2022

    Going Native: Why Cloud-Native Services are Essential

  • 19 May 2022

    How to Tackle Legacy – Breaking Down Walls Between Change and Run

  • 17 May 2022

    Advantages of a Yard Management System

  • 13 May 2022

    Are Phones About to Become the New POS Terminals?

  • 10 May 2022

    The Digital Economy is an Upgrade of Smart Cities and Communities

  • 05 May 2022

    hello! I’m Sumita Davé

  • 03 May 2022

    Physical Automation in the T&L Industry

  • 28 April 2022

    zdravo! I’m Andrej Kotar

  • 26 April 2022

    Open Banking in the US

  • 20 April 2022

    hello! I’m Paul Maguire

  • 19 April 2022

    Digital Automation in the T&L Industry

  • 12 April 2022

    How Do Banks Embrace Embedded Finance – Have the Fintechs Already Won?

  • 06 April 2022

    ESG Data Architecture is a Business Imperative – How to Get Started

  • 05 April 2022

    hi! I am Roy Murphy

  • 05 April 2022

    Modernizing the Shipping and Cargo Process

  • 30 March 2022

    The Metaverse Evolution and Learning from the Games Industry

  • 30 March 2022

    Do Androids Dream of Trading Electric Sheep for Digital Wood? An Introduction to Automated Game Design

  • 23 March 2022

    Real-Time Payments in Australia – Why Corporates Should Get on Board

  • 22 March 2022

    Current Challenges in the Transportation & Logistics Industry

  • 16 March 2022

    bok! I’m Sanja Cvetkovic

  • 15 March 2022

    Rapidly Transforming: Healthtech Trends in 2022

  • 08 March 2022

    How to Digitize Warehouses and Distribution Centers

  • 01 March 2022

    Top Challenges in Warehouse and Distribution Centers

  • 28 February 2022

    Tackling CIB Legacy at its Core

  • 23 February 2022

    salut! I am Isabela Buhai

  • 22 February 2022

    4 Buy Now Pay Later Trends Set to Disrupt the Industry

  • 15 February 2022

    salut! I’m Natalia Ciobanu

  • 14 February 2022

    Product-Led Innovation – a Q&A with Joe Dunleavy

  • 02 February 2022

    Buy Now Pay Later: Will Regulation Burst the Bubble?

  • 31 January 2022

    Innovation Will Spur Ireland’s Race to the Top

  • 28 January 2022

    The Value of Digital and Automation in the Product Returns Process

  • 26 January 2022

    Virtually Disrupted? Keeping Pace with Accelerating Customer Expectations

  • 19 January 2022

    The 3 Big Ps in Modern Insurance: Personalisation, Prediction and Prevention

  • 19 January 2022

    An Introduction to Mobility as a Service in the US

  • 12 January 2022

    hello! I’m Paul Willoughby

  • 12 January 2022

    Buy or Build? A Game-Changing Question in Insurance

  • 11 January 2022

    Payment Service Providers 2.0

  • 21 December 2021

    Making a Positive Impact Through Giving

  • 14 December 2021

    From Global Pandemic to Holiday Spirit – a Q&A With Some of Our Senior Execs

  • 07 December 2021

    Hand in Hand with Artificial Intelligence in the Energy Sector

  • 03 December 2021

    Evolving Digital Self-Service in Insurance

  • 29 November 2021

    zdravo! I’m Ilija Gospodinov

  • 24 November 2021

    yes folks, I’m Joe Dunleavy

  • 09 November 2021

    hi there! I’m Tony Whitehorn

  • 03 November 2021

    Operating Responsibly for Future Success

  • 02 November 2021

    Leveraging ESG Data to Grow Your Business

  • 26 October 2021

    Smart Tech: Providing the Visibility Supply Chains Need

  • 12 October 2021

    hello! I’m Scott Harkey

  • 05 October 2021

    How to Improve Intelligent Energy Storage Systems Using AI

  • 28 September 2021

    Data-Driven Insurance

  • 21 September 2021

    hi y’all! I’m Antony Francis

  • 14 September 2021

    Once Upon a Time … in Payments

  • 31 August 2021

    Personalised Banking: How to Get Ahead of Ever-Changing Client Value Propositions

  • 17 August 2021

    RPA: Using Robots to Streamline Processes

  • 10 August 2021

    The Inclusive Workplace of the Future – a Q&A with Asif Sadiq MBE

  • 03 August 2021

    hello! I’m Elisabeth Bradley

  • 27 July 2021

    How the Board Game Catan Conquered the Digital World

  • 13 July 2021

    The Transformation Trifecta: Cloud, Digital and Open Banking

  • 06 July 2021

    How to Future-Proof the Digital Retail Experience

  • 23 June 2021

    hi! I’m Thomas Bedenk

  • 17 June 2021

    Hello! I’m Adrian Bugaian

  • 18 May 2021

    4 Techniques to Fix Digital Breakages in the Supply Chain – Part 2

  • 11 May 2021

    Phygital in Automotive: Bridging the Gap Between Physical and Digital – Part 2

  • 05 May 2021

    Artificial Intelligence: Where Does The Real Value Lie?

  • 27 April 2021

    4 Techniques to Fix Digital Breakages in the Supply Chain – Part 1

  • 20 April 2021

    Phygital in Automotive: Bridging the Gap Between Physical and Digital – Part 1

  • 14 April 2021

    What ‘We Care’ Means at Endava – a Q&A on Sustainability with our CEO

  • 08 April 2021

    Before Commission / After Digitisation – a Pivotal Era for Australian Payments

  • 06 April 2021

    Insurance Insights: Low Code

  • 30 March 2021

    Insurance Insights: Intelligent Underwriting Workbench

  • 23 March 2021

    The Challenge of Technology is Not Technology

  • 18 March 2021

    Supporting and Empowering Women in Tech

  • 16 March 2021

    Insurance Insights: Customer Retention & Cross-Selling

  • 09 March 2021

    Insurance Insights: Cloud Migration

  • 02 March 2021

    How to Improve Interoperability in Healthcare

  • 23 February 2021

    Insurance Insights: Data Exploitation

  • 16 February 2021

    Insurance Insights: Open Insurance

  • 11 February 2021

    Mapping the Future Applications of Artificial Intelligence

  • 18 December 2020

    Celebrating 20 Years of Endava – with Julian Bull

  • 15 December 2020

    Insurance Industry Trends from DIA Prime Time

  • 08 December 2020

    Celebrating 20 Years of Endava – with Rob Machin

  • 04 December 2020

    Trends in the Automotive Industry for 2021

  • 25 November 2020

    Approaching 2021 – Technology Becomes the Business

OLDER POSTS