Top 10 Global Automotive Trends in 2021
In 2018 and 2019, the automotive industry reeled from shrinking economic activity, rising competition, slowdown in BRIC economies, and tightening lending norms that dampened global demand. Then came the disruption of COVID-19 lockdowns in the first half of 2020, plunging automotive sales to historic lows. But aided largely by the consumer shift towards personal mobility over public and shared transport, the auto industry is reviving at a faster than expected rate.
In terms of how major markets are convalescing from the after effects of the pandemic, China’s automotive market has been the fastest off the blocks, followed by the US which perked up around Q3 2020. Europe and India have also shown signs of a steady comeback, though at a slower rate.
Here are the 10 top trends that are anticipated to invigorate the automotive industry in the months ahead:
Shift From Horsepower To Computing Power
Automakers will have to reinvent themselves as a digital company as more technology-led competitors muscle into the action and digital touchpoints and use cases explode with the advent of Electric and Connected car services, and Autonomous vehicles not far behind. Companies that can’t get their digital act together in 2021 will become obsolete. Companies will be faced with some tough decisions to bring software development in-house and some may have to start building their own operating systems or partner with Silicon Valley companies to develop next generation vehicle operating systems.
Forget A Showroom Visit, Just Crank Up Your Computer
While online retail has already made significant inroads into the more organized automotive markets of North America and Western Europe, what the pandemic has done and will continue doing is push it into hyperdrive. The pandemic has taught consumers how simple, convenient and easy it is to buy everything online, even big-ticket items like cars. The added attraction, of course, is that online marketplaces, unburdened by the cost overheads associated with physical showrooms, can offer prices that are extremely competitive.
We could see automakers turn to innovative marketing strategies, including using social media influencers, to rake in more test drives or, as we’ve seen in China, accept bookings on third party e-commerce platforms. The biggest story in powering the automotive ecosystem to sell and engage with customers digitally will lie in technology enablers. Companies such as Roadster, Digital Motors, G Forces, CitNow, and Sophus3 have shown how they can help dealerships across markets have a fighting chance to sell cars and save dealership jobs.
Connected Cars Will Do More
Connected car Internet of Things (IoT) platforms will bump it up by several notches this year; in-car marketplaces will allow us to indulge in personal retail therapy (or order that butter chicken) from the convenience of a car, while features-on-demand will improve vehicle convenience, comfort, multimedia, performance, and safety. Together, they will totally transform the user experience and push the boundaries of personalization, while opening up innovative business models and recurring revenue streams for automakers.
Rise In Innovative Subscription-based Vehicle Usership (Not Ownership) Models
There could be a bright future for new vehicle ownership models like leasing and vehicle subscription. Highly flexible contract durations, vehicle commitments that could be short, and easy vehicle swapping will represent the upside for consumers but high subscription fees will prove a dampener. In order for vehicle subscription to be successful, therefore, automakers will need to set in place a business model that covers not only the premium needs of the market, but also successfully offers affordable, price-sensitive variants that can be easily accessed by the mass market. Another point to consider will be to include young used cars at an affordable price point, thereby ensuring a fleet mix of both new and used cars catering to both ends of the customer spectrum. For lease providers, leasing will be a quick and easy solution to monetize the large base of used car assets, especially off-lease cars.
With New In Trouble, Used Will Be Good
New car sales might be in trouble but used car sales will boom in 2021. Growth will be helped along by the rising appeal of online used car retail, which we anticipate will jog along at a compound annual growth rate of 9% between 2019 and 2025. Demand for used electric and hybrid vehicles is also expected to pick up.
The Pandemic Will Make Things Personal
With the purchase of compact small cars, first time car buyers will swell revenues in markets like China and India. This will be reflective of more general, global trends where consumers who fear infection risks will give a wide berth to shared and public transport in favor of personal mobility modes. Elsewhere, like in Germany, government subsidies and incentives offered as part of COVID-19 recovery packages will provide a fillip to electric and hybrid vehicle sales.
Pink Will Be The New Green
Aging populations, rising air pollution, increasing road accidents and, need I add, the pandemic will spotlight the importance of health, wellness and wellbeing (HWW) features in cars. Automakers that have so far been focused on green agendas will look to advanced connectivity technologies to keep vehicle occupants in the pink of health. From features that detect if you’ve had too much to drink, purify in-vehicle air, analyze real-time pollution at street level, and even seats with massage functionalities – every part of the car will be revisited with a view to keep vehicle occupants safe and healthy. We expect the number of connected vehicles with such features to increase at a compound annual growth rate of 25% between 2019 and 2025.
Circular Economy, Automotive Industry Innovates to Zero
With wastes generated by end-of-life vehicles becoming a massive problem, automotive companies will look beyond carbon-neutral factories to more fully embrace circular economy concepts and ideas of ‘reuse and recycle’. Propelled by their commitment to developing sustainable vehicles per environmentally-friendly regulations the world over, the automotive industry will incorporate ‘Design and Dismantle’ principles at progressively earlier stages of the vehicle development process with the aim of reducing subsequent waste. ‘Innovating to Zero’ will be another goal towards which automotive companies will continue to work, finding interesting new ways to reach that magic figure of zero, whether in terms of zero fatalities or zero-emission cars.
Electric Vehicles Will Get Their Own Dedicated Platforms
Electric vehicles (EVs) will continue to roll out in big numbers powered by a combination of increasingly stringent emission regulations and shifting consumer preferences. Keen to grab a chunk of the huge addressable market for EVs, automakers will aim for economies of scale by building modular, scalable dedicated EV platform architectures.
The fuel cell electric vehicles (FCEVs) vs BEV battle will become more intense than a Grand Slam final between Federer and Nadal. This could be the year that FCEVs begin to pull ahead: they have 3-5 times the range of BEVs, recharge faster, and are truly clean in that water makes up their tailpipe emissions. I’m not the only one thinking along these lines. Automakers are ploughing more money into FCEV development, while governments in the U.S., Germany, China, South Korea and Japan are also throwing their weight behind FCEVs.
With a rough year behind them, the automotive industry will be looking to 2021 to get right back onto the highway of growth.
READ MORE HERE: forbes.com
Predictions for the 2021 Automotive Market
As we face a new year, industry experts anticipate what lies ahead. Here are some predictions for the market in 2021:
Even with a Vaccine, Things Won’t “Return to Normal” in 2021
The economy and specifically the auto industry will be hunting for a new normal in 2021, a world distinct and different from whence we came only one year ago.
According to dealer research by the Research & Market Intelligence team at Cox Automotive, 54% of consumers believe the U.S. will have a government mandated lockdown in 2021 (vs. 37% of dealers). Less than ⅓ of dealers and consumers think things will “go back to normal” in 2021 and 87% of consumers believe that social distancing and mask policies will continue to be the norm in 2021.
67% of consumers believe people will still wear masks even if the vaccine is widely available. 49% of consumers plan to get the COVID-19 vaccine in 2021, but only 7% think that the vaccine will eradicate the virus for good.
The Auto Industry Will Emerge Stronger from Pandemic
Cox Automotive found that 49% of franchised dealers think their dealership will be very profitable in 2021 (compared to 33% of independent dealers). 35% of franchised dealers will be more reliant on their OEM in 2021 to stay profitable. 27% of franchised dealers think their relationship with their OEM will be BETTER in 2021 compared to 2020.
The pandemic will likely have a large effect on the industry for the foreseeable future. With the future looking unclear, and years-long trends being tossed by COVID, it is important for shop owners to watch projected trends to stay afloat. Staying on the cutting edge of trends within the automotive industry is important to remain competitive within the market.
2021 is the Tipping Point for Digital Retailing
9 out of 10 dealers and consumers believe consumers will do much more shopping online in 2021 instead of physically going to stores for routine household purchases. 45% of franchised dealers believe their OEM will require them to update their software and/or processes to better accommodate digital/online transactions.
Personal Vehicle Ownership will Increase, Ride-Sharing & Ride-Hailing Decline
24% of consumers plan to increase their number of vehicles per household in 2021. 17% of consumers plan to use ride-hailing/ride sharing in 2021 (compared to 39% usage in 2018).
For half a decade leading up to 2020, ride-sharing companies threatened to destroy personal vehicle ownership. People turned to Lyft, Uber, or carpools to get to work instead of personal vehicles. The trends report says that an effect of COVID-19 was a resurgence in personal vehicle usage. As the CDC advised Americans to create small circles of people, the car became “our own private bubble,” the reports says, moving many to opt to ride alone.
The trends report cites Uber purchasing Postmates for $2.65 billion to show that ride-share companies are moving to the transportation of goods. This transition will only reinforce the resurgence of personal vehicles further.
Expansion of EV and Hybrid Vehicles
The trends report says that the 2021 U.S. lineup includes 75 electric or hybrid electric models, a number that increased by 16 from the year before. That’s a result of auto manufacturers introducing EV or hybrid vehicles of their own, such as Ford’s EV F-150 and GM’s EV Hummer.
More competition in the EV and hybrid domains will increase the innovation behind the engineering. Consumers are concerned about the range of electric vehicles. In 2021, however, the average range of EV and hybrid vehicles is expected to increase by 9 percent, according to the trends report. Overall the consumer gains a longer, more advanced, and greener ride experience.
New competition in the EV Market may slow Tesla’s growth. 15% of (non-Tesla) dealers believe Tesla will be the most successful brand of the next decade. 30% of franchised dealers and 7% of independent dealers will invest in upgrading their facilities to prepare for increased EV sales in 2021. Most expect a new electric vehicle startup will come on the scenes in 2021 and rival Tesla.
Decreased Traffic, Increased Speeds, Greater Severity
A result of COVID-19 was a rise in crash severity, a trend so prevalent that both reports address it. The casualty report links a decrease in miles driven to less busy roads, increasing incidents of speeding. Increased speeding led to vehicle collision estimates labeled as “non-drivable” to increase by nearly 6 percent. Airbag deployments also increased by 22 percent, according to the trends report. Both reports predict higher repair costs, insurance demands, and settlement amounts, which could lead to an increase in fraudulent claims.
Recent Impacts to the Automotive Supply Chain
Parts shortages and other factors disrupting production have extended the inventory crunch, and auto retailers said it could be months before relief comes.
Disruptions to the supply chain caused by COVID-19 and component and material shortages, such as the semiconductor industry shortage, have put this into sharp focus. Given the recent impacts of the pandemic and shortages to companies’ supply chains, we have seen a serious focus on supply chain strategy, which requires input and buy-in from supply chain managers, procurement and executives. There are a series of trends that we are seeing automotive manufacturers implement:
- Procurement model that looks beyond the lowest cost supplier
- Right-shoring considerations
- Transparency in the supply chain
- Enhanced cybersecurity
Although pricing and cost always will be driving factors in sourcing decisions, automotive companies are beginning to lessen their focus on sole sourcing and Just-In-Time (JIT) delivery from the lowest cost supplier.
Many automotive companies are taking additional steps to ensure a more stable and resilient supply chain through strategic changes to their procurement model and/or contract changes. Many automotive companies are considering dual-sourcing, on-site and off-site warehousing options to ensure that they have a bank of parts available and taking steps to diversify their third-party logistics providers. On the commercial contracting side, automotive companies are reexamining the standard force majeure provisions in their contracts to ensure that they are properly tailored to: encompass past force majeure events and events that may cause disruptions in the future; focus on rights and obligations depending upon whether the company is a buyer or seller; and allocate risk, including the series of costs that may not have been previously spelled out in the contract, like freight expedites, return costs, overtime, etc., that were necessarily incurred during the pandemic shutdowns and restart.
For some components, automotive companies are considering options to move away from sourcing in China and analyzing the cost versus risk mitigation benefits from shifting their supply chains away from China to other countries. The term “right-shoring” refers to locating a business’s manufacturing operations in localities and countries that provide the best combination of cost and efficiency.
As started happening after the implementation of the tariffs and trade wars commencing in 2018, some automotive manufacturers were considering moving away from China as a major manufacturing hub and looking at other options. Alternatives include reshoring to the U.S., near-shoring to Mexico or Canada, or exploring options in parts of Southeast Asia (Vietnam and Thailand are key locations being considered), India or Latin America (Brazil is a key location being considered).4 When weighing the pros and cons of locations, companies always will consider cost of materials, property prices, labor costs, labor regulations, IP protections and logistics. Notably, China continues to be the main manufacturing hub and sourcing location for certain key electronic components, which will continue to be sourced from China and will become increasingly important with the industry’s movement to electrification.
Automotive companies are taking short- and long-term actions to create more visibility within their supply chains and increasing transparency throughout their supply chains in order to mitigate against future risks. Manufacturers that were able to successfully navigate the pandemic noted the importance of having transparency in all aspects of their supplier’s supply chain, from material providers to facility locations to logistics. Companies that have not already done so are looking at options to digitize their supply chain in order to have real-time visibility into any potential or existing disruptive factors. Of course, this sort of transparency from raw material inputs to end-customer deliverables would require data from all sub-suppliers in a company’s supply chain. Traditionally, certain aspects of an automotive supplier’s supply base and logistics have been considered to be proprietary and confidential information. However, we already are seeing pressure by OEMs to Tier 1 suppliers to provide more information regarding their sub-suppliers, sourcing locations and even pricing information. Although obtaining this level of detail into their suppliers’ operations may be useful for navigating future issues and mitigating supply chain disruptions, we expect that automotive suppliers will resist providing certain pricing and cost details that would allow an OEM unwelcome insight into a supplier’s pricing model or even present antitrust issues in the automotive industry.
With growing technology in both the automotive supply chain and in smart vehicles, automotive companies need to plan to enhance their cybersecurity measures. Automotive manufacturers are rolling out detailed policies that incorporate industry best practices, including SAE guidelines.
In short, there are a number of concerns and lessons learned that are driving changes in automotive companies’ supply chain strategy and best practices. However, cost and pricing will continue to be the main considerations in any sourcing model.
READ MORE HERE: jdsupra.com, bloomberg.com & wsj.com
Accelerated Electrification Strategy and Growth in EV Revenues
Electric vehicles are starting to worry traditional auto dealerships, and the stress is fueling a bitter fight with new electric automakers.
Across the country, upstart EV makers are trying to persuade state legislatures that the normal rules for selling cars shouldn’t apply to them, in part because they help the climate. The outcome of their pleas will shape how Americans shop for cars.
The question at the center of the dispute: Should EV makers be allowed to avoid building a network of dealerships and instead sell direct to the driver? The stakes for both dealers and EV manufacturers are high.
Without the special treatment, EV companies risk being hamstrung in states that don’t allow direct sales, including big ones like Georgia, New York and Texas. Franchised dealerships suggest that letting EV makers sell straight to customers threatens their existence.
The debate over direct sales stretches back a decade at Tesla, which popularized not just a new kind of car but a new way of selling them.
Tesla sells its cars not at dealerships, with their big lots in the suburbs and storied sales tactics, but at “galleries” that are often located in shopping malls. Pricing is straightforward, and the sales pitch is mellow by design. Unlike dealers who traditionally pinned everything on face-to-face interaction, the transaction at Tesla happens as easily online as in-store.
Tesla’s practices are so different that it required exceptions to automotive franchise laws that have been in place for decades. It now can sell direct in at least 20 states and won that status when Tesla was an upstart and its threat to the dealership seemed distant.
But with Tesla’s snowballing success and with a bevy of companies on its heels, the tensions are rising. Tesla’s sales approach is being copied by every new EV maker (Energywire, July 17, 2020).
In some states, EV companies Rivian and Lucid are tasked with getting the same treatment that Tesla did; in others, all three companies are lobbying to create a direct sales channel for the first time.
The battles over direct sales occur as dealerships are discovering new ways that EVs are rattling their modus operandi.
As global automakers rev up electric vehicle production, some are pushing to rewrite the relationship with their dealers. These changes generally limit the role of the dealer and increase the visibility and power of the manufacturer.
Traditionally, the dealer’s ownership of the customer experience is almost total. To buy a Ford, for example, a customer was obliged to physically visit a dealership — at least before the COVID-19 pandemic caused many dealerships to start selling vehicles online. The dealer owns the cars, runs the test drives, negotiates the price and extras, executes the sale, and handles all warranty repairs, all in hopes of developing a long-term, local relationship.
Volvo Car Group announced recently that it would sell only electric vehicles by 2030. At the same time, with less fanfare, Volvo announced it is moving its sales to online only, starting with its new electric C40 Recharge coupe.
Under the new arrangement, the customer’s first contact is not with a dealership but with Volvo through its website. That customer is directed either to a dealership or one of Volvo’s “studios,” modeled on Tesla’s galleries. The automaker sets the price and the options packages, removing the dealer’s ability to mark up prices and increase profit.
In November, General Motors Co. subtly did many of the same things when it rolled out the electric Hummer.
Dealers also must contend with a long-standing reputation for being uninterested and clumsy when it comes to EVs. The EV landscape for dealers has since changed drastically.
In 2019, EVs had a reputation for being “compliance cars” sold to meet emissions requirements in a few states. Now, dealers are following the pronouncements of large automakers, which are boasting nationwide electric sales plans and typically have at least one signature EV model coming to market soon.
GM, America’s largest automaker, announced in January that it would stop making gas-powered cars by 2035 (Climatewire, Jan. 29).
Electric vehicles raise potentially deep financial problems for dealerships, whose revenues rely heavily on repairs and service. EVs need no oil changes and are drastically simpler machines that may break down less often, suggesting a smaller and less lucrative role for the dealership.
Whether profitable or not, electric vehicles have turned heads among dealers as automakers embrace the technology.
More than a decade ago, there was indeed some dealer uneasiness about battery-electric vehicles. Today’s EVs, equipped with more powerful, longer-range batteries, are easier to sell. Prices are slowly dropping, and the charging network is getting better, with possible government assistance on the way to build it out further. In response, EV makers are raising doubts about dealers’ sincerity.
Amid this shifting landscape for dealerships comes the intensifying debate over whether EV makers can bypass them altogether.
Auto dealers have countered that dealerships employ lots of people: The Connecticut Automotive Retailers Association estimates that 10% of jobs would be lost if EV makers were permitted to do direct sales. The latest battles appear to be turning in the direction of the dealerships: So far this year, several bills to authorize direct sales haven’t gotten out of committee in the states considering them.
Whether the direct sales bills prevail or not, the electric vehicle portends big changes for the auto dealership. Dealers’ response to the pandemic, when many immediately pivoted to online sales, shows that they will find a way to thrive, said Lea Malloy, the head of research and development at Cox Automotive, which owns Kelley Blue Book.
“We really believe there is room for everybody here,” said Joel Levin, the executive director. “It’s not like this is a tiny market where everyone is fighting for market share.”