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In the fall of 2020, car manufacturers drew up their 2021 budgets and therefore looked at trends and forecasts for the coming year. 2020 has been a brutal year for many industries, including automotive, with margins and overall profitability under serious threat.

A consecutive year of such an attack on the “bottom line” will be disastrous for the future of many organizations and that of their stakeholders. The forecast for the global industry volume, and the share of each automotive component manufacturer, has never been greater than it is for 2021.

Supply chain organizations have few capabilities in their reserves to support another financial challenge. TIMES OF UNCERTAINTY REQUIRE A RENEWAL OF FOCUS 2020 saw the global passenger and commercial vehicle market decline by around 23% to 70 million units.

The global automotive market 2021 is expected to reach around 77 million, an increase of 10%. However, these numbers are peppered with COVID caveats. If the total volume is large, the pandemic creates too many unknowns.

For this reason, nuances and developments within the industry will be of great importance next year. The automotive market faces many challenges.

1.  Prioritization

The industry needs to prioritize its priorities, as it does not have the resources to capitalize on all of these areas simultaneously.

Autonomy and sharing is no longer a priority Autonomous vehicles were in vogue and highly anticipated in 2016-2019.

However, the investments needed to scale up the required technologies are significant.

Many commentators would agree that a fully self-driving car won’t be a daily reality for another 30 years.

And this will not be a priority for 2021. In 2019, carpooling was starting to gain momentum.

From fractional ownership to rental by the hour / minute for carpooling.

Car ownership gradually morphed into car use as millennials questioned the need to own a depreciating asset that was only used 4% of the time. The arrival of COVID meant that sharing became nonsense, overnight.

While it will eventually come back – and when it does, it will increase at an exponential rate – it won’t be a priority until a vaccine is widely available and/or the threat of a pandemic re-emergence has passed. That leaves electrification and connectivity, both of which will be priorities in the automotive industry for 2021.

2.  IMPACTS OF AUTOMOTIVE TRENDS 2021

Electrification

The decision to increase the supply of battery-electric vehicles (ELECTRIC VEHICLES) is driven by an almost global desire and need to fight climate change.

Over the past 10 years, legislation has focused on carbon emissions to tackle environmental issues, with tailpipe CO2 being the main KPI.

However, this has led the industry to attract demand towards diesel-powered vehicles in certain territories around the world.

Government intervention While diesel vehicles produce less CO2 than their petrol counterparts, nitrogen oxides (NOX) and particulates are generally higher.

Therefore, diesel engines are more detrimental to air quality and human health. In order to mitigate the rise of diesel, regulatory intervention was needed to steer supply and demand towards ELECTRIC VEHICLES.

These measures are criminal in some territories and will increase in 2021.

Europe has set targets for 2020 of an average of 95g/km of CO2 for 90% of vehicles, which will increase to 100% in 2021.

Regulations in Canada , China, India and many US states are stepping up in 2021, using a mix of policies that tax more polluting vehicles and encourage ELECTRIC VEHICLES.

However, despite such government measures, a dramatic increase in demand for ELECTRIC VEHICLES in 2021 is unlikely. Costs to Automakers and Consumers There are two important reasons for the slow adoption of battery electric vehicles.

First, they are almost 30% more expensive to produce than their internal combustion engine (INTERNAL COMBUSTION ENGINE) counterparts.

To make these cars more accessible to the general public, automakers had to cut their margins drastically; some manufacturers are even incurring a net loss on these cars in order to increase demand for electric vehicles. Still, that leaves ELECTRIC VEHICLES much more expensive than an INTERNAL COMBUSTION ENGINE car, which means that AUTOMOTIVE EQUIPMENT MANUFACTURERS aren’t keen on ramping up a company’s ELECTRIC VEHICLE production.

3.  Impacts on OEMs and Governments

AUTOMOTIVE EQUIPMENT MANUFACTURERS will want to obtain data and, for example, predict car breakdowns in order to reduce warranty costs.

Governments will begin to focus on offsetting a lower fuel tax due to increasing electrification with a tax based on vehicle use, which will require connected car technology.

Meeting consumer expectations

The car will have to communicate with the customer’s personal digital device and integrate telemetry into its architecture.

The car will become less of a high-tech consumer environment, and more of a portal for the consumer to connect with their own device. For example, in-car navigation systems will decline, with geo-functional apps on the consumer’s phone connecting to the car instead.

This trend will start to intensify in 2021. Customer orientation Customer orientation will become the driving force of the automotive industry in 2021.

Customers will demand a smooth flow between car, bicycle, scooter, train and any other means of transportation via their personal devices. They will integrate leisure into their mobility activities, thus eroding the silos of various industries.

Customers will want – no, expect – to be able to transact entirely online and demand automation. However, AUTOMOTIVE EQUIPMENT MANUFACTURERS are hampered by legacy systems and are not agile enough to meet all of these needs.

They will have to focus on their main skill: making great cars.

Instead of venturing into other areas, they should instead leverage the expertise of third parties in those areas.

4.  CONCLUSION: THE WAY FORWARD FOR 2021

2021 will be a strongly customer-centric year and they will expect better integration between their car and their personal device.

In light of this demand and the cost-conscious environment of 2021, the biggest comeback for “smart players” in the automotive industry will be in the area of ​​connectivity.

Automakers should collaborate with agile partners, as this will allow them to accelerate connectivity by quickly leveraging success stories from other verticals. Finding ways to deliver nimble and flexible solutions to keep pace with customer expectations and dynamic AUTOMOTIVE AND SOFTWARE EQUIPMENT MANUFACTURERS such as Tesla will be critical.

Source: https://www.endava.com/en/blog/Business/2020/Trends-in-the-automotive-industry-for-2021

Author: TONY WHITEHORN