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Top 5 Challenges & Trends for Automotive Industry in 2020

Top 5 Challenges & Trends for Automotive Industry in 2020

Automotive | Jul, 2020

Automotive industry, which contributes to roughly 3 % of global GDP, is a major industrial and economic force worldwide. The global automotive industry stalled in 2018, registered low sales in 2019 and the trend is likely to prevail throughout 2020 as well due to SARS CoV-2.

Advent of self-driving or autonomous vehicles, transformation from IC based engines to electric drivetrains, growing use of AI and connected cars, among others, are set to revolutionize the sector during the next two quarters of the year, 2020. In fact, change in trend of vehicle ownership, growing demand for mobility on demand and mobility as a service, point towards increasing technological investments in the sector. At the similar front, automakers such as BMW and Ford have made massive investments in the acquisition of several technologies. Internet-related service major Google and Uber are also following the bandwagon as the new buyers are more tech savvy and desire for improved, efficient, vehicles these days.

Like every other sector, automotive sector also witnessed massive dip in sales this year but the industry is all set for recovery in the second half of the year. India witnessed nil automotive sales in April 2020, sales for China and United States also dipped but the pandemic has presented industry with several tailwinds, which will force automakers and allied sectors to change the way they operate.

     1.      Outbreak of COVID-19

First half of the year has already ended and the WHO has confirmed that the COVID-19 is here to stay. The outbreak of the novel virus that started from China has now spread worldwide. Economies enforced lockdown but customer footfall post reopening is still low, which is majorly due to decline in consumer confidence and halted automotive production. Companies such as Tesla, General Motors and Volvo have opened their production plants but shortage of auto components and workforce is negatively affecting the production. Shortage of auto components is primarily due to heavy reliance on China. In fact, push by governments of various economies to cut GHGs by incentivizing adoption of electric vehicles has further pushed the imports from China as the country holds dominant position in electric vehicle and electric vehicle components market. For instance, several tier I suppliers and OEMs have increased imports from China as it is the major hub for battery technology, drive transmission and steering, which are utilized in electric vehicle production, thereby, contributing to the increased trade deficit with China.

Another challenge is lack in coordination with logistics partner, capital investment requirement and insufficient manpower for production. Solution to the problem can be switching to other countries for meeting the demand for automotive components. However, permanent solution is reducing reliance on China and focusing on domesticized production plants, which will open new employment opportunities. Domestically produced auto components can also help to reduce the overall cost of vehicle, as heavy import duties are levied whenever the product is shipped from China.

     2.      Evolution of Connected Vehicles and Growing Prominence of Autonomous Vehicle

Just like any another industry, automotive and allied sectors are going through fast paced technological innovations. Increasing funding in R&D of connected vehicles and autonomous vehicles, launch of semi-autonomous vehicles in recent years and growing integration of IoT in automobiles validates the aforesaid fact. Connected vehicle technology refers to collection of data and communication by automobile with its surroundings. United States Department of Transportation is developing connected vehicle safety applications and European Commission is planning to deploy Cooperative Intelligent Transport Systems for implementing connected vehicle technology throughout the US and EU, respectively. In fact, average microprocessor/microcontroller per vehicle rate has witnessed rise in growth and the rate is forecast to shoot up during the next decade on the wake of growing demand for connected features such as internet connectivity in vehicles, V2V communication and rollout of 5G in the coming years.

Autonomous vehicle may sound like a new advancement but the idea and development started over 80 years ago. Now, we have segregated SAE level from level 0, which is no automation to level 5 which is full automation.