paradigm shift in the automotive industry

Huge challenges  -  but massive opportunities ahead where astutus consult provides support to companies and decision makers.  

The accelerating shift towards electrification of two wheelers, passenger cars, trucks and buses generates meanwhile substantial volumes and further gains momentum as early adoption programs in many markets can be seen. 

In 2021 about  6.5 million electrified vehicles have been sold, which is almost 9% of the global passenger vehicle market and 3 fold since 2019 per International Energy Agency. McKinsey projects a six-fold growth from 2021 until 2030 to 40 million vehicles as battery, hybrid or fuel cell powered. The EU's pledge to ban ICU sales in  the Euro zone by 2035 will further push the European manufacturers in letting go the ICU portfolio. 

 The pressure increases for established companies and new start up BEV manufactures trying to achieve the critical mass as quick as possible and to grow and defend their target market share.    

Fast changing premises, restrictions and opportunities for any international or globally acting company increase the need for evaluations and alignment of logistics, sourcing, production, target markets and sales. 

How do global products and services suit local customers, markets and perceptions? Are the target markets still the rights ones? 

Is the supply and sourcing strategy flexible and resilient enough to cope with global and local challenges? 

Is the production footprint still economically viable with changing premises in trade and sales? 

Are new favorable trade agreements between countries and regions fully utilized to seize new market opportunities and competitive advantages? 

Have relevant geopolitical hurdles but also all opportunities of easing trading policies between countries and regions been looked into?  

 With the technological re-definition of vehicles the digitalization of vehicles, its components and interfaces become the pivot point in engineering of not only the vehicles’ hardware and interfaces but rather the entire vehicle ecosystem towards the user, retailer, manufacturer and third party suppliers.   

An open and flexible operating system compatible with outside sources provides possibilities which have been known so far only from smartphones, tablets and computers and will enable added on technology towards autonomous driving, intelligent vehicle operation, traffic and mobility management and many more.  

With such a shift to advanced and smart technologies the demand in semiconductor, energy storage and required raw materials will increase thus impacting prices and exploring new sourcing possibilities. R&D efforts will increase and accelerate to find faster, better and more economical solutions in an environment, which is deeply impacted by the aftermath of the global pandemic during the last two years and again is challenged by recent geopolitical developments. 

The effects on global sales, production and supply force most companies to assess and align those premises. Cultivating agility develops seemingly as the crucial virtue of conducting future business and strengthen resilience in this ever fast changing environment. 

Established OEMs are in transformation mode to enhance their once successful business practices of the last decades.

They see themselves confronted with immense investments to phase in new EV technologies and production processes while gradually phasing out traditional ICE technology. 

Especially for OEMs being strongly present in the global market place with ICEs the transition towards electrification is found to be paced individually by each and every country.  Particularly in several  less developed countries the EV adaption process is slower paced with less supporting infrastructure and adoption policies.

In contrast new EV OEM start ups do not have the burden of de-assetizing and phasing out traditional ICE technology. Those new players will go first for the early adapting volume markets and grow organically while the established ICE turning EV OEMs have to do exactly the same thus leading to an intensified competition for market shares and customers. 

What will happen meanwhile to the less developed and slow adapting markets? As many established Western car manufacturers gradually reducing their ICE volumes they consecutively have to pull out and give up their ICE volumes without being able them into EV volumes yet. Who will pick up the market share for the time being?

Likely not every OEM with a proven successful history will make the technological transition either by itself of with the market share it was used to. As the electrification provides a historic leveling of the playing field many new companies are entering. 

New start-ups, established system suppliers, former tier 1 and 2 to the once ICE OEM customers launching their own new automobiles and competing with reputable and established brands in a small but fast growing market. 14 major global corporations control more than 60 auto brands around the world (source: Business Insider Feb. 2018) versus around 30 electric car companies joined in the last years in the quest for their electric vehicle market share. 

With those plenty new players joining the need for monitoring and strategy adjustments becomes paramount. Which company and brand will still be around in the next decade? Who will or has to merge, co-operate and forging alliances with other manufacturers, battery- and component suppliers?

Economies and governments play a crucial role in the roll out as Europe is expected to be the first region with plans to fully shift to electric vehicles and to stop ICE vehicle sales. Norway plans to be the front runner to achieve this by 2025, while many European countries aiming at dominating the entire vehicle market with EV sales by 2030 followed by China and Japan’s plan to stop ICE vehicle sales by 2035. Time is critical for successfully claim a place in the new era of mobility.

  The automotive sector has became a light house example in the recent years for many examples of green approaches. 

Yet the task ahead is monumental. Shifting to alternative propulsion technologies as electric engines, further development of fuel cells and further optimization of combustion technologies as part of a bridging phase until phase out.

The pledge of CO2 neutrality creates a particular challenge to all those companies who have to transition from ICE vehicles to BEVs. The carbon footprint of all materials and processes involved in the creation of an BEV offers still substantial room for improvement where reusable and recyclable battery packs and energy storage are the main contributor. 

In a perfect world the vehicle in itself with every component of it is embedded in a revolving life cycle and can be reused, updated or scrapped and recycled with minimal waste and pollutants. 

Who will be the first company introducing real ground breaking concepts like that? 

 The proliferation of Free Trade Agreements (FTAs) such as numerous newly enacted RCEP, CPTPP, EUSFTA, EUVFTA an others means that the trade of passenger cars will be subject to increased competition and improved market access for exporters in these regions. This will lead to greater opportunities for companies to expand their market reach and increase their sales. 

On the other hand, it also means that companies will have to adapt to these new trade agreements and comply with the regulations and tariffs they entail. This might include adapting to different standards and regulations, as well as navigating tariffs and trade barriers. 

However, the benefits of these agreements include access to new markets, reduced tariffs and potential cost savings. Companies that are well prepared, with a strong understanding of the local market, regulations and an efficient supply chain will be in a better position to take advantage of these opportunities. 

In the long-term, the proliferation of these FTAs will lead to increased global trade, and new opportunities for companies to grow and expand their businesses in new regions.