Driving to tomorrow
Launching a webcast series on e-mobility
By Jens Hörning
New mobility concepts and customer attitudes are completely changing. A car is no longer just a means of transportation, but has the potential to be a smart phone on wheels. The COVID-19 pandemic has accelerated transformation and put more urgency on sustainable products and value chains.
Changes in consumer trends, the global economic downturn and unprecedented supply chain challenges brought about by the pandemic made 2020 the weakest year for automotive production and sales since 2009. To recover the lost economic growth, we need to build back.
What will the industry look like at the end of the road? Certainly very different.
E-mobility is emerging at an accelerated pace despite the industry’s overall global decline. Strategy&’s Digital Auto Report 2020 shows that the European Union and China are currently leading e-mobility transformation, with an expected new car battery electric vehicles (BEV) share of 17% and 19% by 2025.
Climate change is a key driver of electrification. Consumer trends, supply chains and regulations are adapting to the urgent need to reduce carbon emissions, and COVID-19 has accelerated this transformation.
The road to recovery
A lot of unpredictability remains in the market.
Will there be more waves of the virus? What impact will the vaccines have? When will people be ready to consume at pre-pandemic rates again? All these questions will impact the future of the automotive industry.
No matter whether we emerge from the pandemic tomorrow or in a year, I expect recovery to take time. March will be a key indicator for how quickly we bounce back. But it’s consumer demand that will have the biggest impact. And a lot of that depends on if we see enough car sales around August and September to warrant a second peak, or if supply chain backlogs will lead to further limitations.
Globally, we predict a slow recovery base throughout 2021, with an acceleration towards recovery in 2022. It is a definite possibility that we will see less than 10% recovery this year. This will require quick reactions from suppliers, agile supply chains, and innovative ways to complete the full process of production to sale.
Navigating the transition to e-mobility
Even though Central & Eastern Europe (CEE) is not yet a big sales market for electric vehicles, we are accelerating towards this transformation. But it won’t be an easy path, and there will be new challenges to ensure climate considerations are at the forefront.
1. Where is the pressure coming from?
PwC’s recent Preparing for Tomorrow’s Consumer Today: The Future of Consumer Markets report shows more than half of consumers value sustainability. Over 50% of survey participants either agree or strongly agree with the following statements:
- I buy from companies that are conscious and supportive of protecting the environment
- I choose products with a traceable and transparent origin
- I am buying more biodegradable/eco-friendly products.
Consumers are paying more attention to brands and seeking out those that align with their values. Socially conscious consumerism therefore has implications for automotive dealers, supply chains and production.
Pressure to comply with environmental, social and governance (ESG) trends is also surmounting from leaders. The same Consumer Markets survey indicates that ESG initiatives are non-negotiables for C-suite executives, shareholders and governments.
Regulatory factors such as emission target levels, BEV/plug-in hybrid electric vehicle incentives, diesel/internal combustion engine bans and restrictions in cities will determine the speed of technology adoption around the world. For example, tightening CO2 emission targets in the EU and new national guidelines in China accelerate BEV penetration in these regions significantly faster than in the US. In the EU, new CO2 emission regulation targets a 15% reduction for passenger cars from 2025 onwards and 37.5% reduction from 2030.
2. The biggest limitation
Keeping pace with the consumer and regulatory trends will require rebuilding the entire ecosystem, from the supply chain to the electricity and charging infrastructure. This requires the support of governments and energy companies, too. But most importantly it requires money.
Financing the investment that is needed to achieve carbon limitation goals may be one of the biggest challenges our region has to face. E-cars are treated as the same commodity as classic powertrain vehicles, and our Digital Auto Report indicates consumers are not willing to pay the premium. Where will the money come from to invest in the future of electric transmission systems? How can the players and supply chain respond to these external forces to build on the momentum and develop resilient business models?
Powering the conversation
CEE has a wealth of automotive players that should capitalise on the industry's transformation. From the manufacturers to the consumers, we want to further explore what is driving the automotive transformation, what new challenges will arise, and how the key players can and should respond.
I am excited to start this conversation through a series of webcasts and articles with important automotive businesses in our region. Over the year, we will deep dive into these specific areas:
- The players - Original equipment manufacturers (OEMs) vs upstarts
- The supply chain ecosystem
- Consumer trends
We will discuss questions such as:
- What do OEMs need to do to continue to be successful?
- Who is leading the transformation towards e-mobility?
- How to build sustainable supply chains?
- What new challenges does the supply chain ecosystem need to address to respond to the push towards e-mobility?
- What are the needs and requirements of the consumer going forward?
On the 23 March, I will be joined by Maciej Mazur, Managing Director, Polish Alternative Fuels Association, and Jonas Seyfferth, Director, Strategy& Germany, to kick off our Driving to tomorrow series. I hope you will join us.