Global Trend Toward Banning Internal Combustion Engines is 2017’s Top Story Affecting Automotive Suppliers

Global Trend Toward Banning Internal Combustion Engines is 2017’s Top Story Affecting Automotive Suppliers

Disruption caused by several emerging trends had a major impact on automotive suppliers in 2017 and will continue to send shockwaves throughout the supplier sector in 2018, according to strategy expert Paul Eichenberg.

An automotive strategy consultant with 25 years of experience working with Fortune 500 auto suppliers, Eichenberg identified the top five most important stories affecting global auto suppliers in 2017 as:

  1. Global legislative ban of the internal combustion engine (ICE) and the beginning of the shift towards vehicle electrification

Starting last February, Norway became the first nation to ban the ICE and it intends to allow only the sale of electric vehicles by 2025. Over the course of the year, India, France, the United Kingdom and China all made similar announcements as the trend towards the adoption of zero emission vehicles or battery electric vehicles (BEV) has started to accelerate around the globe.

  1. The rise in automotive supplier spin-offs

In late 2016, stock analysts started downgrading the long-term outlooks for even the world’s best suppliers that have significant involvement in ICE ecosystem, as automakers confront intense pressure to completely shift vehicle propulsion from ICE to electric. Analysts are not suggesting that this shift will occur overnight, but they do expect it could create significant risk to many suppliers’ earnings trajectories. Understanding these headwinds and the competitive challenges ahead, suppliers such as Delphi announced in 2017 a spin-off into two separate businesses, and Honeywell and Autoliv have announced similar spin-offs considering similar strategic concerns.

  1. Autonomous cars development accelerates.

The autonomous vehicle was the hot topic of industry conversation during 2017 and is already having a tremendous impact on the automotive supplier industry. Several automakers have made formal announcements that highly automated (Level 4) vehicles will be available by 2020, including Daimler, Ford, General Motors, PSA, Volvo, Volkswagen and Nissan. This adoption is driving a new and fast-growing segment of the industry that is focused on cybersecurity, as security experts have identified 50 potential attack points for connected cars, which increase the risk of being hacked and failing to operate as intended.

  1. Continuation of mega-mergers lead by the new entrants.

Automotive is becoming a very attractive market for semiconductor and other technology companies considering the trends towards vehicle electrification, connected cars and autonomous vehicles. These trends began to drive mega-merger by technology companies who see huge opportunity in the auto sector ahead, such as Qualcomm’s announced $47 billion purchase of NXP, Intel’s $15.3 billion acquisition of Mobileye and Samsung’s $8 billion acquisition of Harman.

  1. Car data is declared the new oil of the automotive industry.

Intel CEO Brian Krzanich made headlines by declaring, “Data is the new oil in the future of the automotive world.” One of the trends that could be most disruptive to the industry is the enormous flood of data driven by the proliferation of smart, connected devices, with forecasts projecting that each connected car could soon generate 25GB of data each hour.  And, according to Accenture, the data from connected cars could be worth $5,000 per car in extra revenues for the manufacturer.

The forces that are disrupting the automotive industry will continue to drive dramatic challenges and opportunities for automotive suppliers in 2018, Eichenberg said.

In early January, in conjunction with the North American International Auto Show in Detroit, Eichenberg will issue his list of the top five trends that will impact automotive suppliers in 2018.

Let’s talk.

Want to learn more about how we can work together? Fill out the contact form here or give me a call at 248-670-9108.