This year’s top automotive announcements that have changed the pace of disruption
It’s safe to say that 2020 was the year of the “unprecedented.” But aside from the pandemic-related headlines, the automotive industry also generated some surprising and unprecedented news stories on its own. Announcements from government bodies and large automakers this year have added to the mounting pressure on the automotive industry, making irreversible impacts on the future of automotive.
From tighter legislative mandates and new battery technologies to car makers cashing in on the data produced from their own vehicles, review some of 2020’s biggest headlines that have shaken up the industry for the long haul.
Global legislation changes
Legislation has been a driving force in electrification. As governments worldwide seek ways to decrease their production of greenhouse gases and reduce their contribution to global warming, they are putting pressure on car companies to design and build cars that emit less carbon. In 2020 particularly, we have seen many major economies accelerate their original plans and call for more progressive measures.
The UK accelerated its plans, moving their “ban” date on new petrol and diesel vehicle sales from 2040 to 2030. They also added cars and vans with a significant zero-emissions capability into the mix, banning new sales of plug-ins and full hybrids by 2035. Overall, this means all new car sales in the UK will have to reach a standard of 100% zero emissions in the next 15 years.
China also made some bold moves, with Chinese authorities stating that from 2035 onward, all new cars for sale in the country must be powered by “new-energy.” Half of the market must consist of electric, fuel cell, or plug-in hybrid technology, and the remaining vehicle line-up must meet strict hybrid standards. For perspective, 50% of China’s car sales is equal to roughly the equivalent of what is produced in the entire U.S.
Finally, California, which is the seventh-largest economy worldwide, is making efforts to ban the internal combustion engine (ICE) by 2035. With so many states following the guidelines established in California by CARB (California Air Review Board), it could significantly impact how U.S. car companies decide to move forward.
Carmakers enter the insurance business
Automotive technology is disrupting more than just automakers and suppliers. Automotive insurance companies will also start to feel the ripples of the changing tides as automakers announce plans to provide car insurance. While Tesla has already offered “native” insurance plans to its California car owners, it could expand. General Motors has also launched its own auto insurance program through OnStar.
This announcement falls under a much larger trend of Big Data. As smart technologies start to dominate car design, vehicles are now producing excessive amounts of valuable data that can be used to monitor driving habits and dictate insurance risk (and therefore, pricing). This data will also have a high-dollar value to third parties and more specifically, the original equipment manufacturers (OEM). Ultimately, Big Data is changing the automaker business model.
Of course, it’s impossible to talk about 2020 without mentioning the Coronavirus. This novel virus not only stilled the globe, but it shook up the automotive industry and accelerated car companies’ investments into electrification as well.
As OEMs were faced with less capital and fewer employees due to a COVID economy and pandemic-related layoffs, they were forced to narrow in their focus and reprioritize. Under this scrutiny, many of the major car companies decided to shift their efforts from autonomous vehicles (AV) and robo-taxis, which has proven to be a more complicated route and divert all of their resources into the development of BEVs.
Battery cost breakthroughs
One of the key challenges of the transition to the battery electric vehicle (BEV) is cost. High kilowatt-hour (kWh) costs simply made it hard to compete against the more competitive price of fossil fuels. However, big announcements this year from Tesla and GM changed that landscape – and 10 years ahead of the predicted schedule.
In September 2020, Tesla unveiled its new “4680” tabless, which will increase range by 54%, lower battery costs by 56%, and reduce investment costs by 69%. This equates to a price of $56 per kWh for the battery cell.
China’s Contemporary Amperex Technology Ltd (CATL), who partnered with Tesla in the new “4680” tabless, also announced an improved long-life nickel-manganese-cobalt (NMC) battery that will cost less than $100/kWh. This will join their cobalt-free lithium iron phosphate battery on the product list, which has dropped the price below $60/kWh.
Finally, GM publicized its partnership with tech giant LG Chem to produce low-cobalt batteries out of Ohio, which keeps battery costs well below $100 per 400-mile range battery.
These new lower costs put the cost of owning and operating a BEV, in theory, lower than a gas-powered vehicle.
OEMs development of engine and transmissions
Many carmakers have announced an “all-in” stance on BEVs, meaning that while they may still manufacture and produce gas-powered vehicles in the meantime, they won’t be investing in the advancements of those technologies. Large automotive companies, such as Daimler AG and General Motors have already made such announcements. However, they were joined by Carlos Tavares, CEO of French automaker Groupe PSA and future head of its merger with Fiat Chrysler Automobiles NV says the parent of Peugeot, Citroën and Opel vehicles is no longer spending on internal combustion engine programs.
Shifting forward into 2021
As we switch gears from 2020 and cruise into 2021, it’s safe to say we are officially entering the age of electrification and connected technologies. Major players and government bodies have made firm stances about the direction of automotive this year, and we can expect to see remaining companies quickly follow suit as the disruption becomes increasingly hard to ignore.
This coming year will be a pivotal year for many automotive companies who will need to either face the challenges and changes and build a strategy to cope with them or say goodbye to their spot in the market forever.