With 2023 on the horizon, it’s important to venture in on how “trends” and “new-technology” will shape the future in coming years, within the Automotive Aftermarket. The Automotive Aftermarket Industry will undergo a profound transformation (which already are hot-topics on many OEMs | Automakers’ | Stakeholders’ | and the Automotive Aftermarket’ lips i.e. Vehicle and Bodybuilders’ – the change has already begun).
Companies who’s in the field of Vehicle and Bodybuilding (inclusive of Trailers), as well as the end-user who buy the product will look significantly different. Technology will be leading this change, but it will be shaped by four key themes.
The Vehicle of 2023, onwards to 2025, will include the following aspects:
- A “greener” approach:
Consumers and Regulators is concerned about climate-change, placing pressure on OEMs | Automakers to reduce CO2 emissions, drastically.
Source: Japan Ministry of Economy, Trade and Industry
- End-user convenience:
Traffic in the world’s developing / growing cities, are becoming increasingly worse. Ownership costs is rising, while Vehicles sits unused approximately 95% of the time. This creates opportunity for businesses that can more efficiently match Vehicles with people who require transportation.
Source: Organisation for Economic Co-operation and Development
- Safety, a priority:
Reducing accidents has long been an Industry priority, however, an aging global population is increasing the need for safe (risk-free) transportation.
Source: Organisation for Economic Co-operation and Development
- Affordability is key:
As the world’s per-capita income rises, Vehicle ownership will increase in developing Countries. These new Consumers will be looking for models that are small, and inexpensive.
Source: Goldman Sachs Global Investment Research
The seven key trends; transformation will drive seven key trends that will dominate the coming decade:
- Filling-up, and Plugging-in:
Concerns about “greenhouse gases” and pollution are driving an Industry-wide change in the way Vehicles are powered.
Regulations on fuel economy and CO2 emissions are forcing OEMs | Automakers to make engines more efficient. By 2025, 25% of Vehicles sold will have electric engines, up from 5% today. But most of those will be hybrid technology, and 95% of Vehicles will still rely on “fossil-based-fuels” for at least part of their power-output.
That means OEMs | Automakers will need to make ICE – “internal combustion engines” more efficient to comply with new standards. The development of alternative power sources such as fuel-cells will add to overall efficiency, but only if the end-user can afford them.
The combination of technologies throughout the powertrain can increase the fuel-economy of Vehicles with “internal combustion engines”. These include “direct-fuel-injection”, “turbochargers”, and “high-speed-automatic-transmissions”.
- Lightening-up (tare i.e., unladen weight):
To increase efficiency, OEMs | Automakers | Vehicle and Bodybuilders’ have been looking to reduce Vehicles’ overall weight. But stricter Auto-safety standards have typically required using heavier body parts.
That conflict is starting to ease, as Companies explore materials that are both light and strong, including aluminium, high-tensile steel and carbon fibre reinforced plastic (CFRP).However, these are more expensive materials. CFRP is primarily used only in specialty sports-cars today. Over time, the push for fuel-efficiency will mean more use of aluminium and high-tensile steel.
Source: Goldman Sachs Global Investment Research
- Self-driving Vehicles:
Once found only in science fiction, self-driving Vehicles are about to become a reality. They can help reduce road traffic accidents, clear-up traffic, and provide mobility to the Motoring-Public.
The competition to lead this change is intense, coming from Companies both inside and outside the Industry. Fully Autonomous Vehicles are being tested on roads today, and the first commercially available semi-Autonomous Vehicles could be on the road in the next 1-2 years.
However, that innovation comes with risks. Turning control over to software could lead to new hacking vulnerabilities and other hazards; liability issues that Companies can’t ignore. Vehicles that allow drivers to intervene in emergencies is a more likely scenario in the near future.
- Evolving the Supply-Chain:
The need for more fuel-efficient Vehicles will increase the cost of sourcing parts, that’s fit for purpose.
The businesses that supply these parts will need to find ways to keep up with technology while keeping costs down. While challenging, this situation also provides opportunities for parts Manufacturers.
For large Companies, mitigating risks could mean increasing their budgets and diversifying across a range of technologies. Smaller businesses (SMMEs), on the other hand, can deepen their focus on core technologies while forming alliances with other Suppliers of Goods, for areas outside their expertise.
- New Competitors
With software and other technologies taking the lead, it’s no surprise that consumer tech companies are entering the automotive world. While a car may not be a mobile phone, these businesses’ focus on design, ease of use, automated assistance and battery life will bring new kinds of innovation to the field.
One catalyst for tech innovators to move into the automotive industry now: electric vehicles have just 1/3 the parts of conventional vehicles, lowering the barriers to entry.
FEWER PARTS = SIMPLER MANUFACTURING (and less usage of raw materials, combating CO2 emissions i.e., the Greenhouse effect)
- The Internet of Vehicles:
The “Internet of Things” demonstrates how connecting everyday devices to a network transform what we can do with them. We can expect the same with the “Internet of Vehicles” – which will do the same.
Connected Vehicles, communicating with each other and with the larger world, will not only reduce accidents and ease traffic.
They will have powerful effects beyond the Automotive Industry. Insurers, for example, will have new ways to monitor driver behaviour, reward good drivers and distribute costs to reckless drivers. The ride-sharing Companies can better connect idle Vehicles with the Customers that need them.
Ridesharing may be a mixed blessing for the Automotive Industry. Most Vehicles worldwide are used only to commute or for short trips during the day, leaving them idle 95% of the time. If drivers decide to forgo ownership and access Vehicles only when they need them, Vehicle sales may be affected as a result.
Connected-Vehicles, especially self-driving ones, could also change the way people use their drive time. In a survey conducted, more than 50% of respondents said they would prefer to listen to music, talk on the phone, watch videos, or browse the Internet while traveling by Vehicle.
- THE SHIFT TO EMERGING MARKETS
Vehicle ownership in most economies starts gaining momentum when per-capita incomes move into the R 170 000 to R 340 000 range.
By 2025, many developing Nations will reach that level for the first time, creating a large demand for smaller Vehicles with lower prices and lower operating costs.
India, for example, will become the world’s third-largest Vehicle-Market by 2025, with 7.4 million Vehicles. China, which has already experienced a boom in Vehicle ownership, will continue to grow, with Vehicle sharing expected to become more popular.
Source: Goldman Sachs Global Investment Research
The Take-away:
The global Automotive Industry is on the brink of a major transformation. Technology is driving this shift, shaped by demographic, regulatory and environmental pressures. By 2025, the Vehicle and the world around it will look quite different.
- The Vehicle:
The vehicle will grow smarter and more efficient, with high-efficiency engines, lighter materials and autonomous driving systems.
- The Industry:
The Industry will evolve, with new competition from tech Companies, and Suppliers capable of producing high-tech parts at low prices.
- The Driver:
The driver will look at Vehicles differently; sharing Vehicles and using them as a space to consume media and make calls. A growing percentage of those drivers will come from emerging markets.
