The automotive industry is changing at a pace never experienced before. But change doesn’t always come easily. Here are the top five challenges automakers are facing…
The Climate Crisis
The scientific consensus suggests that human impact is causing, or contributing to, global warming. Described as a ‘climate crisis’, automakers are facing an increasing amount of pressure to reduce the environmental impact of their cars. This includes the manufacturing process and, perhaps more importantly, the emissions they produce whilst in use. Volkswagen’s ‘Dieselgate’ controversy was one of the largest the industry ever faced, causing a widespread backlash and a loss of consumer confidence. Manufacturers are now having to scramble to demonstrate that action is being taken, that’s it’s being taken quickly and all whilst maintaining profitability.
It’s tough to sell cars when fewer and fewer people seem to want them; it’s not rocket science. Germany’s Center for Automotive Research has suggested that the industry is set to take its biggest hit since the 2008 financial crisis. There’s also a lot of speculation surrounding the idea of ‘peak car’. This is the idea that we’ve simply reached the pinnacle of car-ownership and that consumers are turning to alternatives; including ride-hailing, public transportation and even subscription or pay-for-use models. Porsche recently admitted that it couldn’t remain profitable by simply selling cars for much longer.
The automotive industry’s default response to the climate crisis, and significant legislative pressure, is to electrify their models. This is, however, easier said than done and represents an unparalleled challenge. For starters, it means creating new supply chains, mastering new technologies and actually generating demand. Throughout most of Europe, the EV segment represents around 1 – 3% of the market share. A lack of charging infrastructure and consumer appetite means the cars aren’t often profitable. But given state pressure, automakers have no choice but the make them.
The quest for driverless technology is being undertaken by almost every legacy automaker and most of the larger tech companies. This is an unusual challenge in that it’s largely self-inflicted; it’s being pursued, after all, before any real demand has been generated. In fact, most studies show that the general public is cynical and concerned about the safety implications. Either way, billions are being poured into research and the development of the technology. Despite big promises from the likes of Elon Musk, progress is extremely slow. Ford recently announced that it had placed too much faith in the concept.
A Shift From Ownership
What could be worse for the industry than declining ownership? Peak car or not, there are signs that we’re experimenting increasingly with alternative transportation methods. Even if we do regularly use cars, it’s likely that more and more of us will give up on the idea of having one permanently sat on our driveways. Instead, analysts believe we’ll use subscription models; many of which will take the form of apps. We’ll simply book cars, that’ll be delivered to us, as and when we need them. If this proves to be cheaper and more convenient, why wouldn’t we?
Whether you’re a strident Brexiteer or a committed Remainer, Brexit hasn’t been welcomed by the nation’s automotive industry. In fact, it’s been a major cause of concern. This is largely because of fears surrounding customs and tariffs; both of which could wreak havoc with last-minute supply chains and already low profit margins. It’s not just our industry that’s concerned either. Automotive bodies on the continent have warned of the enormous repercussions for themselves, too.
Consumers don’t just want their cars to be a means of getting from ‘A’ to ‘B’ anymore. Instead, they increasingly expect them to be tools. What this means is that automakers are having to cram their cars full of technology, gadgets and gizmos. This might include on board Wi-Fi, infotainment systems and increasingly elaborate safety features like ABS and lane-keeping assist. There’s talk of automakers essentially having to become software developers, relying less on third-parties and doing more internally. All of this can be costly, time-consuming and competitive.
For many major car brands, China is an absolutely vital market. Why? Because that’s where most of the demand for cars has been for a number of years. But a trade war between Trump and Beijing, taking the form of eye-watering tariffs, are taking their toll (pun intended). This is made worse by the fact that, just as many automakers have heavily invested in the vast nation, demand has begun to decline.
Everyone wants an SUV. At least they do according to sales figures. As far as consumers are concerned, bigger is better. Which is why basically every manufacturer is racing to roll them off of production lines. So great is the demand that even the likes of Lamborghini and Aston Martin are getting involved; with the Urus and DBX models respectively. Tesla is also working to get its slice of the cake with the Model Y. Precisely why drivers are opting for these at a time of environmental debate and increasingly stretched road and parking infrastructure is anyone’s guess. Either way, the industry is having to adapt and, in many cases, drop previous plans. Traditionally well-performing models and categories are getting left behind.
The Death Of The City Car
If you lived in London, would you bother to own a car? If you’re not a taxi or Uber driver the answer would probably be ‘no.’ What would be the point? There are a huge range of alternative transport options, congestion is often crippling, fuel prices are enormous and an increasing amount of financial impediments like the ULEZ are emerging.; and try parking! This is the case throughout a number of cities all across Europe where people are simply giving up on even the smallest of cars. The potential consequence is the complete loss of the city car category; which, for many automakers, simply isn’t financially viable anymore.
What Does The UK’s Automotive Industry Consist Of? – https://autoserve.co.uk/motoring-news/what-does-the-uks-automotive-industry-consist-of/
A Third Of The UK’s Automotive Firms Are Cutting Jobs – https://www.autoservefleet.co.uk/latest-news/a-third-of-the-uk-s-automotive-firms-are-cutting-jobs/