The onslaught of Covid-19 saw automakers suffer a difficult first half of 2020, slightly lifted by a more buoyant Q3. Global shutdowns halted production and supply chains were disrupted. Unfortunately, a difficult 2020 has bled into a challenged, yet opportunistic 2021. And in a cruel twist of déjà vu, many markets—namely the UK and EU—are back in prolonged periods of lockdowns which will likely see Q1 auto sales compromised. Even with the severe cost-cutting across OEMs seen last year, and despite an encouraging roll-out of the vaccine in the UK, Covid-related risks remain worryingly high and the auto industry is unlikely to see a rebound this year, or even next few years, back to pre-pandemic sales numbers.
Countries like China which have bounced back from the virus quicker than their Western neighbours will see the pendulum of supply versus demand swing back in favour of the East where automakers with bigger shares in the Chinese market will profit from the region’s relatively fast recovery and growth.
However, despite the gloom, the auto industry is far from stagnant. The next decade will be one of its biggest yet. 2020 gave automakers the opportunity to reposition themselves as they emerge from the crisis on a new path towards electrification and connectivity.
Hard global CO2 emission targets are in play, and automakers must double down if they want to be in with a chance of getting even close to reaching them. Subsequently, 2021 will be the year electric vehicles (EVs) take centre stage. They’ll be pushed out into market, perhaps even with a discount, to drive sales and further contribute to reducing emissions.
2021 will see a continuation of trends that have been bubbling even before COVID. From ramping up EV investment to digital playing an ever-increasing role in the vehicle purchase journey, sustainability and customer experience will be the standout priorities for automakers this year.
The electric revolution
With lofty global zero emissions goals, it will be the decade of the EV, and 2021 is a critical year in that step change. We will see every major OEM begin or increase marketing EVs across their vehicle line-up, with many scaling and recalibrating their business models to sell EVs at scale. Both new and old automakers will launch much-awaited vehicles in 2021. There are many from sport cars to SUVs: Audi e-Tron GT, BMW iX3, Mustang Mach-E, GMC Hummer EV SUT, Lucid Air, Polestar 2 (Volvo), Nissan Ariya, and Mercedes-Benz EQC to name a few. Whilst it is unlikely this immediate roll-out will cause Tesla’s crown to slip, more competitively priced EVs in the market will likely have a knock-on effect in the years to come.
As for the EV start-up market, focus will be on delivery vans and buses which will prove revolutionary if achieved at scale. For example, companies like the UK’s Arrival, backed by Hyundai and BlackRock, will continue to build volume orders in the EV B2B space. Last year saw Amazon reveal its first electric van, developed by EV start-up Rivian, which claims to “raise the bar for next-generation delivery” vehicles. Whilst roll-out isn’t largely expected until 2022—the delivery giant aims to have 10,000 vehicles on the road by next year and ten times that by 2030—its mere promise will see significant movement in this space over the course of the next year. As we start 2021, Rivian is close to raising funds with a US$25bn valuation.
As consumer buying behaviour continues to shift, and COVID-related restrictions remain at least for the first half of 2021, improved customer experience will become absolutely critical in 2021. Subsequently, further investment will be made in digital. Online sales tools will improve and become embedded in the process, and although the models behind them won’t change quite yet, they will begin to evolve and identify gaps in the current customer experience. Digital leaders like Daimler offer single sign-on to streamline the customer experience for both current and prospective customers. Most of the automakers are focusing on accelerating their connectivity and voice-activated capabilities to improve the in-car, shopping and service experience. To do this, not only are they implementing the technology, but they are also building data platforms to activate on the data and be able to make faster and smarter decisions on how to elevate and evolve the customer experience.
Self-driving and autonomous vehicles
Whilst not a major area of focus for automakers in 2021 as they prioritise efforts to new and upcoming legislation on emissions, developing and marketing climate-friendly products, and recouping their losses, self-driving and autonomous vehicles will likely continue to be a hot topic of conversation, and still make for the occasional headline.
Self-driving and autonomous vehicles will be a test-and-learn endeavour but will not be where all, or even most, of 2021 budgets go. The immediate need in the economy and post-pandemic for the creation of jobs and solid cash flow will require a focus on what OEMs can bring to fruition at scale in the next 18 months. EVs are that opportunity.
In the interim, it will be the big tech giants—Google, Apple and Microsoft—that continue to work on autonomous vehicles and partner with automakers to bring these to a reality in the near(ish) future. Tesla will also lead the charge given it already has an EV platform to fuel the business. As autonomous vehicles won’t be a reality for a while, we’ll see target geographies where these technology players, Tesla and the OEMs will continue to evolve the technology, targeting roll out in the next few years. But 2021 will be a year more of chatter than market realisation.
Additionally, companies like Uber and Lyft have business models that ultimately rely on autonomous, so we may see them build momentum this year, but it will be cautionary until the technology and rules of the road work with the needs of autonomous vehicles.
We’ll also likely see new designs for autonomous vehicles, at least at CES, that take the frame of what we know as how automobiles look inside and out, and place focus more on the experience itself. In 2021, dreams of what it could be like to be in an autonomous vehicle will be refined and begin to build a reality for consumers, realised through technology.
A big focus for automakers this year, in addition to building an EV platform, will be connected vehicles and how they can provide a more robust and 2021-like experience for consumers who are increasingly demanding of such. Recent research shows that expectations for vehicles pre-fitted with connected tech is now mainstream, with almost all people surveyed (93%) desiring at least one connected feature in their next vehicle, cameras and navigation coming out top. The look-and-feel of the car and how it improves and engages with consumers’ digital lives is what will create the most brand loyal customers.
Unfortunately, the process of streamlining businesses is most probably far from over for automakers. With a difficult year behind them, and perhaps also a difficult year ahead, they urgently need to decrease the complexity of their business and increase profitability; reducing the numbers of derivatives which are not profitable, minimising their ‘nice-to-have’ projects and increasing the speed of change to make a difference. The alternative outlook is unfavourable.
Ultimately, 2021 will be a year of meticulous focus: focus on building the future of the auto industry, with EVs and connectivity being the primary areas for growth and transformation along with targeting operating approach and costs.
About the author: Alyssa Altman is Global Transportation & Mobility Lead at Publicis Sapient