Automotive industry, turning point is approaching

In July 2020, Intel’s subsidiary Mobileye obtained a test license for autonomous vehicles issued by a German authority. This will mean that it can carry out autonomous vehicle driving tests on urban roads, rural roads and highways in any region of Germany.

It is worth noting that Mobileye is one of the first non-traditional car manufacturers to obtain a test license. Currently, autonomous vehicle testing in Germany is basically conducted in a closed and safe laboratory environment.

As a powerful country in the automotive industry, Germany, which has a number of well-known brands, has a voice in the automotive field for a long time, but the popularization of technologies such as electric vehicles and driverless driving is restructuring the market structure. Technology companies with native digital thinking and deep pockets are running wildly, and traditional car companies are generally aware of the importance of this change and accelerate to catch up.

With the joint efforts of the industry, the turning point of the automotive industry is also coming fast. According to the estimates of Bain & Company’s latest report “Electric Vehicles and Autonomous Vehicles: The Future Is Coming”, the electric vehicle market will begin to expand rapidly around 2024, and the autonomous vehicle market will also see an inflection point around 2028.

The complexity of the epidemic
Whether it is in the field of electrification or autonomous driving, technology companies with advanced technology have established a solid market position, and automakers are in the process of accelerating catching up. However, the new crown pneumonia outbreak that broke out at the beginning of the year has become a rare but huge variable, which has caused adverse effects on multiple levels: at the micro level, the decline in travel demand brought about by home isolation will affect consumers’ willingness to buy cars in the short term; at the macro level , Its adverse effects on global trade and the overall economy will also impact the willingness of auto manufacturers to invest in technology research and development.

At present, saving cash and controlling costs to deal with the various uncertainties that may come is making some auto manufacturers become increasingly conservative, and they are beginning to show more and more cautious attitudes in R&D and capital investment expenditures. This caution has also triggered specific industry landmark events in the field of electric vehicles and autonomous driving technology. For example, Daimler and BMW suspended their cooperation in the field of autonomous driving. When facing the trade-off between short-term survival and long-term development, companies often need to give priority to the former. Saving high costs is naturally an option, even if these costs may bring huge benefits to the company at some point in the future.

However, the process of technology research and development by automakers has not been fully terminated, and they will still bet their limited resources on more certain opportunities.

For example, Daimler and Nvidia are cooperating to develop a software-based automotive application system for autonomous driving. In addition, Daimler also teamed up with Alphabet’s subsidiary Waymo to develop an L4 self-driving truck. Level 4 means that the truck can drive autonomously under certain conditions without manual intervention.

The relatively limited budget is only one aspect of the impact of the epidemic; for auto companies, some of the various follow-up effects brought about by the epidemic are also beneficial to them. For example, some subsidy measures that will end as originally planned will continue because they are regarded by governments as an important part of stimulating economic recovery as soon as possible.

In addition, the publicly made market commitments of some emerging companies also provide a bright future for the transformation of the automotive industry-important online car companies such as Lyft and Uber have recently promised that their fleets will complete the transformation by 2030, with the goal of 100% electric car. The promises of leading companies often have a demonstration effect. Their statements indicate that technologies such as electric vehicles and driverless cars will have a broad market space in the future.

As the biggest “black swan” event in 2020, the new crown pneumonia epidemic has had a dramatic impact on all walks of life, but these effects are not entirely negative. It may also provide manufacturers with a breakthrough for transformation and upgrading and overtaking in corners.

By 2028, the development of autonomous vehicles will begin to accelerate

Source: Bain & Company, UBS, IHS Markit, HSBC, Morgan Stanley

The electric vehicle industry will usher in an inflection point in 2024

Source: Bein, IHS Markit and European Federation of Transport and Environment

Robot taxis will become an attractive option in major cities

Source: According to public information

Approaching inflection point
In an interview with China Business News, Zeng Weimin, senior global partner of Bain & Company, chairman of the performance improvement business in the Asia-Pacific region, and the author of the report, pointed out that the electric vehicle market will grow from low to high growth around 2024. The turning point, technical factors, cost factors, consumer acceptance, the construction of charging infrastructure and government policy support will all affect the formation of the turning point.

Zeng Weimin pointed out that the next 2 to 8 years will be a critical period for the development of the electric vehicle market. The price of electric vehicles will decline at this stage, and the global penetration rate of electric vehicles will increase significantly. A survey of consumers in the United States, Germany and China showed that nearly 50% of the respondents clearly mentioned that they are considering purchasing plug-in hybrid vehicles (PEHV) or pure electric vehicles (BEV) as the next generation car.

What drives consumers to have a strong purchase intention is the reduction in the cost of owning a car. Zeng Weimin mentioned the concept of “total cost of ownership”, that is, if the purchase price and operating cost of a car are packaged into consideration, in the German compact car segment, the total cost of ownership of electric vehicles is already comparable to similar gasoline vehicles.

The cost of owning an electric vehicle is related to the model, the size of the battery, the price of electricity, and the way the driver uses the vehicle. Therefore, the data in different scenarios are quite different. For example, on the whole, the owners of frequent vehicles and long-distance driving vehicles have a 9% cost advantage in driving electric vehicles compared to gasoline vehicles. It is precisely because of this characteristic that organizations such as Amazon, UPS, and FedEx have announced that the distribution fleet will be electrified.

Whether electric vehicles can truly enter the mass market is tested by the ability to control overall costs. In this regard, there have also been signs of improvement, such as the decline in battery pack prices. Batteries account for about 30% of the overall cost of electric vehicles, so the cost of this link will greatly affect the price of the entire vehicle. Bain mentioned in the report that by 2025, the battery cost will fall from US$124/kWh to the level of US$100/kWh.

The continuous improvement of infrastructure such as charging stations will also improve consumers’ willingness to buy in the field of electric vehicles. In an era when charging facilities are not well developed, electric car owners need to plan driving routes along charging stations, and mileage anxiety brings extremely inconvenient driving experience.

The inclination of policies has also brought advantages to the development of the electric vehicle industry. For example, in Norway, electric car users can enjoy tax and fee concessions, and they can also drive on bus lanes. The ferry is also free. The direct result of this is that electric cars account for nearly 50% of the total number of new car registrations in Norway. In the United States, the purchase of electric vehicles can also enjoy preferential tax and fee policies provided by governments at all levels, which also makes Tesla Model 3 and other electric vehicles among the top 10 best-selling passenger cars in 2019.

Statistics show that the proportion of electric vehicles in global new car sales will reach about 12% by 2025, and this value will further increase to more than 50% by 2040. The development of global electric vehicles is expected to gradually enter the fast lane in the next few decades.

The future of transportation
If the development of electric vehicles is the future within reach, then driverless technology is farther away, but the driverless scene will not stay in science fiction movies for a long time. In the report, Bain mentioned two main scenarios for future unmanned driving: road assisted driving of private cars and robotic taxi fleets in urban areas.

In fact, Waymo has launched a pilot service for self-driving taxis in Arizona, and Baidu also launched a similar pilot service in Beijing in October 2020.

The latest progress of technology companies in the field of autonomous driving is also related to the relaxation of the regulatory environment; the legislative and administrative forces in the United States, Europe, China and other countries and regions are increasingly showing a friendly attitude towards this technology; the continuous improvement of legislation and supervision is also related to It is paving the way for the commercialization of autonomous driving.

People’s doubts about the safety of autonomous driving are also a key factor affecting the popularization of technology, and technological progress is breaking through this bottleneck. According to data from the California Department of Vehicles, Waymo has an average driving distance of 13,219 miles (approximately 21,300 kilometers) in autonomous driving mode without human intervention-although it has made significant progress, there is still considerable development compared with manual driving space. According to an analysis report by Allstar, American drivers only have one traffic accident every 10.5 years or 140,000 miles (approximately 225,300 kilometers). Only when unmanned driving technology develops to this level will it have the possibility of being truly accepted by the public.

But in any case, the rapid development of unmanned driving technology is an irreversible trend. By 2030, 4% to 9% of new cars in some regions will be equipped with L4 autonomous driving technology, and most of them will be private cars equipped with road assisted driving functions. In addition, self-driving car-hailing services will also become a profitable solution in the field of urban mobility, as a supplement to the existing public transportation system, helping to relieve traffic pressure in congested areas.

The cost reduction of autonomous driving systems will also help its increasing popularity. Currently, the price of an advanced autopilot kit is around $70,000. As mass production increases, this value will drop by more than 85% by 2030-the price of around $10,000 will make autonomous driving a technology that more consumers can afford.

Compared with the rapid “touching the net” of other industries, the digitization of automobile scenes is not fast. Fortunately, this process is speeding up with the joint efforts of all parties. For ordinary consumers, a completely different future transportation picture is no longer far away.