The year 2020 will certainly go down as one of the most (regrettably) eventful in history. Between the wildfires, tragedy, pandemics and general terror that has gripped much of the year, we have seen many industries suffer at the hands of many disasters. The global COVID-19 pandemic is arguably the disaster that has had the most lasting influence on economic performance worldwide. The automotive industry, in particular, has been massively impacted.
Automotive Industry Trends in 2020
A number of important trends helped to define 2020, but the majority of them are related to the following two main factors:
The COVID-19 Pandemic
Without a doubt, the pandemic of 2020 has been the defining factor behind many of the other trends listed below, so we’ll deal with this one first. It has been responsible for changing driving habits and accelerating the decline of overall new car sales, but also for changing many of the ways that car companies and dealerships do business.
The most obvious impact has been on driving habits. As early as June, 2020, it was being reported that mileage in the United States had declined by as much as 39.8 percent by April of 2020. The Detroit Bureau reported this fact back in June 2020, citing the reasons that increased working from home and home-schooling of kids meant a huge reduction in daily driving. With Americans either confined to their homes or only willing to drive when absolutely necessary, it’s natural that mileage would greatly reduce.
Gas consumption was also hit by this change in driving habits. The US Energy Information Administration (EIA) reports that in December 2019, Americans were purchasing more than 23.3 million gallons of gasoline daily. By April 2020, this number had dropped to 12.3 million gallons each day.
New car sales around the world also dropped a great deal. The Germany-based Verband der Automobilindustrie (VDA), had predicted the fall to be as much as 17 percent. This turned out to be very close to the 17.1 percent that has become reality. Where global sales reached 79.5 million units in 2019, they slumped to 65.9 million in 2020.
Finally, the pandemic had a marked effect on how car companies and dealerships do business. With people being either unwilling or unable to head to dealerships to look at new cars, they instead turned to online platforms. This has already been a growing trend since at least 2018, but the pandemic naturally accelerated that. In 2018, geomarketing.com quoted numbers from digital marketing agency, Adtaxi, saying that 86 percent of car shoppers conduct online research before deciding to visit a local dealership. The pandemic has undoubtedly boosted people’s willingness to not only research online, but also purchase. Used car platform, Carvana, reported that in Q2 2020 their revenue reached $1.12 billion and almost 56,000 units sold, which represents a 13 percent increase from the same period in 2019.
Abandoning Gasoline Cars by 2040
Another defining trend in 2020 was the increase in momentum for governments around the world to set limits on the future production of both gasoline and hybrid cars. In 2019, Massachusetts and New Hampshire, along with D.C. all set targets for zero emission vehicles to become the standard within the next two decades. Joining them in 2020 were New York, California, New Jersey, Washington, Hawaii and Colorado. Washington was the most gung-ho, saying that the model year 2030 will be when all passenger and light-duty vehicles sold in the state will be electric only.
These US states join a growing list of countries, including Austria, Belgium, Canada, Costa Rica, Denmark, Egypt, France, Iceland, India, Ireland, Japan, the Netherlands, Norway, the United Kingdom and many others, who have made similar targets for themselves, some of them backed by serious legislation.
What this has done is given rise to the inevitability of electric cars. No more is the EV a probable alternative to gasoline cars, but instead the true heir apparent to the automotive mainstream, which has been occupied by gas and diesel cars for more than a century. The past year has shown further the value of electric vehicles, being able to charge at home and not having to rely on whether crude oil supplies are maintained or gas stations remaining open. In future times of difficulty, people will appreciate the additional power and control that an EV can give them.
For further proof of the growing trend of electric vehicles, we only need look at the prevalence of all-electric choice in the current car marketplace. In 2020, the number of all-electric models available rose to an unprecedented 59 models. First-time electric releases in 2020 included the Mercedes-Benz EQC, Mini Electric, the Porsche Taycan and even an electric Aston Martin, the Rapide E. Other brands like Tesla, Nissan, Kia, Audi and others also released updated version of their existing electric range. In 2021, the number of available models is set to increase to 71, with even electric trucks becoming available like the all-electric Ford F-150, and the new GMC Hummer EV.
What’s Coming for the Automotive Industry in 2021?
As the new year dawns, there are certain shadows from the previous year whose influence will undoubtedly continue to guide events. The most prominent of these, of course, is the ongoing pandemic. With vaccines now rolling out across the world, however, the threat of COVID-19 should quickly begin to diminish and the auto industry can undertake the robust recovery that many have already predicted for this year. Below are some of the important automotive industry predictions for 2021:
Recovering Vehicle Sales
Even as the pandemic continues to influence, and even seemingly worsen in certain parts of the world, experts have predicted that with primary automotive markets getting over the worst of the crisis, sales will begin to recover from this 2020’s very low 65.9 million units.
This does not mean, however, that in 2021 we will see a return to the pre-pandemic levels of unit sales. One Forbes contributor, Neil Winston, predicted that global sales won’t fully recover the pre-pandemic highs until at least 2023. While that is somewhat bleak, an upward tick in 2021 will still be a boon to an industry that is estimated by McKinsey and Company (October 27, 2020) to see profits declining by $100 billion or so in 2020 among its top-20 OEMs.
Changes to Automotive Business
Operations on the ground are sure to start noticeably changing in 2021. The arrival of new and innovative online platforms like cazoo.co.uk in Britain, which has turned buying a new or used car (along with part-exchange) into something just about as easy as buying a book on Amazon, will surely shake things up. Another US-based example is carbevy.com in San Diego, California. This is a platform that allows buyers to indicate the car they want and what price they’re willing to pay, which is then shared anonymously with a closed network of dealerships. Should one accept, the two parties are connected and the transaction can happen. Should the buyer gain no luck, they can try again, or raise their price affordably, all while remaining anonymous and free from the aggressive sales approach of a typical dealership salesperson.
This trend isn’t exclusive to the UK and US. Mainland Europe, too, has started to willingly embrace digital channels. McKinsey research also shows that use of digital channels in Europe has increased by 13 percent on average, with the biggest jump of 28 percent coming from Germany. Furthermore, among German respondents to the research, 72 percent of those using digital channels for the first time said that they would continue to use digital channels in the future, even once COVID-19 has vanished as a threat. An almost equal 70 percent of existing and regular users of digital channels said the same thing.
The customers have spoken, and it turns out they want more options when it comes to buying vehicles. They want simplicity, comfort and, above all, to avoid both red tape and aggressive sales pitches as much as possible. Both Tesla and BMW have made alterations to the style of their sales forces, even ensuring that the word “sales” isn’t included in the team members’ titles. They are known as experts or advisors, and their job is to be the customers’ main point of contact, to learn about the vehicles they are interested in, and find the right fit.
Finally, dealerships will focus on building their digital channels over the traditional brick-and-mortar visit ones. We predict that in 2021, we’ll see a greater trend of people arriving at dealerships mostly to test drive vehicles, sign paperwork and/or pickup vehicles already chosen through online channels. This will inevitably create a shift in how dealerships are operated and staffed over time, with a focus moving to instruction rather than sales patter. Digital marketing will now make the sales pitch, while on-site staff provide the detail and aftersales service that will set new auto brands apart from each other.
An Increase in “On-Demand” Mobility
Above, we talked about how many drivers are discovering how owning and operating an electric vehicle is a good way to ensure retention of a greater degree of autonomy and control in tough times. When you only need to ensure that the electricity is on, there are very few external crises that could threaten that ability to keep one’s car charged and ready to go.
For many, however, EVs remain an expensive, even unaffordable option. For these people, the concept of on-demand mobility has greater appeal because of its flexibility and the lack of any need to risk large amounts of capital for the acquisition and use of private transport. This demand is sure to see an increase in shorter-term leases, greater use of ridesharing, and maybe even entirely new ways of owning and operating vehicles.
How this demand breaks down can be a little complex because needs differ so much from city to suburb and from suburb to rural area. They also vary geographically. It will be an interesting sight to see how OEMs and other companies come together to bring more flexibility to the automotive market in 2021.
Huge Advances in Electrifying Technology
We discussed at some length above about how electric cars are no longer a strong possibility as rivals to gasoline cars, but now an inevitability. Beyond the models that have already been announced for release in 2021, we can expect further action to be taken this year, possibly even some prototypes and announcements on new technologies, concepts and ideas that will remedy the biggest challenges currently facing the notion of electrification and abandoning of gas vehicles, namely:
- The relatively high cost of EVs compared to gasoline/diesel cars
- The additional question of charging infrastructure
- Driver concerns regarding range, charging and cost, all of which are currently putting many off from making the switch to electric cars.
There are already some indications that these announcements and prototypes are coming. In September 2020 at the annual ‘Battery Day’ event, Tesla founder and CEO Elon Musk announced the innovation of ‘tabless’ batteries — also known as 4860 cells — which apparently offer an energy capacity five times greater than that of existing batteries. Better yet, many will be produced in-house by Tesla, and others bought in larger quantities from suppliers, which hopefully will mean a pretty big cost reduction overall. It finally raises the prospect of a Tesla model in the near future being able to break below the $30,000 barrier, shoving even premium EVs firmly into the lands of the affordable.
Another big indication of this development is from Toyota, who up until now have been more singularly focused on mastering the middle ground of hybrid cars. Their hybrid range is now easily the most rich and diverse, but they are now also looking to take the lead in EV technology. In December 2020, President of Toyota, Akio Toyoda, unveiled the plans for an incredible new solid-state battery technology that would be powering a new prototype vehicle they are planning to release in 2021.
Solid-state batteries don’t rely on liquid electrolytes like traditional EV batteries do, making them more durable and efficient. Toyota’s proposed new EV model will be able to charge from zero to full in a staggering 10 minutes. With even the top luxury EV models coming up in 2021, the best among them is only promising 100 miles of range to be restored within a period of 10-15 minutes, and that’s only when using the fastest-available public DC charging.
In sum, these advances in EV technology promise at least the foundations of greater range, faster charging and hopefully reduced sticker prices on electric cars. Together, that could make 2021 either the year, or a step closer to the year, that EVs finally become the viable industry alternative to gasoline and diesel vehicles for which we have waited so long.
Ditching the Dream of Autonomy
With so many stories in the past year’s news regarding various companies’ advances in the realm of autonomous driving, it all seemed to be pointing to the arrival of the driverless dream set out by former US Secretary of Transportation, Anthony Foxx. Back in 2016, he confidently declared that by 2021 we would have fully autonomous cars on every street.
Shifting into 2020, and even with the pandemic, is this dream really any closer? Elon Musk promised in July 2020 that Teslas would reach full autonomous driving capability by the end of the year. The end of 2020 has come and gone and we are apparently not there. In fact, Fortune ran a story on November 9, 2020, reporting the concerns of federal regulators who promised to “take action to protect the public against unreasonable risks to safety.” That was there way of saying, “Not so fast, Mr. Musk.”
The way we see it, driverless cars are coming, but 2021 isn’t the year. There are bigger priorities for people in the coming wake of the worst pandemic in living memory. Autonomous cars will have to take a back seat for a while longer.
Hiatus on Ride-Sharing
Back in August 2020, techcrunch.com did a piece reporting second-quarter loss of $1.78 billion. This was preceded in quarter 1 with a loss of $2.9 billion, and succeeded by another $1.2 billion the third quarter. As a result, the share price took a tumble, dropping 4 percent back in August after the second-quarter losses were announced. That was a total of $1.02 per share down.
What does all this mean? Uber’s underperforming in 2020 isn’t exactly due to anything that was wrong with their initial planning. In fact, the first quarter net loss of $1.78 billion was down from $5.24 billion the previous year, so progress was made. The fact is that in the climate of an ongoing public health crisis, the entire concept of ride sharing was going to take a hit. In healthier times, we used and loved these services, but in the days of masks, disinfectant and serious personal space issues, ride sharing is just not right for us.
For these reasons, and theorizing that Uber’s losses in 2020 are not unique to their own model, we believe that in 2021, ride sharing will be on a brief hiatus while buying your own private personal space on wheels makes a real comeback. Uncertain times give people a craving for control, and that’s what your own car gives you.
Greater Use of Connectivity by OEMs
Finally, another key trend in 2021 will be the increased use of digital technology and connectivity by manufacturers. Even in 2020, more than 70 percent of cars already have telematic capability, which means they are able to connect to the OEM, other cars and even the systems and services present in smart cities. With such a high percentage already carrying these systems, and a host of new cars with them being bought in 2021, we can expect these systems to be used much more widely, especially by OEMs.
Why do OEMs want this? For data, of course. The real-time data they collect can help the company predict potential problems and fix them before they become too serious. In this way, they can avoid ballooning warranty costs. They’ll even be able to streamline their selections more easily by determining which are the problematic on-road models, and therefore worthy of the axe come model-year renewal.
Another side to connectivity will be OEMs abandoning their own integrated systems like built-in navigation in favor of models that more easily connect with the driver’s smartphone. Already we have seen Apple CarPlay and Android Auto go wireless, causing some to wonder why any OEM bothers with their own built-in navigation these days. If your screen is displaying what’s on your phone, what else do you need? The can simply becomes an extension of your digital limbs.
What Do These Trends Mean for the Industry and Beyond?
As has been the case for so many decades already, the development and fate of the automotive industry in 2021 will be inextricably linked to our own lives. Here’s how all of the above-mentioned trends and more will affect various parties moving forward:
Manufacturers will have no choice but to adapt to the coming changes. Greater pressure from governments to dramatically cut emissions are driving the early onset of electrification. Longer-term commitments to outlawing sales of new gasoline and diesel cars are pushing that even harder. What it means is that every OEM in 2021 will either have to be releasing or planning an all-electric model for release in the coming years.
Besides this, manufacturers will also have to consider how the other arms of their businesses will work. What will happen to the cars after they’ve rolled off of the production line?
Brick-and-mortar dealerships are likely to remain for quite some time, but the way they work and operate will certainly change. Short-term health risks will see skeleton crews at first, but as we return to normal, it’s more than likely that the dealership will start its transition into car test, pickup, customer assistance and vehicle maintenance and repair centers. The sales patter of the dealership staff will be replaced by the alluring photos of the online platform and the friendly voice of an advisor talking you through your new purchase. It won’t all happen in 2021, but we’ll get a good deal closer.
Many will continue to resist electric cars in 2021 because of the continuing high prices and the ongoing availability of cheaper alternatives. It’s reasonable to predict that a number will turn to hybrids, and possibly PHEV options in order to get used to the idea of going electric. They are affordable and economical, and as long as you like Toyota, come in so many different shapes and sizes.
The new year may have arrived, but COVID is still with us, and that is still going to spur many to favor their own vehicle over ride-sharing for at least a short time. The year 2021 could be one in which we see a spike in Millennial interest in car ownership.
While the majority will remain with their gasoline and diesel vehicles, there’ll still be a good number of people who switch to electric this year. This could spell disaster for state and federal governments when it comes to tax revenues. Fuel taxes have helped to fund so much government work over the years. Hundreds of thousands of people switching away will mean the dents already made just get bigger and bigger.
We could therefore start to see talk of increased taxes in other areas, perhaps new road taxes on electric vehicles. It’s likely government will try to find an alternative within the automotive sphere so as to avoid creating too much controversy.
Conclusion: 2021 is About the Start of Recovery
Overall, there seems to be one unifying theme that connects all the factors we have explored in today’s article. The year 2021 is not about an absolute bounce back to pre-pandemic levels. With vaccines rolling out slowly, there’s likely plenty of months left in the COVID cycle. What most experts should agree upon, however, is that 2021 is the year in which things will start on their upward tick back to success. It may take a few more years to get back to where things were, but the sense among the pundits is that the outlook is positive moving forward.