Automotive Industry Overview, Analysis, and TrendsSadaf Abbas
Automotive Industry Overview, Analysis, and Trends
The following article consists of an introduction to the market. First, it briefly describes the history of the automotive industry, calculates the market growth, and focuses on the key market segments and the leaders of the automotive industry. Further, it also explains the reasons for the chip scarcity in the current scenario and their impact on the production of the vehicles. Further, the industry trends are discussed, including the growth of EVs and autonomous vehicles, the size of IoT based vehicle market, and its benefits. Finally, it also discusses the future of hydrogen fueling and the blessings of shared mobility.
After several years of decline, the global auto production market is growing at a CAGR of 3.1%. It is estimated to be worth $2.9 trillion in 2022. However, Covid-19 severely hit the automotive industry, and the growth rate reached -13.7% in 2019-2020. Moreover, the economics of the automobile sector is also changing; the world is adopting new trends. The use of the internet of things (IoT) is growing; electric vehicles are getting more attention, and autonomous vehicles are in demand. Azom mentions that by the end of this decade, 15% of all new cars will be fully autonomous.
Automotive Industry History
In 1885, Karl Benz invented the first gasoline-powered three-wheeled car with a patent in Germany, known as the ‘Motorwagen.’ After the development of iconic car models like Ford’s Model T in 1908, car designs started to veer away from the carriage look and adopt a more car-like appearance. Further, several developments in the auto industry occurred throughout the 1950s and 1960s due to more technological advancements. New ideas included fuels with better compression ratios, vehicle comfort and appearance, growing safety and environmental requirements, vehicle speed restrictions, and heating and ventilation technology.
After the 1980s, the market share of energy-saving autos kept rising. The Japanese automakers’ higher-quality, more fair priced, and more fuel-efficient cars started to take market share away from the U.S. automotive sector, due to which globalization of the auto sector started.
Automotive Industry Analysis
The graph below shows the trend in global sales growth from 2015 to 2021. According to Deloitte, Covid-19 had a substantial impact on the automotive industry. The disruption of Chinese part exports brought large-scale manufacturing halts in the European market. The US market also suffered assembly plant closure due to a depressed global supply chain. The annual sales growth was negative during the Coid-19 but regained momentum in 2020.
In the last 22 years, the manufacturing of automobiles has steadily increased globally. However, only two events influenced the production of vehicles, one was the 2008 financial crisis, and the other one was the most recent, Covid-19. Keeping these two events constant, the growth rate of manufacturing up till 2021 was 2.37%.
With the world’s increasing population, the demand for passenger cars is also significantly increasing. As a result, passenger car manufacturing has increased by approximately 6% in the last three years.
On the other hand, light commercial vehicle manufacturing increased to 2.49%, but the manufacturing of heavy commercial vehicles showed a decline in 2021. Whereas, with the most considerable growth of 14.89%, heavy buses and coach demand has significantly risen.
China has the largest market share worldwide. Japan is on second, and so on. As per Statista, In 2021, more than 32% of all vehicles produced per annum worldwide were made in China, which is greater than the European Union, the United States, and Japan put together.
Volkswagen AG and Toyota are currently leading passenger car manufacturers. In the Year 2021, Toyota was the leading company, but due to supply chain issues and low sales in its home country, Toyota was ranked 2nd in 2022.
Toyota, the most revenue-generating company in 2021 in the automobile sector, also has a best-selling passenger car. A few of the models which are the most selling throughout the world are Corolla, RAV4, Camry, and Hilux.
Automotive Industry Chip Shortage
Mckinsey mentions some reasons for the shortage:
- The demand for PCs, servers, and wired communication during COVID-19 increased, so the supply was shifted toward the IT sector, and the automobile industry has to face the shortage.
- Furthermore, the Russia-Ukraine war has also added uncertainty to the semiconductor supply chain and automotive demand. Also, Russia provides 25 to 30 percent of the world’s palladium, a rare metal in semiconductors, and Ukraine delivers 25 to 35 percent of the world’s refined neon gas.
- The bullwhip effect: the automobile industry is placing orders for surplus semiconductors, around 10–20% more than necessary, due to the increasing chip scarcity.
The below graph shows the global manufacturing of automobiles halted in 2021 owing to a shortage of semiconductors, with forecasts for 2022 and 2023
Automotive Industry Trends
As per Statista, the demand for electric vehicles is increasing.
- In 2023, the market for electric vehicles is anticipated to generate US$457.60 billion in revenue.
- Market volume is predicted to reach US$858.00 billion by 2027, with revenue forecast to expand at 17.02% per year (CAGR 2023–2027).
- In 2027, the global market for electric vehicles is anticipated to sell 16,206,9K automobiles.
The graph below estimates the top revenue generating countries from electric vehicles. China is above all other countries in selling electric cars.
According to Mordor Intelligence, the autonomous (driverless) auto industry, estimated at USD 22.22 billion in 2021, is predicted to grow at a CAGR of 22.75% from 2022 to 2027 to reach USD 75.95 billion. More autonomous cars are being produced with highly refined technologies integrated with smartphones, opening the potential for market companies to attract customers. Also, governments are making strict rules to improve road safety. Recent developments in artificial intelligence technology have made it possible for automakers to improve the self-driving capabilities of their vehicles.
Here is the list of the top ten autonomous vehicle companies by Emergen Research:
|Microsoft Corporation||Tesla, Inc.|
|Alphabet Inc.||Baidu, Inc.|
|Uber Technologies, Inc.||Ford Motor Company|
|General Motors Company||Aptiv PLC|
|Nvidia Corporation||Luminar Technologies, Inc.|
Use of IoT
Automotive IoT is the integration of devices, sensors, cloud computing, applications, and other similar segments into the auto to work as a sophisticated system for connecting cars, fleet management, insurance, and other things. Some of the benefits explained by Onomondo are:
- For manufacturers
- More actual data gathering and analysis,
- A quicker and more effective manufacturing process,
- Lower risks and more robust industrial safety standards,
- Monitoring of equipment theft, etc.
- For users
- Vehicle condition analytics that lower operating costs and increase safety,
- With a mobile phone app that makes it simple to check a car’s fuel level and parking position, start the engine, and link to your calendar, as well as access other information about the car and activate functions,
- Improvements to the in-car infotainment system.
The graph below shows the expected commerce of connected cars in the US.
A fuel cell uses the energy generated by the hydrogen-oxygen reaction to generate electricity. Furthermore, the enormous amount of energy released without any hazardous byproducts makes hydrogen fuel cells an excellent power source for electric vehicles. Therefore, the report by Expleo exhibits the following benefits of hydrogen vehicles ranked by automotive leaders from different countries.
|Country||Lower Emissions||Long-range driving on one tank||Less reliance on rare materials for batteries|
In addition, the report also mentions that hydrogen fueling still needs some time to develop fully. Infrastructure for hydrogen fueling vehicles is not available on a large scale, there is a limited number of service stations available, and the primary concern is related to the high production cost.
A vehicle is owned by the operator and rented to the public for a predetermined amount of time under shared mobility. Furthermore, the vehicle can be shared by multiple users simultaneously or sequentially. The added reports that the market for shared mobility was estimated at $166.3 billion globally in 2021, and analysts predict it will expand at a CAGR of 16.9% from 2020 to 2030.
The primary reasons determined by the report for ride-sharing are convenience and cost-effectiveness.
“A business like an automobile, has to be driven, in order to get results”
~ B. C. Forbes
The trillion dollars industry, and it’s still at the pace of climbing up. The above research shows the importance of this sector and how it relates to other industries. The IT sector has a direct connection, and they offer high integration in the future. In addition, the economies of the market are also changing; people prefer cost-effective and more convenient modes of transportation. Investors, especially SMEs and start-ups, must continuously monitor their business models and adopt modern automotive techs.
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