Although most major automakers are investing heavily in electrification and autonomous vehicles, the Center for Automotive Research (CAR) predicts those investments could slow in the coming years and that such vehicles will represent only a fraction of sales a decade from now.
According to the report,The Great Divide: What Consumers Are Buying vs. The Investments Automakers & Suppliers Are Making the U.S. automotive industry is in a critical period.
U.S. light vehicle sales are plateauing at a high level that includes a rich mix of pickup trucks, SUVs, and CUVs. Sales of these high-priced and high-margin vehicles are producing record profits that companies are pouring into new products, processes, and technologies. Some technological developments—including automated driver assist systems (ADAS); connected and automated vehicle technologies (CAV); and advanced powertrains—have the potential to transform not only the vehicle but also the entire automobile industry.
Alone or in combination, these technologies can enable new mobility paradigms and business and revenue models that could dramatically alter the way consumers purchase transportation and interact with vehicles, says CAR. Even while the industry is making substantial bets on the future of automotive technology and the automotive business more broadly, companies must continue to develop and sell vehicles to make a profit in today’s market. The mixed fleet—personal ownership and shared mobility—will likely persist for decades. Developing and manufacturing a light vehicle is a costly endeavour with uncertain paybacks.
Automakers must justify their platform and powertrain business cases over a multi-year time horizon to meet internal rate of return (IRR) hurdle rates or the targeted level of return on invested capital (ROIC). Capital and human resources are typically constrained, and current technology trends have tightened the constraints even further.
Autonomous vehicles may take decades
CAR says that most automakers and suppliers agree that the “three revolutions” of automated, shared, and electric vehicles will be transformative. However, it may take decades for this idealized future to take hold, and even then, automated, connected, electric, and shared vehicles (ACES) will not make sense in every region of the country or every climate.
CAR says that ACES mobility will eventually transform the automotive industry and the transportation of people and goods, but these changes are not going to happen overnight, says the researcher. CAR’s research shows that full SAE Level 5 autonomy is currently projected to be commercially available by 2030, and IHS|Markit projects that just 3.8 percent of vehicles sold in that year will be capable of Level 4 or Level 5 autonomy. The share of autonomous-capable vehicles sold increases steadily throughout the 2030s and comprises over half of all new vehicles sold by 2040.
Also in 2030, more than 90 percent of global new vehicles sold will still have an ICE, and BEVs and FCEVs will comprise roughly 8 percent of new vehicle sales, says CAR.
Still, the researcher urged action, even in the face of economy driven delays:
“While the technology to electrify and automate vehicles will take decades to proliferate, automakers and suppliers must invest now to have a stake in the future of the transformed automotive industry. Profits have been steady, and investments have continued throughout the economic expansion. The challenge will come when sales begin to soften further and profitability lags. Will the auto industry continue to spend at the current pace through a downturn in the business cycle? If recent history is any guide, they will not—at least not at the current speed and scale of investment.
“Automotive investments in new products, new technology, new processes, and advanced R&D all suffer during an economic contraction. A prolonged market slump, or a steep market correction, could delay the full implementation of EVs and AVs by as long as 5-10 years.”