The auto industry invested many billions of dollars to design and develop vehicles for connected, autonomous, shared and electrified (or, in industry parlance, CASE) mobility, but they have been disappointed by the profits from these investments, according to PwC global Automotive trends 2019 report.
In this context, the auto industry must find a way to balance accelerating innovation and financial survival, until the direction of development becomes clearer.
“Connected cars are already ubiquitous and electric cars are gaining in popularity, but autonomous and shared vehicles are still a futuristic bet. Most of the automakers who based their strategies on the idea that a revolutionary change in the automobile and invested billion of dollars in the past decade have been disappointed by the profits even when their expectations were conservative. It is impossible to predict precisely what types of vehicles will be leading the market a decade from now. That’s why, they shouldn’t abandon their long-term strategies for CASE, but they should temper them with short-term realism, especially when the pressure comes from the need to process automation and robotization”, said Daniel Anghel, Partner and TLS Leader PwC Romania.
The main conclusions of the PwC report
During the next ten years and beyond automakers will be compelled to corral factory costs, primarily because the fulsome research and development and M&A outlays they made in order to design and develop entirely new kinds of automobiles could cut deeply into potential profits. As a result, the role of robotics and automation in factories will rise exponentially.
The pressure on cost reduction and automation will will likely slash the global auto industry workforce at least in half by 2030. Moreover, there is likely to be further consolidation before the direction of the auto industry becomes clearer. Today, there are more than 20 global automakers; by 2025, there may be only half that number.
PwC realized three scenarios for the auto industry in 2023, in which the market value will reach the same value of USD 2.6 trillion, from USD 2.2 trillion in 2018, only that the profit margins are different.
In the first scenario, the electric vehicle development is fast-paced and the margins are 4-4,4%. In the second scenario automakers delay investment, cutting their current electric vehicle production plans by about half and the margins will be 5,1–5,5%. In the third scenario that represents a future with difficult market conditions and big investments, the margins will be 3-3.4%.
Other conclusions of the report
- Successful approaches should involve the same overarching principles: a more specialised portfolio, a more focused value proposition, more rigorous financial management, and more willingness to collaborate with other companies, particularly in CASE-oriented innovation and capital investment.
- Following automation and robotization, companies will have to change their recruitment policies.
- The number of required data engineers will expand by 80% or more in some automobile factories, while the number of software engineers needed will expand by as much as 90%.
- The time required between R&D and the point of production could shrink from three to five years today down to two years or so, in order to keep pace with technological and design changes.
- The auto factories of the future will fall into two categories: one will be a highly automated ‘plug and play’ plant producing large volumes of cars with minimal variations among vehicle types for the discount arena; the other will produce customized, premium vehicles — including, but not limited to, those for the combustion engine, electric and autonomous markets.
- Investment in innovation and product introduction is projected to continue to rise an estimated 59% through 2023, with the fastest growth by far in electric and autonomous vehicles.
- The development of CASE vehicles will be more profitable for companies that make sensors, batteries, propulsion software, and infotainment and connectivity programes.
- The time until autonomous cars will run in large numbers on the roads became difficult to estimate.