Global Automotive Industry: Getting Hot Under the Hood

The outlook for the global automotive industry is bright as, consumer spending over vehicles is expected to rise and the aging vehicle fleet is at record peaks. Automotive sales are highly associated with consumer confidence which is gradually improving as consumers continue to strengthening their finances and reducing their household debt levels. As, a result banks are readily extending favorable credit terms and making it more viable for consumers to purchase valuable items.

The global automotive industry is at the front position of technological advancements and regulatory risks. The automotive industry is expected to witness reflective changes to ripple across auto-related companies in nearby future and see broad implications for other related industries. Rapid adoption of advanced digital safety features anticipated triggering significant industry disruption in coming years, and the industry do not expecting to see fully autonomous widely adopted any time soon. The sales of EV (Electric Vehicles) is gradually ramping up as cost of EV vehicles falling and charging infrastructure is improving, but automotive sector do not expect this trend starting to shake up the industry until beyond 2020. With adoption of new technologies, semiconductor and software providers will be the primary beneficiaries of the rising digital content inn vehicles, although the automotive OEMs and part suppliers are working aggressively to catch up. A parallel evolution is taking place in the powertrain – from conventional combustion engines to electric engines. This evolution is the transition is a key to curbing greenhouse gas emissions. According to International Energy Agency (IEA), global transport sector accounts for nearly half of projected rise in GHG (Green House Gases) emissions through 2030. China on the other hand, aiming at growing its EV fleet to battle rising pollution, which is expected to account for up to 40% of the hybrids and battery EVs sold by 2030. The Electric vehicle share of the global fleet of automotive rising slowly, and the next few years are expected to be crucial for adoption, as lower priced models start to address the mass market.

New technologies don’t come inexpensive, and current automotive industry players are not as cash-rich as their technology industry peers. Major automakers are facing challenge on how much to invest on EV technology in current scenario. If EV sales disappoint the automakers they will lose money, and if they wait for the demand to increase they risk being lag behind in competitive landscape.EVs require more spending on research and development as the technology is still quite expensive to build EV due to their pricey batteries. Battery prices have fallen in past few years, but still make up 30-50% of the materials cost in today’s EV models.

Automotive industry market is likely to grow at +4% per year, with an increase in production in major emerging geographies such as India, China and Mexico at the expense of Europe. The production of new is projected to surpass 100 million vehicle by 2018. The major automotive component suppliers have relocated to follow production and register healthy level of profitability.