Andrew Marsh, FIMI, Engineering Director at Ezi-Methods, provides his view on automotive consumerism and the potential effects on the industry post-COVID.
Welcome to the end of things! Fresh out of more than two years of unparalleled economic disruption, not everywhere is suffering from an almighty economic downturn fuelled by profligate spending by the ruling elite. Yet, the automotive business, for the most part, faces ruin.
Let’s dig a bit deeper.
Europe decided to push for never-ending reductions in tailpipe emissions, introducing not only member state-level tax incentives but also a direct tax on vehicle manufacturers for each gram of Carbon Dioxide emitted over the fleet average target. The tax was planned for 2019, and after lobbying by ACEA failed to stop this, most vehicle manufacturers got on with compliance.
The result was, in effect, doubling product variants – a mix of internal combustion engine powertrains with mild electric hybrid assistance through to pure electric powertrains for Europe and other – more profitable – mixes for non-European markets. The USA woke up and liked what it saw – and the campaign migrated. Indeed, most major vehicle manufacturer home markets expressed intent to adopt the EU emission control model.
Just before March 2020, there were a series of fires and electrical outages that severely damaged the supply of microprocessors – especially the older products favoured by the vehicle manufacturers and their component suppliers. The production issues that arose were not easily fixed. The pandemic led directly to the first major strategic error, where most vehicle manufacturers simply stopped – including orders for microprocessors. Yet demand for consumer goods, which also tended to use the same legacy microprocessors, boomed during the lockdowns.
When the long haul back to production began, the mistake was revealed. In effect, the microprocessor production slots had already been sold to other customers. Literally, key components became scarce. The lockdowns rolled on…
Planning and the great unplanned events
Leading up to 2019, vehicle manufacturers planned to build enough ‘electrified’ vehicles to boost their image and negate or even eliminate EU tax penalties. This required new commodities such as traction motors, traction batteries, power controllers and cooling systems for the high voltage components.
The whole process was kicked off during the early years of this century, culminating in the Euro VI disaster, which demonstrated the chaos legislators could unleash. The crisis deepened by 2015 when the first contract failures for traction batteries emerged, leaving major manufacturers with planned production and no way to complete it. For example, Mercedes-Benz EQC production was limited for three years because the company had simply failed to buy enough battery cells at the right time.
Vehicle manufacturers discovered their offer to pay for goods, and services did not have the same clout as other companies ahead of them in the queue for finite resources. Meanwhile, the plan rumbled on.
By March 2020, the very time most of the electrified product was supposed to reach the market in Europe, the lockdown season began. The new car market tanked, stock was piled up everywhere, and the big campaigns to promote this new product line were left in tatters. The change since then? The products planned years ago just keep arriving, and the market confusion simply deepens.
Critically, Tesla took a different path. They used off-the-peg semiconductors frequently found inside computers and smartphones to avoid the trap of being tied to older production facilities – they pursued sourcing flexibility rather than saving fractions of a cent. In addition, Tesla had the biggest traction battery order book outside of China and established a partnership with Panasonic. There were component shortages, but the effect was minimal compared to their peers.
The biggest automotive market in the world
For a few years, China has overtaken the USA as the biggest automotive market in the world, and yet…. there has been surprisingly little innovation. Automotive technology transfer to China has been underway for more than three decades. The huge drive to sell pure electric vehicles is more about the fastest practical way to alter air quality in the overheated Eastern city economies rather than saving the planet.
We are now exposed to vehicle designs that have more to do with the target audience in China than in our markets. Tell-tales include shots of the rear passenger seat (more important than the front seats in China), excess ‘surface entertainment’ both inside and out, along with an emphasis on connectivity. The latest generation of BMW 7 series, the scene-setter for the whole range, has an electronic screen ‘plank’ option nailed to the headliner, like a refugee from McDonald’s. Understated class?
Not here.
The China market has been famous for endlessly benchmarking products, and recycling perceived successful ideas in the hope of success. After four decades of this formula, it has yet to succeed outside of China.
The concern
The flurry of ‘electrification’ hides both ambitious and not-so-ambitious products, which means each launch dilutes instead of builds. There are the endless reviews from ‘influencers’ who promote or destroy each new vehicle as it arrives on a whim.
One example. Volvo XC40 is available with MHEV, PHEV and also EV. The latter – Volvo XC40 P8 Recharge – is based on the same steering, suspension, brakes, bodyshell and safety systems as the other versions. The damming review? ‘It feels like an ICE conversion’. Well, it is, and it carries 400kg more weight, which makes the ride easier to optimise. No excuse, really.
This illustrates the problem. Each model family takes between 18 months and seven years to create, and if the number of models is doubled, and those models have to appear close together…, shortcuts have been taken. The danger is this bulge of product will appear to be indistinguishable. New car? New phone? New fridge freezer? Even though one of these products typically weighs more than 1200kg, has upwards of 25000 components, and has more computing power than anything else we own, it is the car that is relegated to a ‘blank’.
The question: Is the confusion an opportunity?
If you would like to contact Andrew, please email him at andrew.marsh@autoindustryconsulting.com
