Furthermore, Autonomous vehicles (AVs), also known as self-driving or driverless cars, are shaping the future of autonomous vehicles and becoming increasingly common on city streets around the world. Moreover, developers of these vehicles are striving to provide drivers with a safe, comfortable, and hands-free experience, pushing the boundaries of comfort and safety in road travel. Sensors, cameras, radar, and artificial intelligence (AI) enable a driverless car to travel between destinations without a human driver. Its technology developers use vast amounts of data from image recognition systems, machine learning, and neural networks to build systems that can drive autonomously. This data includes images from cameras mounted on the AV that can identify any driving environment’s components, such as traffic lights, trees, curbs, walkers, street signs, etc. However, Automakers and technology companies lag in releasing fully autonomous cars. While no self-driving cars are available for individual purchase, some vehicles offer advanced driver assistance features. There is some confusion about what today’s cars are capable of and whether today’s active driving assistance (ADA) systems, which automatically steer, brake, and accelerate under certain conditions, are considered self-driving. Levels and types of AVs According to the Society of Automotive Engineers (SAE), six vehicle driving automation system levels exist, ranging from Level 0, where vehicles have no automation, to Level 5, which represents full automation. Most vehicles on the road are at Level 1 equipped with driver assistance or Level 2 with partial automation, while some prototypes are at Level 3 or Level 4 with conditional and high automation, respectively. Right now, we are at Level 2, with cars that can control steering, acceleration, and braking while still requiring the driver to remain engaged. In the future, Level 5 autonomy would mean fully driverless vehicles. According to McKinsey & Company, the first Level 3 traffic-jam pilots or prototypes, in which autonomous systems control driving and monitoring in some situations, have already received regulatory approval in 2021. [caption id="attachment_8808" align="aligncenter" width="641"] Figure 1. Levels of driving Automation (Synopsys, 2023)[/caption] Which vehicle segments could be autonomous? New modes of transportation will emerge, primarily driven by factors such as what is being transported, the type of vehicle ownership, and where the vehicle operates. As of today, the strongest candidates to become fully automated are passenger cars, including private cars and shared autonomous vehicles, also known as robo-taxis or shuttles; the second segment is autonomous truck platooning. It is forecast that by 2040, there will be over 33 million driverless vehicles on the road. When it comes to the cost of shared autonomous vehicles, the cost per mile of a robo-taxi trip could be just 20% higher than that of a private nonautonomous car in specific contexts, depending on the segment, geography, and local conditions such as the city archetype. A robo-shuttle could be 10 to 40% cheaper than private, non-autonomous cars, though less convenient. Another segment where full automation is close to becoming a reality is truck platooning, where a group of vehicles equipped with advanced technology travel together in a line at high speed. In a truck platoon, a lead vehicle is followed by the other vehicles at the same speed and maneuvers as the lead vehicle. Each vehicle communicates with the lead vehicle, which is in control. These new transportation means, especially robo-taxis and shuttle mobility, can potentially disrupt our future mobility behavior and cannibalize the many miles people travel daily. Global Autonomous vehicles Market size According to an autonomous vehicle market forecast by Next Move Strategy Consulting, the global market for L1 and L2 autonomous vehicles reached nearly USD 106 billion in 2021 and is projected to reach over USD 2.2 trillion in 2030, growing at a CAGR of 35.6% from 2021 to 2030. [caption id="attachment_8814" align="aligncenter" width="555"] Figure 2. Global Autonomous Vehicles Market Size (Statista, 2023)[/caption] Additionally, Asia Pacific is expected to account for the largest market share by 2030, followed by Europe and North America. The main factors driving the growth of the autonomous / self-driven car market are: Increasing demand for a safe, efficient, and convenient driving experience Rising disposable income in emerging economies; and Stringent safety regulations across the globe Autonomous Vehicles market players in 2023 Furthermore, many companies are already conducting extensive testing of private AV cars, fleets of shared AVs, and AV trucks. The companies involved range from original equipment manufacturers (OEMs) and suppliers to tech players and start-ups. [caption id="attachment_8815" align="aligncenter" width="535"] Figure 3. OEMs and suppliers to tech players and start-ups (AI Time Journal, 2023)[/caption] Autonomous Vehicles in the Middle East The UAE has become the first in the Middle East and the second globally to test self-driving cars on the streets with the approval of a temporary license to test self-driving vehicles on the roads. According to the Dubai Autonomous Transportation Strategy, launched by His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, 25% of all trips on various self-driving transport means in Dubai will be driverless by 2030. In April 2021, the Roads Transportation Authority signed an agreement with Cruise, a General Motors-backed company, to operate Cruise autonomous vehicles to offer taxi and e-Hail services until 2029. It is planned to reach 4,000 Cruise AVs in Dubai by 2030 as part of its efforts to enhance Dubai’s pioneering role in self-driving transport and transform it into the smartest city in the world. [caption id="attachment_8817" align="aligncenter" width="578"] Figure 4. Dubai Self-Driving Transportation Strategy 2030 (Road and Transport Authority UAE, 2023)[/caption] Can we see driverless taxis on UAE streets in 2023? According to Dubai’s Roads and Transport Authority, Cruise has sent two of its autonomous Chevrolet Bolt electric vehicles to Dubai to begin mapping the streets in the Jumeirah area, driven by specialist drivers using two Chevrolet Bolt electric vehicles equipped with sensors and cameras in preparation for a planned launch in 2023. The technology uses a high-resolution map of the physical environment using several sensors, including LiDAR, cameras, and others. The cars were driven around the city to collect data, which can then be used to create a navigable map for Cruise’s driverless vehicles to follow. Dubai is aggressively integrating self-driving transport across all modes of public transport, from taxis and metros to buses and shuttles, and wants to set a global example for policy and legislation regarding self-driving transport. Challenges and future of Autonomous Vehicles Regulations and safety In a McKinsey survey conducted with 75 executives from automotive, transportation, and software companies working on autonomous driving in North America, Europe, and Asia-Pacific in December 2021, 60% of respondents viewed the need for regulatory support as the greatest requirement for autonomous driving; those in Europe were most likely to voice this sentiment. Notably, several European countries have launched independent efforts to create regulations. Different regulations have also emerged in China at the municipal level. [caption id="attachment_8821" align="aligncenter" width="536"] Figure 5. Main challenges to the adoption of Autonomous Vehicles (McKinsey & Company, 2021)[/caption] Technology barriers Developers must test the technology for many millions of kilometers before fully commercializing it. To achieve a 95% equivalency to a human driver, an autonomous automobile needs to travel around 291 million miles without causing any fatalities. For instance, the first fatal accident happened in March 2018, when a Level-4 Uber prototype collided with a person crossing the street. Lack of required infrastructure In emerging countries, the development of IT infrastructure on highways is slow as compared to developed economies. 3G and 4G-LTE communication networks, which are required for connectivity, are limited to urban and semi-urban areas. Autonomous/ Self-driving cars require basic infrastructure such as well-organized roads, lane markings, and GPS connectivity for effective functioning. We can conclude that the market size of autonomous vehicles is expected to grow rapidly in the next decade, reaching trillions of U.S. dollars by 2030 due to the expected expansion of autonomous vehicle levels. More than half of the new vehicles sold globally will be at least at level 3, while about 10% will be at level 4 or higher. North America and Europe may lead the adoption of higher-level AVs for personal use, while China and Asia-Pacific may dominate the market for robo-taxis and shared mobility services. Highway driving or parking may be more suitable for higher-level AVs than others, such as urban driving or off-road driving. This will be driven by technological improvements, regulatory support, consumer demand, safety benefits, and environmental concerns. Do you think autonomous vehicles will be a reliable and safe option for everyday transportation without the need for a human driver? Sources: https://www.theguardian.com/technology/2023/feb/17/taking-ride-self-driving-car-nissan-servcity-autonomous-vehicles https://www.mckinsey.com/features/mckinsey-center-for-future-mobility/our-insights/whats-next-for-autonomous-vehicles https://www.techtarget.com/searchenterpriseai/definition/driverless-car https://www.marketsandmarkets.com/Market-Reports/near-autonomous-passenger-car-market-1220.html#:~:text=The%20global%20autonomous%20%2F%20self%2Ddriving,automotive%20customers%20across%20the%20world. https://www.statista.com/statistics/1224515/av-market-size-worldwide-forecast/ https://www.esquireme.com/gear/cars/dubai-cruise-driverless-taxis-2023 https://www.telecomreview.com/articles/reports-and-coverage/5651-uae-drives-the-future-of-mobility-and-autonomous-technology https://www.rta.ae/links/sdt/sdt-final.pdf https://techcrunch.com/2022/07/24/cruise-starts-mapping-dubais-streets-in-prep-for-2023-robotaxi-launch/?guccounter=1 https://ai4beginners.com/top-10-self-driving-car-companies-in-2020/ https://www.aitimejournal.com/autonomous-vehicles-companies-to-watch/ https://www.neusoft.com/Products/Automotive/2286/ https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/the-road-to-affordable-autonomous-mobility https://techcrunch.com/2022/07/24/cruise-starts-mapping-dubais-streets-in-prep-for-2023-robotaxi-launch/ https://www.telecomreview.com/articles/reports-and-coverage/5651-uae-drives-the-future-of-mobility-and-autonomous-technology https://builtin.com/transportation-tech/self-driving-car-companies https://www.theguardian.com/technology/2023/feb/14/amazon-tests-robotaxis-zoox-california https://www.theguardian.com/technology/2023/feb/20/self-driving-vehicles-from-overseas-face-ban-in-england-and-wales https://www.researchgate.net/publication/366986201_Autonomous_Car_Current_Issues_Challenges_and_Solution_A_Review https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/autonomous-drivings-future-convenient-and-connected https://www.mckinsey.com/features/mckinsey-center-for-future-mobility/our-insights/whats-next-for-autonomous-vehicles https://www.bbc.com/news/technology-60126014 https://www.forbes.com/sites/naveenjoshi/2022/07/22/5-ways-autonomous-cars-will-reshape-our-world/?sh=7b32995b589b https://www.synopsys.com/automotive/autonomous-driving-levels.html
As with most industries, digitization and increasing automation have revolutionized the automotive industry, giving rise to four major disruptive technological trends: electrification, autonomous driving, shared mobility, and connectivity. These trends, combined with demand and supply challenges such as declining purchasing power, increasing inflation, rising fuel prices, and reliance on Chinese supply, are putting pressure on automotive players to reconsider their current business models. Since the invention of the automobile, the sales model has remained mostly the same. In the early 1900s, multiple distribution models were attempted in the auto industry; however, by the 1950s, the dealership model had proven to be the most effective for distributing automobiles. In this model, the manufacturer builds the vehicles and then sells them to dealers, which act as retailers and service providers. Traditional sales models, however, have undergone fundamental changes in recent years as e-commerce and industry leaders revolutionized the purchasing process. Currently, new automotive players, such as EV startups, have started to adjust their sales model to adapt to evolving buying behaviors. Since 2016, EV pioneers like Tesla have been combining their city showrooms with their online stores, providing their customers with a simple interface and a brand-new purchasing experience when compared to traditional sales models. The agency sales model: transforming the automobile purchase journey The agency sales model can be considered the evolution of the traditional three-tiered sales model towards an integrated online/offline sales model. In that sense, the vehicle manufacturers interact directly with the customers and assume all sales responsibilities. The dealers still play a decisive role in this model, but they act only as agents and only retain activities that require physical interaction, such as the execution of test drives and handling of service appointments. The traditional sales model players, which include dealerships and national sales companies (NSCs), remain present in the agency model but are there to provide a superior omnichannel customer experience, allowing OEMs to establish a 360° customer view, resulting in increased cross-selling and market transparency. Likewise, certain roles and responsibilities are transferred from the dealer to the manufacturer. The dealer’s financial risk can be reduced while gaining full access to the national car inventory and shortening delivery times. [caption id="attachment_8493" align="aligncenter" width="608"] Figure 1 - Traditional sales model (three-tiered, mainly offline) vs agency sales model[/caption] Automotive retailing: a shift toward e-commerce The online car buying market refers to the end-to-end purchase of vehicles through online platforms. This offers customers accessibility and ease of shopping from home, more visibility on pricing, and digital and secure payment processes. Online vehicle sales have increased significantly in recent years. The global online car buying market was valued at $237.93 billion in 2020 and is projected to reach $722.79 billion by 2030. This market was not triggered by the pandemic in 2020, but rather is the result of the accelerated digitalization of car manufacturers and a shift in mindset and consumption behavior. According to BCG projections, it is expected that online billing & payment transactions will account for 5-7% of new vehicle sales in 2025 and up to 33% in 2035. In terms of market share, Tesla continues to be the leader in direct sales, along with “Polestar”, which provides a mature online interface that challenges Tesla. [caption id="attachment_8494" align="aligncenter" width="621"] Figure 2 - Projected Growth in Online Sales of News Cars Around the World[/caption] Online aftermarket sales: the rise of a new sales channel The online automotive aftermarket is a secondary market accessed through e-commerce databases that sell almost all automotive spare parts, marketing services, and auto-related services. Since the pandemic, the automotive aftermarket has registered an important evolution led by multiple trends, which can be perceived through the continuous global demand for used vehicles, auto parts becoming more sophisticated, and consumers holding onto their cars because of the financial downturn caused by the pandemic. The whole automotive aftermarket sector (online & offline) is expected to grow from about $380 billion in 2021 to $449 billion in 2023. Moreover, the COVID-19 pandemic, along with the global disruption of the automotive supply chains, is acting as the main factors affecting buying behavior and leading a growing number of consumers toward the online aftermarket. In that sense, according to Hedges & Company, online sales totaled $16 billion in 2020, a 40% increase from $7.4 billion in 2019 (figure 3). Similarly, business-to-consumer mobile sales also saw a significant increase in recent years, accounting for approximately 50% of all online auto part sales in 2020, an increase of 35% compared to the previous year. Currently, the online aftermarket channels are being led by new players such as Car Parts and Mister Auto, whose business models are 100% online. Likewise, automotive manufacturers are also starting to respond to the current industry disruption by cooperating with online players to sell their parts and accessories. [caption id="attachment_8495" align="aligncenter" width="552"] Figure 3 - Business to consumer online Sales in USD Billions[/caption] Growth of e-commerce automotive aftermarket The trend of consumers looking for aftermarket products online has been accelerated by pandemic restrictions and the accelerated drive toward digitization in 2020 and 2021, which helped online sales channels increase their penetration rates (figure 4). The trend was most noticeable in the parts and accessories segment, which includes enthusiast and general maintenance DIY brands that experienced a sustained increase in sales in 2021. [caption id="attachment_8496" align="aligncenter" width="567"] Figure 4- e-commerce Penetration in the Automotive Aftermarket[/caption] Ultimately, a growing number of customers sought alternative channels for a variety of products, despite the fact that retailers were deemed essential service providers and operated during multiple shutdowns. As a result, retailers have been accelerating their digital solutions projects by improving e-commerce functionality and adding new shopping options, such as curbside pickup and faster home delivery. The automotive industry is experiencing major changes in its landscape with digitization, electrification, and the complexity of the global market. Leading global players, including suppliers, OEMs, and new entrants, are already innovating their business models to adapt to the extremely competitive ecosystem. Even though the industry's online penetration has increased in recent years, there are still plenty of opportunities for leaders to seize. Success in 2030 will require automotive players to prepare for uncertainty, leverage partnerships (e.g., around infrastructure for autonomous and electrified vehicles), and reshape their value propositions. Concurrently, aftermarket players must improve their e-commerce strategies due to a greater emphasis on digital presence, as shoppers are becoming more accustomed to online channels due to the increased breadth, convenience, and ability to find exact specifications over traditional ones. Finally, as suppliers and retailers focus more intently on digital strategies to address consumer purchasing behavior, the e-commerce channel will continue to grow at an exponential rate in the automotive aftermarket. Sources: https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/disruptive-trends-that-will-transform-the-auto-industry https://europe.autonews.com/guest-columnist/how-auto-industry-revolutionizing-its-sales-model https://home.kpmg/xx/en/home/insights/2022/08/changing-times-new-business-models-pose-challenges.html https://www.capgemini.com/wp-content/uploads/2021/09/Automotive-Agency-Sales-Model_POV_Capgemini-Invent.pdf https://www.alliedmarketresearch.com/online-car-buying-market-A10067 https://www.jefferies.com/CMSFiles/Jefferies.com/Files/IBBlast/Industrials/IB-Autocare-2021-Review-and-Outlook.pdf https://f.hubspotusercontent20.net/hubfs/6890475/PDF-Premium-Downloads/Automotive-Aftermarket-2022-Report-Valtech-Absolunet-V2.pdf https://www.statista.com/statistics/1199431/online-car-sales-share-in-selected-markets-worldwide/ https://www.simon-kucher.com/sites/default/files/2022-02/Brochure_Automotive-Study-2022.pdf https://www.precedenceresearch.com/aftermarket-automotive-parts-market https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Consumer-Business/us-2022-global-automotive-consumer-study-global-focus-final.pdf https://www.globenewswire.com/en/news-release/2021/11/03/2326186/0/en/Global-E-Commerce-Automotive-Aftermarket-is-Anticipated-to-Reach-USD-132-75-billion-by-2028-Fior-Markets.html#:~:text=E%2Dcommerce%20automotive%20aftermarket%20provides,served%20by%20the%20market%20players. https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/disruptive-trends-that-will-transform-the-auto-industry/de-DE
Aluminum industry in the global economy The Russian military operations in Ukraine had a significant impact on many industries, including the aluminum industry. At the beginning of the year, global aluminum prices were already soaring, but the conflict surely exacerbated the situation in February. Notably, the war has not only impacted the aluminum market but also various products in which aluminum is a vital component, from beverage and food cans to aerospace applications. These various applications are expanding and driving up aluminum demand year after year. As a result, the global aluminum market size has grown from 150 billion USD in 2020 to 152.3 billion USD in 2021 and is expected to reach 160.7 billion USD in 2022. Due to the anticipated growing demand, by 2027, the global aluminum market value is projected to reach 210 billion USD. Global Aluminum Market Size (2020 – 2027), in billion USD [caption id="attachment_8323" align="aligncenter" width="441"] Source: Statista.[/caption] Note: the value from 2023 to 2026 are estimated based on Infomineo analysis (CAGR 4.9%). The high demand for aluminum comes from its essential contribution to multiple industries, including packaging, automotive, and construction. -In packaging, for example, the aluminum content represents 73% of the beverage cans by weight -In the automotive industry, the aluminum share of vehicle weight is expected to grow from 9.1% in 2017 to 16% by 2028. - In construction, the consumption of extruded aluminum (extruded aluminum is the major product used in construction) has grown from 30.7 million tons in 2020 to 33.4 million tons in 2021. It is forecasted to continue to grow to reach 3 million tons by 2025. Major drivers of aluminum prices Aluminum production involves multiple stages until the finished product can be used directly in different industries, including mining the bauxite ore, shipping to smelters, refining, casting, etc. Besides the demand-supply balance, there are many factors in these operations that affect the aluminum price, the most important of which are: Raw material prices: The price of bauxite, as the aluminum-source ore, along with the raw materials used in aluminum production like alumina (refined bauxite), coke, pitch, silicon, magnesium, and caustic soda, all affect the price of the ready-for-shipping aluminum. Shipping costs: Freight costs, particularly sea freight (containers), have a direct impact on raw material prices as well as primary aluminum prices. Energy cost: the cost of power is deeply involved in aluminum production costs as one of the most energy-sensitive industries, accounting for 12% of the global industrial sector’s energy use. National policies and market dynamics: To regulate the market and adjust to national policy, producing countries use instruments such as tax cuts and rebates to respond to importing countries that apply anti-dumping taxes on imported aluminum products. The war’s impact on aluminum price drivers The war pushed the price of aluminum to unprecedented levels. For example, the aluminum price on the LME (London Metals Exchange) with the three-month contract peaked at a record $4,000 a ton in early March 2022, compared to the $3,224 February monthly average of the same year. Market prices have recently declined as price hikes discourage demand, but even in May2022, aluminum trades at the $3,300 level, which is 40% higher than the previous year. There are multiple factors that have impacted aluminum prices. Firstly, and most importantly, oil price spikes had a detrimental effect not only on aluminum, but on all commodities. The Brent oil price was marked at around $80 per barrel at the beginning of 2022, but the price jumped from around $96 per barrel on February 14th, 2022, to around $123 per barrel on March 7th, 2022. More than four months after the start of military operations, the Brent price remains around $120 (June 2022). Secondly, supply chain disruptions due to the Russian invasion increased the cost of shipping operations. The ClarkSea Index (all shipping markets) shows a dramatic increase in the shipping rate from around $30,000 per 40-foot container by the end of January 2022 to over $40,000 in March. ClarkSea Index in Thousands USD/day – all shipping markets [caption id="attachment_8324" align="aligncenter" width="539"] Source: UNCTAD Secretariat[/caption] Finally, the impact of changing national policies on market dynamics should not be overlooked. Since aluminum is one of the biggest emitting industries, China's aim to achieve net-zero carbon emissions by 2060 has resulted in a reduction in China's aluminum output (the world's top producer). To compensate for the decreasing domestic output, China's aluminum imports surged dramatically. The war has reversed the equation. As natural gas and other energy prices skyrocketed, European aluminum companies reduced production, creating a metal shortage and a price gap of roughly $300 per ton between China and Europe. Also, since China has not imposed sanctions on Russia, the country has had access to cheaper energy and lower production costs compared to Europe. This created a profit opportunity when a trader buys Asian aluminum and resells it in Europe or the United States. Secondary aluminum as a solution As a solution to the difficult circumstances ranging from COVID-19 to the Russia-Ukraine war, the top aluminum producing companies focused their efforts on secondary (recycled) aluminum as a less expensive option during the difficult period. Several of the top 10 aluminum producers recently invested in secondary aluminum: Rio Tinto (UK/Australia) – March 2022: Rio Tinto has commissioned a new remelt furnace at its Laterrière Plant, adding 22,000 metric tons of recycling capacity to its aluminum operations in the Saguenay – Lac-Saint-Jean region of Quebec. The $8.4-million project has been completed over two years to offer rolled product customers in the North American automotive and packaging industries a new sustainable supply solution combining low-carbon and recycled aluminum. Alcoa (US) – April 2022: Alcoa has completed the installation of a new furnace in Norway that uses renewable energy to recycle scrap aluminum, saving energy and unlocking the infinite recyclability of our metal. The project stems from a collaboration between Alcoa and MMG Aluminum, a German-based metals trading company that supplies Mosjøen (Norway) with clean aluminum chips and shavings that have been compressed into briquettes. The induction furnace efficiently melts those briquettes and then pours out the recycled aluminum for blending with the smelter’s low-carbon aluminum and other alloying materials, depending on the end-use applications. Norsk Hydro (Norway) – May 2022: Norsk Hydro has announced a tender offer to acquire 100 percent of the shares of Alumetal S.A., based in Poland. Hydro describes that company as the second-largest producer of aluminum casting alloys in Europe. Alumetal has an annual production capacity of 275,000 metric tons at its three plants in Poland and one in Hungary. Hydro describes the company as experienced in the sorting of post-consumer scrap and says Alumetal is currently “constructing a new, state-of-the-art sorting line” for the scrap it melts. The secondary aluminum market aids in reducing demand for primary aluminum. However, much more effort is required to reduce the recent metal price surge. This will eventually allow the global aluminum market to recover and restore normal conditions while mitigating the effects of COVID-19 and the war. Sources : https://www.statista.com/statistics/1113683/global-aluminum-market-size/ https://www.aluminum.org/canadvantage https://www.statista.com/statistics/892783/japan-aluminum-share-in-medium-sized-passenger-cars/ https://www.statista.com/statistics/1113623/global-aluminum-exports-by-country/ https://www.iea.org/reports/aluminium https://www.eia.gov/todayinenergy/detail.php?id=38392#:~:text=Within%20the%20industrial%20sector%2C%20the,and%20other%20intermediate%20metal%20goods. https://www.reuters.com/article/aluminium-rebate-idAFL3E7FC0WI20110412 https://asia.nikkei.com/Business/Markets/Commodities/Ukraine-war-turns-China-into-net-exporter-of-aluminum https://www.westmetall.com/en/markdaten.php?action=averages&field=LME_Al_cash https://www.statista.com/statistics/326017/weekly-crude-oil-prices/ https://markets.ft.com/data/commodities/tearsheet/summary?c=Brent+Crude+Oil https://unctad.org/news/war-ukraine-raises-global-shipping-costs-stifles-trade https://www.statista.com/statistics/280920/largest-aluminum-companies-worldwide/ https://www.riotinto.com/news/releases/2022/Rio-Tinto-commissions-new-aluminium-remelt-furnace-at-Laterrire-Plant- https://www.alcoa.com/global/en/stories/releases?id=2022/04/alcoa-advances-sustainably-with-recycled-aluminum-produced-using-renewable-energy https://www.recyclingtoday.com/article/hydro-alumetal-aluminum-recycling-norway-poland-acquisition/
The rapid evolution of technology has opened multiple doors for innovation. Despite the economic plunge caused by the COVID-19 pandemic, industries worldwide are striving to recover. Even better, they are coming back with greater visions. Industries have been increasingly focusing on developing unique and innovative products designed to address current needs while incorporating futuristic features. The automotive industry is no exception. For decades, car producers and Original Equipment Manufacturers (OEMs) challenged themselves to offer customers a wide variety of cars, equipped with the latest technologies. Opportunities in the automotive industry seem nearly endless. However, two key trends, namely electrification and connectivity, are set to further push the automotive industry forward in the long run. These automotive industry trends are mainly driven by policy changes and technology. Electrifying the Road Ahead: Trends Shaping the Future of the Automotive Industry Initiatives & Regulations Electrification in the automotive industry refers to the replacement of a car’s Internal Combustion Engine with an electric battery. Cars equipped with such 'Engine' are Battery Electric Vehicles, or simply EVs. One of their main benefits is contributing to greenhouse gas emission reduction, a goal highly encouraged by policymakers and governments through various initiatives and regulations. Among these is the European Union’s “Fit for 55” program, which aims to reduce GHG emissions by 55% by 2030. As for the US, President Biden announced a new target of up to a 52% GHG reduction by 2030. In Asia, India aims for a 45% reduction target by the same year. However, China, the world’s number one in CO2 emissions, is still behind in such initiatives, having announced that it would reduce carbon emissions by 20% by 2035 and achieve neutrality by 2060. Incentives Besides the regulations, governments have introduced several incentives to encourage the use of EVs. In Europe, for instance, France and Poland offer grants which can go up to EUR 6,000, if some conditions are met, for the purchase of an electric or hybrid car. Italy provides incentives of up to 40% of the purchase price as well as tax exemptions for the first 5 years. In the US, car buyers can benefit from a federal tax credit of up to $7,500. In Asia, China proposed a tax exemption on purchases for 2 years, and India offers a subsidy of INR 10,000 ($136.4) per kWh. Future projections Electric vehicles are projected to become more widely available globally. Some countries are even planning to completely ban the sale of diesel cars, leaving electric vehicles with essentially no competition. In 2020, more than 10 million electric cars were on the road globally. This number is set to grow to 300 million vehicles by 2030, according to the Net Emissions by 2050 Scenario (IEA, 2021). OEMs are also determined to increase their EV car production. According to the research team of Credit Suisse Global Auto, the global EV production share of total vehicle production is set to increase from 11% in 2020 to 62% in 2030, with the number of fully electric vehicles projected to reach around 29 million. (Embedded Computing, 2021). While these figures might seem too ambitious, many OEMs have already started taking initiatives to reach that goal. For instance, Volkswagen Group, converted its German plant in Zwickau to produce EVs instead of ICE vehicles, making it the first large-scale EV production plant worldwide. Jaguar Land Rover (JLR), on the other hand, started on R&D of BEVs after a loan securement of EUR 749 million (Autovista, 2022). By 2030, several OEMs plan to reach about 50% as an EV fleet. Percentage of OEM EV Fleet Over Time [caption id="attachment_8218" align="aligncenter" width="440"] Automotive industry trends[/caption] Sales of EVs are forecasted to represent 60% of all new vehicle sales, compared to 4.6% in 2020 (IEA, 2021). Projected EV Car Sales in Units [caption id="attachment_8223" align="aligncenter" width="443"] Source: International Energy Agency[/caption] Electric Vehicle Chargers Market The electric vehicle charger market is also expected to grow at a CAGR of 26.8% (2020-2027) to reach USD 25.5 billion by 2027. A fast scenario projection done by the International Energy Agency sees the number of chargers publicly available around the world reaching 2.5 million chargers by 2030, from only 385,678 chargers in 2020. One example of government incentives encouraging charging installation is France. The country offers a tax grant of up to EUR 300 per person for the installation of a charging station at home. This shows the emphasis governments place on making sure that it is more convenient to own an electric vehicle rather than a diesel engine car. Connected Drive: Navigating the Future Landscape of Automotive Connectivity Trends Apart from electrification, connectivity through technology is another factor contributing to the race to build the cars of the future. From digital screens to external platforms such as Android Auto or Apple CarPlay, we have witnessed the introduction of several connectivity features in the automotive industry in the last decade. Yet, the automotive industry is still looking for new ways to innovate. With the continuous efforts to integrate 5G, Internet of Things (IoT), and Artificial Intelligence (AI), automotive connectivity can only be seen as imminent. The three pillars of connectivity Connectivity can be separated into three pillars: infotainment, telematics, and infrastructure. Infotainment represents the link between the passengers and the vehicle, including in-car entertainment, integrated digital cockpit, heads-up display, and Wi-Fi. Telematics consists of the monitoring of information through telecommunication devices, including the cloud. It can allow the car to gather data on the driver’s behavior, for example. The infrastructure connects the car to its surroundings, allowing it to recognize and distinguish traffic lights, pedestrians, and even other vehicles with the same feature(s). Automation (Level 5) Several features within automotive connectivity are growing, and driving automation is one of them. Connectivity will soon enable OEMs to achieve the ultimate level of driving automation — level 5. Level 5 is the full automation level where the vehicle performs all the driving aspects without any supervision or human interaction requirements. According to a McKinsey report, this ultimate level is expected to be reached and widely adopted by 2030. Vehicle-to-Vehicle (V2V) Another feature is Vehicle-to-Vehicle (V2V) connectivity, enabling vehicles to 'talk' to each other through real-time data sharing. For instance, Stellantis, the joint venture between Fiat-Chrysler-Alfa Romeo (FCA) and the French PSA group, announced last year its software strategy, which aims to provide 36 million connected cars by 2030, through a 4-year investment of more than EUR 30 billion (Stellantis, 2021). Mercedes-Benz also announced plans to reach 20 million fully connected vehicles by 2025 (Automotive World, 2020). Future projections In 2020, the connected car market was worth around USD 55.6 billion, with nearly 47.5 million connected cars circulating worldwide. This market is projected to reach USD 191.83 billion, growing by 245% in 8 years (Carzato, 2021). By 2025, connected vehicles are expected to attain a share of 53%. The latter is expected to grow even more, reaching 77% by 2030 (Ericsson, 2021). Conclusion The automotive industry is heading towards a brighter and cleaner future. OEMs are extensively working on their R&D to create cars tailored to the customers’ needs and suitable for the environment. While electrification will play a big role in reducing GHG emissions, connectivity will provide customers with interactivity and more comfort. What does this mean for OEMs? There will certainly be a massive need for expert skillsets to develop these cars of the future. Partnerships between car manufacturers might be a solution to overcome the skillset shortage. As for consumers, the main topic of debate will be data privacy. Connectivity will require access and storage of data, meaning that your personal car will have data on exactly where you have been every single time. However, according to Deloitte, this would not be an issue as consumers might consent to share their own data with their car’s laptop, provided this would allow them to save time or money, and it would provide them with a safe driving experience. Within this evolving landscape, e-commerce is emerging as a crucial component. The digitization and increasing automation in the automotive sector align with broader trends seen across industries. Sources: https://www.iea.org/articles/global-ev-data-explorer https://www.alliedmarketresearch.com/electric-vehicle-charger-evc-market https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/why-the-automotive-future-is-electric https://www.whitehouse.gov/briefing-room/statements-releases/2021/04/22/fact-sheet-president-biden-sets-2030-greenhouse-gas-pollution-reduction-target-aimed-at-creating-good-paying-union-jobs-and-securing-u-s-leadership-on-clean-energy-technologies/ bbc.com https://www.french-property.com/news/money_france/tax_credit_purchase_electric_cars https://cleantechnica.com/2022/02/01/polands-ev-market-is-quickly-catching-up-with-the-rest-of-europe/ https://blog.wallbox.com/italy-ev-incentives/ https://www.fueleconomy.gov/feg/taxevb.shtml#:~:text=Federal%20Tax%20Credit%20Up%20To,local%20incentives%20may%20also%20apply. cleantechnica.com https://e-amrit.niti.gov.in/electric-vehicle-incentives https://autovista24.autovistagroup.com/news/analysis-eu-electric-vehicles-gain-share-market/ https://embeddedcomputing.com/application/automotive/electric-vehicles-powertrain/the-race-to-automotive-electrification-what-it-takes-to-win https://www.volkswagenag.com/en/news/2019/03/VW_Group_JPK_19.html https://www.cnbc.com/2021/05/26/ford-ups-ev-investments-targets-40percent-electric-car-sales-by-2030-under-latest-turnaround-plan.html https://www.carzato.com/the-future-of-connected-cars/#:~:text=There%20were%20roughly%2047.5%20million,to%20%24191.83%20billion%20by%202028. https://www.ericsson.com/en/blog/2021/6/charting-the-future-of-connected-cars-and-mobility-with-5g https://www.stellantis.com/en/investors/events/sw-day-2021?adobe_mc_ref= https://www.mckinsey.com/features/mckinsey-center-for-future-mobility/overview/autonomous-driving https://www.automotiveworld.com/news-releases/new-mercedes-benz-strategy-announced-targeting-structurally-higher-profitability/ https://ihsmarkit.com/research-analysis/auto-electrification-and-decarbonization-shift-toward-net-zero.html
Critical shortages of crucial semiconductors are causing severe problems in various industries across the globe. Why is there a microchip shortage, how is it influencing policies and strategies implemented by governments, and will it end anytime soon? What are microchips? A microchip (sometimes referred to as a chip, a computer chip, an integrated circuit or IC) is a set of electronic circuits on a small flat piece of silicon. Transistors on the chip act as small electrical switches. Silicon, the material of choice in the chip manufacturing industry, is a ‘semiconductor’. By mixing it with other materials such as phosphorus or boron, its conductive properties can be increased, which makes it possible to turn an electrical current on or off. Microchips are used in many consumer products such as smartphones, laptops, gaming consoles, household appliances like fridges and washing machines, alarm clocks, and even cars, as well as a variety of other industries, including medical devices and networking equipment. What are the causes of the shortage? Chips themselves are quite resilient pieces of technology. They are made to handle external shocks such as vibrations and extreme temperatures. However, the global supply chain, as has been demonstrated these past months, is fragile and prone to disruptions from natural and artificial shocks. In Spring 2020, the COVID-19 pandemic caused a significant drop in auto sales. This prompted car manufacturers to cancel orders of various materials and parts, including microchips, which are used for everything from computer management of engines for better fuel economy to driver-assistance features such as emergency braking. At the same time, a significant part of the workforce purchased equipment to recreate the office at home, school systems switched to virtual learning through laptops and tablets, and households increased their spending on home entertainment products. These changes, accompanied by the continuous growth experienced by cloud computing, as well as the 5G rollout, ended up capturing the capacity that had been freed up by car manufacturers. When the latter realized demand was bouncing back sooner than they had forecasted, chip factories were already committed to their customers in industries such as consumer electronics. But these ended up experiencing shortages as well due to the “stay at home” effect that resulted in some of the strongest demand in decades. Shortages were also exacerbated by geopolitical factors. Since early 2017, the US and Chinese administrations triggered a new era of trade restrictions that led to major microchip supply chain disruptions. These became even more critical after official bans in 2019 for Huawei, the world’s largest communications equipment and second-largest smartphone manufacturer, and in 2020 against Semiconductor Manufacturing International Corporation (SMIC), China’s largest semiconductor foundry and the fifth largest in the world, while over 40 major Chinese technology companies were designated as military-related entities by the US department of Defense in 2020 and 2021. Constraints in the global transportation system have added another layer of complexity. With shortages of shipping containers, companies ended up having to pay premiums for shipping, thus driving demand towards airfreight. The latter was, however, already under heavy strain because of the pandemic, and thus lacked the necessary freight capacity. Finally, weather-related disruptions contributed as well to transforming a supply shortage into this global supply crisis. The state of Texas was hit by a record blizzard and extreme cold weather in February 2021, which triggered a triple power outage of the electric grid, gas and diesel. Several major semiconductor manufacturers, including Samsung, NXP Semiconductors and Infineon, were thus forced to shut down their local plants. In Japan, a fire at the main facility of Renesas Electronics’ Naka plant in March shut down production. These events were devastating for the automotive sector since Renesas, NXP and Infineon represent nearly one-third of the entire supply of auto semiconductors. In Taiwan, the worst drought the country has experienced in half a century placed a strain on semiconductor producers, who require large volumes of water for chip manufacturing. How are governments reacting to the crisis? Since these devastating chip shortages have exposed the fragility of the global supply chain, governments across the world have started to take action. In the United States, an estimated 169 industries spend more than 1% of their GDP on chips and have thus been impacted by the crisis, according to a Goldman Sachs analysis. Acknowledging the importance of semiconductors for the economy, President Biden signed Executive Order 14017, “America’s Supply Chains” in February 2021, directing the government to undertake a comprehensive review of domestic supply chains to identify and address risks and vulnerabilities, as well as develop a strategy to foster resilience. Congress also introduced in June 2020 the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act. The Senate approved in June 2021 $52 billion in order to strengthen domestic capacity for semiconductor manufacturing. As part of its $2 trillion COVID-19 economic recovery package, the European Union’s “Digital Compass” includes as one of its goals the production of at least 20% of the world’s next-generation semiconductors by value in 2030, compared with 10% of the world chip market in 2020. In September 2021, during her State of the European Union address, President of the European Commission Ursula von der Leyen announced a European Chips Act. With member states currently designing national strategies, the Act would aim to integrate these efforts through a European semiconductor research strategy, a collective plan to enhance European production capacity, and a framework for international cooperation and partnership. In South Korea, Samsung Electronics and SK Hynix will be leading a $451 billion investment on domestic semiconductor production over the next decade under a national blueprint devised by President Moon Jae-in’s administration. They will be among 153 companies, focusing on the K-semiconductor belt, a newly named region south of Seoul that hopes to be the epicenter of South Korea's semiconductor push. Kung Ming-hsin, the head of Taiwan's economic planning agency, the National Development Council, told Reuters in late April 2021 that between now and 2025, Taiwanese companies have planned more than $107 billion in investments in the semiconductor industry, with chip giants such as Taiwan Semiconductor Manufacturing Co Ltd (TSMC) and Powerchip Semiconductor Manufacturing Corp looking to expand. How is the crisis evolving? While the semiconductor crisis had been expected to be solved by the end of 2021, experts believe that the global supply chain could remain in dire straits until 2023. This sentiment was also mirrored by Intel CEO Pat Gelsinger: "We're in the worst of it now, every quarter, next year we'll get incrementally better, but they're not going to have supply-demand balance until 2023," Gelsinger was quoted as saying. Indeed, while investments have started to accelerate, it will take time before they can have a real impact. Furthermore, supply chains are bound to keep experiencing severe strains as demand for electronics grows. As Gartner analyst Alan Priestley put it, “The capacity [the chip makers] are putting in place now will be enough for the next few years, and as these things come on stream there’ll be too much capacity. But then, in another five years, we’ll be maxing out capacity again because everyone wants the latest smartphones, and we expect to see demand for things like smart homes and electric vehicles increasing. The industry is very cyclical; that’s just the nature of the beast.” Sources: https://www.asml.com/en/technology/all-about-microchips/microchip-basics https://www.cnbc.com/2021/08/04/moodys-analytics-on-global-semiconductor-shortage-and-governments.html https://hbr.org/2021/02/why-were-in-the-midst-of-a-global-semiconductor-shortage https://www.scmp.com/tech/tech-war/article/3133061/why-there-global-semiconductor-shortage-how-it-started-who-it-hurting https://www.euronews.com/next/2021/08/03/global-semiconductor-shortage-more-challenging-times-ahead-for-europe-s-major-carmakers https://spectrum.ieee.org/chip-shortage https://finance.yahoo.com/news/these-industries-are-hit-hardest-by-the-global-chip-shortage-122854251.html https://www.sdxcentral.com/articles/news/can-congress-52b-chip-bill-overcome-the-silicon-shortage/2021/09/ https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf https://ec.europa.eu/commission/commissioners/2019-2024/breton/blog/how-european-chips-act-will-put-europe-back-tech-race_en https://www.wsj.com/articles/eu-seeks-to-double-share-of-world-chip-market-by-2030-in-digital-sovereignty-drive-11615305395 https://www.counterpointresearch.com/chips-governments-move-address-shortage/ https://www.bloomberg.com/news/articles/2021-05-13/korea-unveils-450-billion-push-to-seize-global-chipmaking-crown https://www.reuters.com/technology/taiwan-minister-sees-years-growth-chip-industry-2021-04-23/ https://techmonitor.ai/technology/chip-shortage-tsmc-samsung-us-uk-taiwan-automotive https://www.businessinsider.in/tech/news/intel-ceo-says-global-chip-shortage-will-not-end-before-2023/articleshow/87200140.cms
