Global Automobile Sector: Roadblocks and Milestones

Ahead

Introduction
The global automobile sector consists of wide array of organisations involved in research
and development, manufacturing and sales of automobile products, services and spare
parts. This industry construes a major chunk of world’s economic sector by revenue. The
sector sales are experiencing contraction standing at 92 million in FY2017 to 90 million in
FY2019 as per the data provided by International Energy Agency (IEA).To make situation
worse, Covid 19 pandemic has caused the sales to drop to 20% y-o-y basis for FY2020 based
on data provided by Credit rating service Moody’s Investor. We will look at the challenges
that were lurking before the covid 19 pandemic as well as future challenges for global auto
sector.

Declining Demand: Chronic or Sporadic?

Source: IHS
Stagnant demand persists in European, US and Japanese markets at the end of FY2022.
Although most of the population would choose to believe that this phenomenon is due to
Covid19 crisis; In Japan particularly it is because of the aging population which will drive out
the auto market by 25% till 2029 of what it is today whereas European and US market is
being lynched by shifting demographics, increasing urbanization, environmental concerns
and new technological advances. The global auto sector is experiencing a growth recession
of increasing only 3.1% from 2014-2019 against the growth of 4.7% in 2008-2013.Hightened
competition can be seen from the fact that in year 2000 there wee 89 OEMs and 1,544
models whereas in 2015 there were 97 OEMs and 2,306 models. Almost 50% increase in
models and 10 % rise in OEMs. Although developed countries market tends to contract the
Asian markets are set to explode due to exact opposite reasons.[1]
Regulations of Governments and Technological Ripples: Boon or Bane?
Amid the covid19 pandemic, all major global automotive markets have in place increasingly
stringent legislation focusing on control of green house gases (GHG), PM norms coupled
with right powertrain technologies and societal preferences in this changing regulatory
environment.

Source: BCG analysis

The percentage share of conventional fuel vehicles is continuously contracting with
proportional increase in hybrid vehicles being 1% in 2018 to 3% in 2020 driving up to 20% till
2030. In an interview with Xavier Mosquet, Boston Consulting Group he said that “The next
three years are going to be challenging, and so if you're a car manufacturer or automotive
supplier and you've invested in EV technology, you need to have a market and the consumer
needs some support for the next three years."[2]

Conclusion
The global demographics, technological demands, population characteristics, governmental
policies, environmental factors and global ongoing health crisis will continue to be
challenges for global automotive industry but will also provide mutual growth of
infrastructure, cleaner emissions, healthy environment and preparedness for climate
change by 2025. The solution lies in process improvement and development, proactive
market research and increased co-ordination between governments and automobile
makers. Consumers on other hand need to make intelligent choices based on environmental
factors rather than just a performance of the vehicle.
Bibliography:
1. Fulbrook, A. and Couchman, C., n.d. [online] Cdn.ihs.com. Available at:
<http://cdn.ihs.com/www/pdf/AUT-TL-WhitePaper-5.pdf> [Accessed 11 September 2020].
2. St. John, A., 2020. EV Sales Growing Faster Than Expected. [online] Automotive News.
Available at: <https://www.autonews.com/mobility-report/ev-sales-growing-faster-
expected#:~:text=EV%20sales%20are%20expected%20to,over%20the%20next%20three
%20years.> [Accessed 11 September 2020].