Goparaju Purna Sudhakar, PhD, PMP
The $3 trillion global automobile industry is making lot of innovations with respect to electric vehicles, battery technologies, automobile semiconductor chips for autonomous driving and driver support services, and embedded cellular technologies into automobile industry. The $3 trillion auto economy involves the established automobile manufacturers from US, UK, Germany, Japan, Korea, France and China. Automobile industry growth is required for the economic development in any country. This specific industrial insight describes the developments related to battery technologies in automobile industry, innovations in automobile industry related to chip making, multiple players in India, and Mobility as a service (MaaS).
Battery Technologies: As on 2019, global electric vehicle sale is around 2.5% of all automobile vehicles sale. Despite the less market share, electric vehicle industry is growing at a compound annual growth rate of 20% till 2030. As on January 2021, Volkswagen is setting up its own battery manufacturing plant with an initial investment of EURO 450 million. Tesla, BYD and Great Wall are fully integrated into battery production. Several global auto manufactures are in fact localizing their battery production because of the inherent supply chain challenges. BYD, a Chinese battery manufacturer, done the forward integration and entered into auto assembly to sell electric cars with their batteries. Similarly, American auto maker like Ford is looking for backward integration with battery makers; and also manufacture indigenously. General Motors is developing its own battery technologies with an aggrieve plan for electric vehicles.
Innovations in Auto Industry: As the automation and autonomous vehicles research is taking traction in automobile industry, several startups in ADAS and AV development (Audio visual chips) are entering to market with several innovations. These semiconductor startups are making different disruptive innovations in areas such as connectivity solutions, energy systems, autonomous driving, and driver assistance systems creating competition in automobile semiconductor industry. If we apply the Michael E. Porter’s competitive forces model to this automobile semiconductor industry, the major forces working on automobile semiconductor industry include emergence of new entrants with niche technology and market specific products, entry of chip manufacturers from computing and mobile industry, and mergers and acquisitions taking place in the industry from established players. The players in automobile semiconductor manufacturing include Renesas, NXP, IDT, Infineon, Cypress Semiconductor, and Maxim. Intel, Qualcomm and Nvidia are also entering into automobile chip manufacturing industry. These companies may specialize in high-end computing required for automobile industry. Qualcomm is trying to integrate the chip technology and the cellular system useful for communication in automobiles. One of the drivers for the automobile semiconductor industry is the reduced out of the pocket expenditure for chip solutions because of the improved design methodologies and IP reuse.
Multiple Players in India: As on January 12, 2021, a Fortune 500 Swedish automobile manufacturer, Autoliv, Inc. agreed to setup its manufacturing plant in Tamil Nadu at an initial investment of Rs 100 crore. Autoliv at its Cheyyar plant going to manufacture air bags, steering wheels, and seat belts. Autoliv, Inc. has chosen Chennai, The Detroit of India, to setup its manufacturing plant over Vietnam, Thailand and Philippines, because of the established automobile ecosystem in Tamil Nadu. In 2020, Tamil Nadu could attract around $2 billion investments in automobile sector. Daimler India is going to expand its commercial vehicles portfolio by generating around 400 jobs in Tamil Nadu. Netherlands based OEM (Original Equipment Manufacturer), Dinex is investing for its plant in Mahindra World City. BYD India is setting up its manufacturing plant in Tamil Nadu to manufacture electric vehicles. Similarly, Ola Electric Mobility agreed to start manufacturing electric 2-wheelers out of Tamil Nadu from its Hosur Plant. Thus, Indian automobile industry is getting diversified with several players entering into market creating stiff competition. We need to wait and watch to see whether Indian auto market is going to be fragmented or some new age auto players emerge from India with major market shares.
Mobility as a Service (MaaS) Industry: In 2019, Japan has launched “my route” mobile app using which passengers can choose the destination of travel and different route on the way involving different modes of transport such as taxi, bus, walking, and train modes. Japan started Mobility as a Service (MaaS) by integrating searching, reservation and payments, etc. for transport. The secret behind this MaaS innovation is, in Japan, transportation industry is led by several private players and not the government run transport. These private players are making innovations combining several services and apps and creating a new MaaS industry which can worth $61 billion by 2030 from $813 million in 2018. The MaaS industry is growing at a rate of 44% annually. The “my route” app also provides the information on restaurants and cafes on the way to destination.
Challenges: Automobile assemblers have strict requirements for quality components and chips from semiconductor manufacturers. For new entrants in automobile semiconductor startups getting initial funding and venture capital support for scaling up are also current challenges; because venture capitalists prefer to invest in less asset intensive industries. Another challenge for startups is disruptive customers like Tesla, Waymo, Byton, and Nio are the new established customers in high tech automobile industry, which were not existent some 15 years ago like GM, Ford, Toyota, BMW, Honda and Chrysler exist.
In global automobile industry, new technological and innovation markets are growing at double digit growth rate. And services based on automobiles are also creating new industries. Definitely these are going to add significantly to the economies of different countries in the world.
Hope you enjoyed reading………
Best Wishes,
Dr.Goparaju Purna Sudhakar
References:
- Freeman, D. (2020), “Chip Startups are gaining traction in auto industry”, EET Asia, December 24, 2020.
- FortuneIndia (2021), “The New Year Playbook: India Inc Predicts 2021”, Fortune India, January 17, 2021.
- JapanBrandVoice (2020), “Japan is Innovating Mobility as a Service and Creating a $61 billion market”, Forbes, November 30, 2020.
- Kandavel, S. (2021), “Swedish Manufacturer Chooses Tamil Nadu over Vietnam”, The Hindu, January 12, 2021.
- Perkowski, J. (2021), “Automakers seek to Integrate and Localize – Battery Production”, Forbes, January 07, 2021.
One thought on “Industry Insight: on Global Automobile Industry and Mobility”
Melisesife says :
May be very interesting