The global automotive industry is in a transformational phase. Even without the coronavirus pandemic it is facing major challenges, such as increasingly strict emission regulations while technological advances are likely to lead to greater electrification of cars, autonomous driving, and new car-sharing concepts.
The second quarter–which will for the first time fully include the effects of the near complete shutdown in most industrial and emerging market economies–will likely mark the low point in terms of global auto demand. But while some observers predict that the industry will only slowly recover from the crisis and is therefore just like other industries in need of state support, not everybody is in favor of a scrappage premium or other incentive schemes if this means a return to the old ways.
According to Volvo CEO Hakan Samuelsson, subsidizing diesel and petrol engines would be a waste of money, and instead governments should be focusing on investing in charging infrastructure for electric vehicles. Speaking in an interview with German newspaper "Süddeutsche Zeitung", Samuelsson said that customers won't return after the pandemic to buy as usual a gas or diesel-powered vehicle. "The crisis has demonstrated the great value of sustainable health," he adds.
Commitment to electrify all vehicles
Volvo, which together with its parent company Geely, has set up its own automotive brand for electric performance cars, Polestar, has pledged that from 2019 all its new vehicles will be electrified, i.e. hybrid electric vehicles (HEV) or plug-in hybrid electric vehicles (PHEV). Furthermore, since Geely has taken a 10% stake in much bigger German luxury car maker Daimler (Mercedes), there are rumors that both companies will cooperate on electric drive trains. In fact, Geely is building the new electric Smart for Daimler.
For CIO automobile analyst Rolf Ganter, the industry-wide trend towards electrification is inevitable. He is predicting annual sales of some USD 400 billion for the related "Smart Mobility" theme by 2025, of which electrification represents more than half; an increase of eight or nine-times today’s figure. "We advise investing in a broadly diversified selection of stocks in order to minimize company and technology-specific risks," he says. He also advises reviewing individual stock holdings in the auto industry, as Smart Mobility is likely to affect these.
For further details on fundamental trends in the industry, please read the CIO longer-term theme on " Smart Mobility".