The Changing Auto Industry and What it Means for Investments in Autonomous Technology
Though the auto industry recovered well after the Great Recession, 2018 and 2019 have seen a period of change in the industry. The development of autonomous vehicle technology and recent declining auto sales mean a disruption to the industry’s status quo. Auto manufacturers are subjected to shifting priorities and economic pressure, yet many still realize and embrace the importance of investing in the evolving autonomous vehicle industry.
Slow Sales and the Shift to Autonomous Vehicles
Slow auto sales numbers indicate that the auto industry is entering a period of uncertainty and change. Automotive News reports that U.S. auto sales during the first six months of 2019 were down by 2.4 percent. Currently, the auto industry is projected to finish out the year with sales reaching just 16.9 million vehicles. This would be the first time that the auto industry sales dipped under 17 million since 2014.
While sales of large cars were down by 21 percent and compacts were down by 16 percent, subcompact and mini cars such as the Chevy Spark, Ford Fiesta and Kia Soul enjoyed higher sale rates even in this downward sales trend. Full-size pickup sales increased by 1.5 percent during the first six months of 2019 and midsize pickup sales increased by 15 percent.
Numerous other factors are changing the automobile industry. The current trade war with China casts uncertainty across the automotive manufacturing industry, with President Trump slated to institute tariffs on $300 billion of Chinese goods on September 1st and December 15th. On December 15th, China will also institute a 25 percent tariff on vehicles and a 5 percent levy on auto parts.
These factors, paired with the downturn of auto sales, mean that the automotive industry is headed toward a disruption.
Autonomous Technology and the Auto Industry
Auto manufacturers aren’t just facing the challenge of staying profitable in the slow car market. They also have to balance their traditional product development with investing in future technology – in particular, autonomous technology and electric vehicles.
According to CNBC, annual investments in autonomous vehicles continue to grow and are expected to reach $85 billion a year by 2025. The battery-car industry is also expected to grow by investments totaling $225 billion between 2019 and 2023.
To develop those new technologies, auto makers are changing their strategies and many are teaming up. Honda and General Motors have paired together to partner their autonomous vehicle development, which helps them to stay profitable while also investing in this technology that will be vital in the future.
These companies aren’t alone; more automakers are recognizing and embracing autonomous vehicle technology. In May, Toyota announced the creation of a $100 million venture fund to invest in startups in the areas of autonomous vehicle and robotic technology. Thus far, Toyota has invested in 19 start-ups from 2017 through 2019. Toyota and auto-part manufacturer Denso partnered to invest $667 million in Uber’s self-driving vehicles in 2019. Toyota also agreed to invest an additional $300 million in Uber’s self-driving vehicle initiative during the next three years.
While the release of self-driving vehicles has been slower than expected, auto manufacturers are already investing in and preparing for the changes that autonomous technology will have on the entire transportation industry. Ford has announced a goal to put 100 self-driving vehicles on the road by the end of the year, and BMW and Tesla are also looking to lead in the autonomous technology space.
When We’ll See Self-Driving Vehicles
Developing self-driving vehicles is full of challenges, and the day when we’ll see Level Five self-driving vehicles on the roads is still years or even decades away. However, autonomous technology is already transforming the auto industry. Driver-free shuttles are operating on limited routes in cities like Columbus, Ohio, and pilot programs are currently testing the use of autonomous vehicles in spaces like senior living facilities and college campuses. As we described in June, the United States Postal Service is running a pilot with TuSimple to explore the use of autonomous technology in long-haul trucking.
Within the next decade we’ll likely see self-driving taxis and even autonomous farm machinery. With time and technology refinement, self-driving vehicles for the everyday consumer can also become a reality.
Investments in the Changing Automotive Industry
The auto industry is in a time of uncertainty which makes strategic investments a challenge, but the major auto manufacturers are already demonstrating the importance of autonomous technology with their investments. Even under the economic pressure created by reduced car sales, manufacturers aren’t shying away from autonomous technology. Instead, they’re continuing to invest and are even increasing those investments.
The auto industry has always been an industry that embraces change and innovation, and consumers will expect the industry to keep pace with new and evolving technology – self-driving vehicles included. We’re likely to see manufacturers continue to invest in self-driving technology, and programs like Ford and Tesla’s self-driving vehicle manufacturing initiatives will probably become more common. Even under economic stress, manufacturers and investors must realize that autonomous technology is essential to staying competitive in the ever-changing face of the auto industry.
SAVE THE DATE: AutoTech Connect 2020
2nd Annual Matchmaking Event Scheduled for September 1, 2020
Capstone’s second annual AutoTech Connect, a corporate matchmaking and bespoke networking event, will be held 9/1/2020 in “Michigan’s most beautiful ballroom” at The Henry Ford in Dearborn, Michigan. Our inaugural event brought together dozens of Autotech companies, Tier 1 suppliers and auto aftermarket companies from around the world for one-on-one meetings to discuss potential partnerships and customer needs. Keep an eye on this space for more details. Questions? Email them here.
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