Even before 2020, and the arrival of COVID, the motor industry was experiencing seismic shifts, forcing it to change and adapt. Here, the team at Golley Slater has highlighted some of the main issues the industry has faced and what the future might hold for a sector in which we have worked for over 20 years.
The Kyoto Protocol.
For the UK motor industry it all kicked-off with The Kyoto Protocol, adopted on 11 December 1997, coming into force on 16 February 2005; when the EU signed-up to limit carbon emissions, a part of which was to limit emissions from new cars (Regulation No 443/2009 of the European Parliament if you’re remotely interested).
It was, however, a legally binding agreement, forcing manufactures to progressively reduce emissions from their petrol and diesel engines, or face the inevitable punitive fines (little wonder it led to the emissions scandals from VW amongst others).
Then Brexit – a simple yes or no vote with gigantic consequences; one of which being the obvious impact for motor industry manufacturers in the UK which produced 1,300,000 cars in 2019, of which 1,055,997 were shipped worldwide – or 81% of total production*.
The other being how the UK is viewed from outside the EU. From our own experience in Japan it was viewed with incredulity; why leave its pre-eminent position in one of the most outward-oriented economies in the world and the world's largest single market. This decision would have a significant impact on how global manufacturers view the UK.
Then we have the little publicised EU Corporate Average Fuel Economy (CAFE) standards, a tool used by governments to reduce emissions in the transport sector. The US implemented CAFE standards in 1975, and today all major vehicle markets – from China to Mexico – have an emission standard. The new EU standard was one of the most demanding in the world, requiring automakers to reduce emissions by 18%.
The CAFE standards for the EU direct that, from 2021, phased in from 2020, the EU fleet-wide average emission target for new cars will be 95g CO2/km (this emission level corresponds to a fuel consumption of around 4.1 l/100 km of petrol or 3.6 l/100 km of diesel). This means that manufacturers selling new cars in Europe must be able to average their emissions to 95g CO2/km, otherwise punitive fines would be levied.
This is why we’ve seen all major European and US automotive brands move rapidly towards a hybrid and EV product mix, with VW pursuing a strategy to become the global leader in electric cars, and the UK Government bringing forward a ban on sales of all non-EV cars from 2030.
To cap it all, along came the first global pandemic in a century, with UK motor industry car sales in April plummeting by 97.3%, factories mothballed and dealerships closing.
But the lockdown had a greater impact than purely a reduction in car sales. It’s accelerated a change in structures, attitudes and behaviours which are unlikely to return to pre-COVID times.
A crisis forces us to look closely at the strength of our IT infrastructure and supply chain.
It’s a little-known fact that, before the 2011 Fukushima earthquake in Japan, a pigment called Xirallic, which provides the ‘glitter’ in metallic paint, was produced at only one factory in the world - the Onahama plant close to the Fukushima-Daiichi nuclear power station.
The factory closed following the earthquake and there was an immediate worldwide shortage of metallic paint – affecting almost every car brand across the world.
COVID has caused us all to review our structures, our IT infrastructure, and the crucial role of our supply chain, and the motor industry is no different.
Is the daily commute a thing of the past?
The average UK driver covers around 2,500 miles a year on the daily commute.
With technology facilitating working-from-home, and forecasts suggesting that 25% of workers will continue to do so after lockdown is eased, consumers will likely review their choice of car.
As range anxiety becomes less of a concern, this could prompt a shift from larger petrol or diesel weekday commuter vehicles, to smaller electric vehicles.
Similarly, the ongoing anxiety about shared spaces may boost car usage as public transport is shunned.
Will we treat our cars like our mobile phones?
With reduced dependency on the car for the daily commute, an increase in shopping online, the increased pressure from climate change, and as central and local government move to reduce congestion, pay-for-use mobility providers are likely to fare well.
Similarly, Mobility as a Service, or MaaS - where various forms of transport services, whether they be public transport, car or bike-sharing, taxi or car rental/lease into a single mobility service, with a single payment channel instead of multiple ticketing and payment operations – will become a feature of local government transport policy .
Electric cars will become the norm.
The UK Government’s pronouncement that petrol, diesel and hybrid cars will be banned from 2030 means the inevitable acceleration of growth in the sale of electric cars.
Concerns over range anxiety, and the difficulties for some to charge their cars at home, will be eased by the launch of Britain's first electric car forecourt.
The Gridserve Electric Forecourt in Braintree is the first of 100 to be built across the UK in the next five years, with charging taking 20-30 minutes and costing 24p per kWh - less than £10 for an average EV to go from 20% to 80%.
So, in summary, 2020 has been the catalyst for accelerated change for the good.
Much of what will come about after COVID was inevitable; more flexible home-working; emission reduction; a move to electric; embracing technology; shifts in our relationship with the car and a move towards greater transport integration.
It’s just brought it all forward a little quicker.
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