The shift of buying behaviour in automotive
Vinay Sharma
Principal – Intellectual Asset Management
Strategy Consultant - Technology Research and Advisory | IAM 300 | Patent Agent | Attorney
The automotive industry is at an inflection point today. What happens in the next few years will decide the fate of the future automotive. Let us pause to ask: what has caused this moment to be the one that will transform the automotive industry as we know it? Well, there are multiple reasons for this.
The automotive sector was destined to undergo a complete transformation.
Technologies like Artificial Intelligence, 5G, and the need to shift to alternative greener transportation are the key underlying drivers of this change. The pandemic and the rapidly changing consumer mindset have only accelerated the process.
All these factors are also responsible for fuelling the demand for autonomous vehicles.
Taking a trip down memory lane, the internal combustion (IC) engine took the automotive industry by storm back in time when in 1886, Karl Benz invented the first IC engine Car.
The IC engine may, however, soon be a thing of the past as electric and fuel cell-based cars start to make their presence feel. EV and fuel cell-based automobiles are garnering increasing customer attention, with EVs stealing the spotlight presently. While EVs seem recent, it is surprising to know that the concept of EVs is not new. In fact, it finds its mention in history during the late 1700s and then in the 1800s!
Coming back to the present, EVs and green automotive started taking momentum a few years ago. The adoption of EVs was turtle-paced initially but has accelerated manifolds in recent years. As per a Forbes article, global EV sales increased by 160% in the first half of 2021 alone. Norway is already leading the space, with 54% of the total vehicle sole in 2020 being EV. 77.4% of the country's total new vehicles sold in September 2021 were electric!
So what is driving this change in consumerism in automotive? The reasons are plenty.
Increase in Government Mandates and Incentives
Governments around the globe are bringing in mandates, compliance requirements, and collective goals that encourage EV and sustainable transport adoption. These mandates and regulations are a move towards accelerating a sustainable environment.
Biden administration, for example, has announced an ambitious target of 50% EV by 2030. The European Union also proposed an effective ban on selling new Petrol and Diesel vehicles from 2035 to accelerate the shift towards EVs. Besides policies, there are many subsidies and incentives that governments are providing to encourage EV adoption among consumers.
Change in Consumer Mindset
Increased climate awareness and demand for sustainability
If there was a positive in the restrictions imposed during the pandemic, it was a significant decrease in pollution levels globally. This brought forth vehicular emissions' impact on the environment and the dire need for alternate fuel options. With climate consciousness increasing among the general population, more and more people are turning to EVs and alternate transport mediums like public transport or shared mobility.
Demand for better features and driving experience
Gone are the days when consumers used to decide on their next automobile purchase after evaluating engine strength or mileage. The new-age customer chooses comfort, convenience, and luxury. Hence customers now evaluate automobiles on the features they provide and the level of convenience they offer. The new consumer mindset is therefore fuelling increased demand for autonomous vehicles.
To catch the market's pulse, automotive players now offer automobiles that use advanced electronic control units and Advanced Driving Assistance Systems(ADAS). Automotive players are now investing heavily in building vehicles that fall in autonomous level 2 or greater.
For the unversed, automotive vehicles are classified into autonomous levels where Level 0 translates to nil automation and Level 2 to a certain amount of automation that assists drivers. There are five autonomous levels, and the degree of automation increases as we move up. Level 5 automation is still quite some distance away; the MG Astor, GM's Supercruise and Nissan's Propilot are good examples of vehicles with Level 2 automation.
EVs are becoming affordable.
Until recently, the notion was that EV batteries put forth a considerable expense.
EV battery prices have been falling rapidly (very significantly), and this trend is only likely to continue. BloombergNEF's annual survey outlines the drastic fall in battery prices. Lithium-ion battery prices fell from $1200/KWH to $132/kWh in 2021, which is an 89% drop. The 2021 battery price was another 6% less than in 2020, when the price was $140/kWh.
In addition, repurposing batteries promises efficient battery waste management and helps in further cost reduction. The automotive industry is almost at a tipping point, with the modern “green” consumer driving this transformation.
With these waves of change, automotive stakeholders face enormous challenges as the paddle shifts to other industries. For them, it is "reinvent to sustain".
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