Car engines roared to a stop at the announcement of a global pandemic in 2020. Companies employed work-from-home policies to encourage public safety and stop the spread of the COVID-19 virus. Cars sat lying in driveways and garages as rush hour traffic slowly disappeared.
The automotive industry faced unique circumstances in 2020. Car dealerships quickly pivoted selling strategies amid government-mandated shutdowns. Automobile factories switched to producing medical equipment rather than vehicles.
The year 2020 closed with a 15 percent drop in new vehicle sales in the United States. In the years to come, statisticians and health experts will continue to evaluate the effects of this global crisis.
The question many people are asking now is "how will the events from 2020 affect 2021?"
What changes and trends can we expect in the automotive industry?
Together with leading automotive experts, we’ve outlined some of the biggest trends to impact car brands, dealerships, and consumers in 2021. Trends focus on autonomous vehicle progression, car inventory and sales, the digital vehicle buying experience, electric vehicle advancement, and new vehicle technology.
Many car brands have joined the race to create the first autonomous vehicle. However, experts predict that a fully autonomous vehicle will not hit the market for at least another 5to 10 years. Investing in autonomous solutions is expensive and risky especially during uncertain economic times. Ethical issues continue to be a major obstacle for programming an autonomous vehicle to keep car passengers and other road occupants safe. John Vincent, senior reporter for Autos at U.S. News & World Report, comments on the future of autonomous vehicles.
Several new vehicles have autonomous settings such as lane departure, collision avoidance, adaptive cruise control, street sign recognition, etc. These features still require your attention but allow for sensors on the road for improved safety.
Some auto manufacturers such as Tesla, Cadillac, and Audi currently sell car models with an autopilot feature. Autopilot enables cars to operate independently of the driver within the artificial intelligence guidelines. However, these cars are not equipped to use autopilot in all weather conditions and terrains without a driver behind the wheel. Consumers interested in autonomous vehicles may choose to upgrade to a car with self-driving features. Just be aware that cars with autonomous settings are often much more expensive than the basic models.
The 2020 COVID pandemic forced many automakers to shift production towards medical equipment. During the initial spike, car dealerships offered major incentives in fear that economic recession would later impact car sales. However, car sales began to pick back up towards the end of the summer.
The low inventory will have a direct impact on both dealerships and consumers. Unlike the recession in 2008, consumers are still buying cars at a steady level. Dealerships will benefit from this trend with a greater overall profit from the cars they do sell. The overall quantity may be lower so the revenue might still be lower compared to previous years.
Joe Akers, Director of Operations for Cowles Nissan and Ford in Virginia, address vehicle supply projections for 2021.
As of January 2021, major car manufacturers are experiencing a chip-shortage crisis because of a redirect in chip supply to other consumer products such as smartphones and gaming devices. Semiconductor chips are used to power critical vehicle components such as the brakes and power steering. The chips are also used in infotainment systems. High-end models with complex interworking require more semiconductor chips to operate. Many automotive companies will experience a revenue loss due to the chip shortage such as Honda, Nissan, General Motors, and Ford. The total global loss could amount to over $60 billion in revenue for the auto industry.
Toyota is the only automaker to report an excess chip supply to cover the next four months of production.
Some car companies have had to shut down manufacturing facilities until the chip shortage has been resolved. This will put a strain on automakers seeking to recover from the pandemic sales drop. Consumers can expect to see delays in vehicle launches for new 2021 models. Experts predict that the inventory shortage will be resolved by mid-year.
A concern for safety is a driving factor of the digital car-buying market. Limiting the amount of face-to-face interaction helps incentivize a safe transaction. However, consumers still need peace of mind that they are making the right decision before buying a car. That’s why car dealerships are diversifying their sales techniques to include virtual showing, online car building, and quick response customer service. Gina Callari, COO of Evox Images and RelayCars, discusses predictions for the future of digital car-buying.
Even after the vaccine is administered, we are likely to see the digital car-buying market continue to grow because of convenience. The opportunity to find the perfect vehicle without spending hours at a car lot will create demand among millennials. Consumers may spend more of their time online researching vehicle speciations.
However, according to an analysis by Mckinsey & Co, car dealership experience is still the number one factor in the car-buying process. Although dealerships should strategically position themselves online, they should also make changes to welcome back customers into the showroom. Until VR or AR can fully replace the physical experience of seeing a car, we may not see a huge shift in how consumers make the final decision to purchase a car. The younger generation may also be more inclined to make the transition from dealership purchase to online.
According to a recent webinar given by J.D. Power, COVID hasn’t influenced consumers to buy more electric or plug-in cars. Consumers continue to purchase diesel and traditional hybrid vehicles. The electric car market faces obstacles such as a lack of charging stations, high prices, and experimental technology. Currently, government incentives may be the only factor strong enough to help grow the electric vehicle car market.
Sustainability initiatives are pushing more auto manufacturers to produce eco-friendly vehicles. Companies producing trucks and SUVs must pivot to produce vehicles that are both large and sustainable. For example, Jeep is releasing a new electric vehicle version of the Jeep Wrangler. Jeep also plans on releasing other hybrid models by the year 2025. However, auto manufacturers must balance these new initiatives with current customer demand to remain profitable.
Lauren from the Car Coach foresees a shift in electric vehicle production due to the corporate average fuel economy standards.
The new corporate average fuel economy (CAFE) standard is set at a 1.5 percent increase per year. Automakers are expected to increase fuel economy and decrease carbon emission by 1.5 every year. These regulations are set in place from 2021–2026. This new goal is lower than the standards set in previous years. However, the small margin continues to put pressure on automotive companies to create reliable vehicles with fewer environmental impacts.
Other emission reduction initiatives are expected to follow the new U.S. presidential administration. The administration plans to deploy close to 500,000 charging stations across the United States to make charging more accessible. Other future initiatives include replacing the federal vehicle fleet with electric models and increasing the electric vehicle tax credit for consumers. A prospective car buyer may want to consider some of the upcoming incentives for electric vehicles.
The pandemic sped up the need for better and more far-reaching coverage for businesses and personal communication. Companies are rolling out 5G technology and networks to cities across the United States. More devices can connect to the new 5G network improving the reach and signal of device communication.
In the coming year, car infotainment and communication systems will experience major improvements by allowing drivers to access features in more rural destinations. Drivers can expect better integration among their smartphones and car infotainment systems along with increased Wi-Fi availability.
Many drivers already enjoy the luxury of controlling their vehicles through smartphones. Through your phone, you can lock, unlock, and start your car. Consumers may witness increased app control and vehicle notifications such as for car maintenance. The ability to monitor your vehicle remotely is another benefit of IoT connectivity. Drivers can receive notifications if someone tries to enter their vehicle without proper authorization.
On the auto manufacturing side, the Internet of Things provides an opportunity to improve operational efficiency. Car companies can manage and analyze their production process through connected AI devices. This will help companies pinpoint weaknesses in the supply chain and production plants.
Despite a tough year for automakers, top car companies continue to innovate and strategize to combat the unique consequences of 2020. Automakers seek to put drivers in affordable vehicles while minimizing environmental risk. The increased connectivity of IoT and new 5G networks is speeding up the adoption of new vehicle technology.
Consumers in the market for a new car should consider the effect of 2021 automotive trends on their car buying experience. The second half of 2021 may be a better time to purchase a new vehicle when automakers can catch up with inventory shortages and dealerships bring back incentives.
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