President and Founder, Japan Electrification Research Institute, Ltd.
SUMMARY. The global auto industry is bubbling with changes and dramatic new ideas, but the current declining financial performances of Japanese auto OEMs may force them to drop out of the race temporarily before they can take advantage of the growing demand for autonomous vehicles.
The mobility of your dreams – whether fully autonomous vehicles or “flying cars” – is part of the conversation today, and a number of ideas have even been proposed to connect autonomous cars with consumer mobility solutions like MaaS (Mobility as a Service).
Moreover, it is possible the automotive world soon will enter a new age of intuitive mobility known as CASE (Connected, Autonomous, Shared, Electric), a concept proposed by Daimler chairman Zetsche at the 2016 Paris Motor Show (https://www.daimler.com/case/en/).
Ideas such as “CASE” have become popular, and that is fine, but it is important to consider what is happening in the automotive industry today.
Auto Sales Are Slumping
Dramatic change has occurred in the automotive industry since 2018 as unit sales in Europe and the United States have fallen. The market further deteriorated in 2019. In the first half of this year (January to June), year-over-year (YOY) sales in the United States decreased 2.4%, while Europe decreased 3.1%, and China is expecting a double digit decrease of 12%. In China, 2019 sales could drop by 3 million units compared with 2018, if changes are not made.
In Japan, Nissan Motors suffered a precipitous 99% drop in operating income for the first quarter of fiscal 2019 (April-June). Unfortunately, Nissan is not alone. Mitsubishi Motors announced an operating profit decline of 86% in the first quarter.
In Europe, Daimler recorded a deficit of ¥ 160.0 billion (US$ 1.47 billion) in the first quarter due to sluggish sales growth in China and increased costs related to stricter emissions standards. As the financial results of other automakers continue to be announced, the news is expected to be equally grim.
Some observers were optimistic that the downturn due to US-China trade friction would not last long. That outcome is yet to be seen.
At the same time, the consumer’s mindset has changed from a desire for vehicle ownership to a need for vehicle use, even though rideshare has not been approved in Japan. This change has spurred the explosive spread of rideshare services around the world and has added to the declines in automotive markets.
Signs of Optimism
On the other hand, it is not all bad news. Sales in China of new energy vehicles (NEV) were up 53% in Q1 2019. In 2018, sales hit 1.26 million units for the full fiscal year. If things continue at the current pace, sales will reach around 2 million units in 2019.
Autonomous driving expansion had its origins in the 2004 US DARPA Grand Challenge which brought together top technical teams from across the US. (https://archive.darpa.mil/grandchallenge04/media_gallery.htm).
The challenges continued in ensuing years. Rideshare icon Uber, established in 2009, along with OEM Tesla and others, have further disrupted the market through testing of autonomous drive systems.
Problems For Autonomous Driving
Autonomous driving technology still faces severe challenges in terms of practical application and widespread adoption. Advanced Driver Assistance System (ADAS) functions have been developed and put into practice at Levels 1 and 2. Here, the driver monitors the vehicle, and the autonomous driving function operates under very specific and controlled conditions.
Reaching Level 3 and Level 4 will take time.
Level 5. Truly autonomous driving. At this level, computer system monitoring is centered, and requires engagement of cars, as well as communications systems, navigational equipment, urban infrastructure revision, government regulation, industry standardization, and more.
Although many companies are conducting development and verification tests, it will take years to implement these features.
Dark Clouds
In my view, bad weather will continue to plague the auto industry in the second half of 2019, and full-fledged storms are likely to come after that. IT/AI related companies as well as automakers and component suppliers will be affected.
The decline in car sales will continue beyond the second half of 2019, which will be a harsh business environment not only for car OEMs but also for the entire car industry, including parts makers and AI/IT-related companies. In view of such a tough situation, each company is required to have a strategy that appropriately determines what is necessary and what is not necessary, to prepare experiencing such a tough environment. PSR
Kenichiro Wada is President and Founder of the Japan Electrification Research Institute, a consultant firm specializing in e-mobility since April 2013. He is one of the first e-mobility consultants in Japan. Mr. Wada provides consultation in e-mobility systems including EV/PHEV business and battery charging.
