12 May 2020
Coronavirus (COVID-19) has taken a monumental toll on the automotive industry. Production paused, sales slumped and business performance felt the fallout. But how has COVID-19 impacted the development of new technologies in the industry? Autovista Group Daily Brief journalist Tom Geggus investigates the situation.
Releasing their Q1 2020 results, manufacturers revealed just how hard they have been hit by COVID-19 and the related lockdowns. The majority of manufacturers scrapped their full-year 2020 outlooks, saying things were now too murky to make an accurate annual prediction. But while they try to ensure net liquidity by employing cost-cutting countermeasures, the need to invest in research and development (R&D) remains strong.
It appears manufacturers plan to continue pumping time, money and effort into what they see as potentially future-proof projects. But with balance sheets now highly sensitive to each and every expenditure, where OEMs spend their money will expose what automotive technology they perceive as essential, and what they decide can be shelved.
Driving the future
As manufacturers review their R&D budgets, long-term investment in electrification looks set to continue. In order to avoid large fines as a result of emissions regulations, carmakers cannot afford to divert funds from alternative-fuel technologies. But why electric in particular? In terms of emissions, a recent assessment showed that electric vehicles (EVs) produce a third less CO2 than internal combustion engine (ICE) models, even when accounting for production.
With the promise electrification holds and the backdrop of climate change, carmakers have simply travelled too far down the electric development path to turn back. The amount of capital, time and effort that has gone into electrification looks to continue, driving projects further.
The prioritisation of electric-drivetrain technology can be seen in how plants reopened as lockdowns lifted. Volkswagen Group’s (VW’s) first vehicle plant to reopen in Germany was Zwickau, where the battery-powered ID.3 is produced.
‘We are continuing to invest in key technologies, including electrification and digitalisation. They are non-negotiable elements of our future,’ said Ola Källenius, Daimler’s chairman of the board of management, in the group’s first-quarter financial statement.
Meanwhile, the future of other alternative-powertrain technologies, like hydrogen, seems less certain. In late April, Daimler announced it was ending development of fuel-cell technology for passenger cars. The carmaker had been working on the GLC F-Cell model at its Bremen plant in Germany. But due to the costs involved, only a few hundred units were ever produced for business partners, with the car never making it to the public market.
However, this doesn’t mean hydrogen fuel-cell technology will be laid to rest entirely. Instead, it will be developed in the more viable commercial-vehicle arena. Volvo and Daimler are slated to sign a new joint venture, allowing Daimler to consolidate its fuel-cell activities and Volvo to acquire 50% of the new business for roughly €600 million. By joining forces, the two manufacturers will lower their development costs and accelerate hydrogen’s market introduction in heavy-duty transport. With a final agreement expected by Q3 2020, it is hoped the technology will start appearing in the second half of the decade.
Manufacturers will also be assessing the viability of autonomous technology as they weigh their balance sheets. With COVID-19 making social distancing vital, the need for self-driving systems would appear to make a lot of sense, particularly with last-mile deliveries. In San Francisco, autonomous car company Cruise has been helping to make contactless food deliveries to vulnerable communities. Milton Keynes in the UK has also seen autonomous vehicle drop-offs, as miniaturised delivery vehicles transport food to residents across the town.
While these applications demonstrate the usefulness of self-driving systems in the current climate, this does not mean all barriers have now been removed for development. The World Economic Forum pointed out that varied regulatory landscapes are making it extremely difficult for manufacturers to map out the next decade, in a period when autonomous systems are expected to reach a level of maturity.
Audi recently announced that the next A8 will not feature level 3 autonomous systems as planned. The carmaker puts this down to an absent legal framework, making integration into a series-production car exceptionally difficult. Audi also pointed out that the ‘development of automated driving is extremely complex and cost-intensive.’
Weighing the cost-benefit relationship of autonomous technology, at a time when liquidity is king, reveals that for many OEMs this simply is not the right time to pursue automation. COVID-19 has highlighted some useful applications but full-scale development for series production can be put on hold as manufacturers focus on essential technologies.
While balance sheets and regulations will determine the future of alternative drivetrains and autonomous technology, consumer demand will help dictate the features these cars boast. An Ipsos survey of new-car buyers in China revealed the top driver of purchase consideration was ‘health configuration’. The top four most-preferred features were related to health monitoring and protection. Respondents wanted air conditioners with germ filters, interiors with antibacterial materials, outbreak-area reminders and health-monitoring systems for passengers.
Geely has paid attention to this market demand with its launch of the Icon, an all-electric compact SUV. In response to the epidemic, the carmaker developed an intelligent air-purification system that is N95 certified. According to Geely, the system works in tandem with the air conditioner to isolate and eliminate harmful elements in the cabin’s air, including bacteria and viruses. Ultraviolet lamps are also being developed for SAIC’s air-conditioning systems to sterilise airflow.
However, some scepticism has arisen over the development of in-car air-purification systems. ‘I would be suspicious of any claims for effective ambient filtration that does not involve slightly pressurising the cabin with filtered air,’ said Werner Bergman, research director at Aerosol Science, speaking to SAE International. Getting a good enough seal is difficult enough to achieve, but as soon as a door or window is opened, unfiltered air enters the car.
While the demand for these health-protection technologies appears strong in China, the same might not be true in Europe. Andreas Geilenbrügge, head of valuations and insights at Autovista Group’s Schwacke, commented that demand for ‘pandemic technologies’ in Germany would be limited, quite possibly because of how the impact differed between the two countries.
‘The shutdown was, of course, heavy and people felt it strongly but, from my point of view, they will experience this retrospectively more as an economic crisis and recession than as a health and hygene crisis,’ Geilenbrügge said. Instead, he expects German demand for vehicle equipment to be more focused on comfort and power.
In North America, however, signs point to increased investment in germ-fighting capabilities. Antimicrobial technology company Microban recently formed a partnership with vehicle detailing specialist Adam’s Polishes. The firms claim that as well as combatting bacteria on application, its new detailing products will be able to protect surfaces, making them inhospitable to germs. These kinds of advancement in cleaning capabilities will be important to dealerships, rental companies and car-sharing companies alike. Consumers will need to be reassured that vehicles don’t just look clean, but are a safe place to be.
From expensive electrification and autonomy strategies to air filtration and antibacterial systems, COVID-19 has thrown a portlight on technological development at every level of the automotive industry. Even after the pandemic ends, the technology that consumers and manufacturers are left with will stand testament to a time when only necessary projects were developed.
Contributors to this article include: Andreas Geilenbrügge, head of valuations and insights, Schwacke Germany and Anthony Machin, head of content at Glass's.
Autovista Group’s latest thinking, insight, and data on the coronavirus pandemic and its impact on the automotive industry can be found here. Be the first to know when we publish something new - sign up to the Autovista Group Daily Brief.