Auto Industry Expectations for 2023 in Europe

The personal car market though may be affected by persistent supply chain problems and the possibility of an imminent recession EVs are the fastest-growing sector in Auto Industry.

FREMONT, CA: The pandemic had a significant negative impact on global vehicle sales; consumers lost faith in the industry and continued to be appropriately cautious even when COVID-19-related restrictions started to loosen. Surprisingly, though sales started with light vehicles, the sector has moved the fastest with electric cars (EVs) and hybrids.

The automotive sector will need to find solutions to the supply chain disruptions brought on by the pandemic, and novel ideas will be needed to address the growing bottlenecks that have been impacted by the conflict in Ukraine. As a result, despite the higher inventory costs, it is anticipated that manufacturers would switch from "just-in-time" to "inventory banking" tactics to expand supply.

Automakers are increasingly likely to take into account vertically integrated business structures, notably in the battery value chain, with localised battery manufacturing rather than importing cells from one or two major suppliers to protect themselves against additional supply chain disruptions. More and more instances of a hybrid approach will be seen in the market for personal vehicles. Notably, the profit margins of automakers have been badly impacted by the oil crisis. The growth rate is significantly in danger due to geopolitical unrest and macroeconomic concerns.

Even though the automobile sector is facing several difficulties, EVs are leading the way because of rising worldwide interest. It is anticipated that the transition to electrification will pick up speed in 2023 as a result of regulatory pressure and strict deadlines and objectives for the banning of specific types of internal combustion engine (ICE) cars. A 50 per cent battery electric and plug-in hybrid (BEV+PHEV) EV penetration rate is anticipated to be reached in Europe by 2027.

The declining range anxiety is one of the main drivers of development. Consumers are becoming less concerned about range due to the expansion of long-range EV models, ongoing advancements in battery technology, and changing charging infrastructure. Consumer worries will be further allayed when personal EV use becomes more commonplace.

Contemporary EVs are evolving into cutting-edge technological marvels, laden with connection and entertainment capabilities akin to those found in smartphones and geared at younger users. As a result, to draw in young drivers, automakers are speeding up their plans to implement technology like sophisticated driver-aid systems in automobiles. Proposals for complete autonomy have been put off in part due to the increasing complexity of the technological and regulatory environments.

It's anticipated that automakers will concentrate more on offering individualised in-vehicle experiences, including voice-activated services, biometrics, and digital cockpits that replace touch controls with haptic feedback. The use of the metaverse, virtual reality, and augmented reality (AR, VR) are being discussed as ways to improve the consumer experience. For the same automakers will need to combine internal software development with well-established technology partners to take advantage of their software knowledge and provide consumers with the finest software-defined features available.

Lack of expertise is one of the main issues the automobile sector is facing. Megatrends like electrification have raised the need for digital expertise while making certain jobs obsolete, including conventional engine assembly and service personnel. Since the industry is unable to provide the sorts of compensation packages offered in the IT sector, hiring fresh personnel is not an option. Therefore there is a clear need to reskill the current staff, which in turn demands a large investment.

Automakers will also continue to be pressured to adopt proactive measures towards long-term sustainability objectives by increasing regulatory scrutiny for decarbonisation. Yet a compromise is to be drawn between achieving their corporate goals and upholding environmental standards.