Supply chain disruption and factory shutdowns due to the COVID-19 outbreak has caused global new vehicle sales to contract by an estimated 19 per cent in the first quarter of 2020. The automotive industry’s high dependence on brick-and-mortar retail sales facilities has not helped the situation either.
It is not just conventional automakers that have been hit by the slump. Studies show shipments of connected vehicles, and connected car platform subscription growth have also been equally affected. According to ABI Research, a global tech market advisory firm, new connected vehicles will drop at least 15 per cent globally in 2020. Their research also points to OEMs and suppliers being forced to reduce their expenditure on R&D, which will lead to industry consolidation and rationalisation of investment.
“In the short term, a few OEMs may temporarily postpone immediate projects that add additional value to customers to concentrate their efforts on actions to reduce costs of ownership and to make their supply chain resilient and agile. However, investments and adoption of connectivity packages should remain constant due to standard fitment, such as eCall,” explains Maite Bezerra, Smart Mobility and Automotive Analyst at ABI Research.
The study shows while OEMs with less liquidity will have to give preference to providers offering turnkey, low-cost solutions, larger OEMs with substantial investment in in-house solutions will be more willing to migrate to third party offerings and benefit from lower costs. When it comes to infotainment, off-the-shelf solutions from providers like Google and Amazon are expected to benefit from the distress of OEMs, as these companies may now be willing to lose a little bit of control over their systems to decrease costs.
“With the decrease in new vehicle sales, which was already in decline before the COVID-19 outbreak, automakers will have to find strategies to decrease the churn rate of connected services and maximize revenue from registered vehicles. Meanwhile, service providers should increasingly invest in lower-cost turnkey solutions that meet the industry-standard requirements but allow some customization on top and further upgrades,” Bezerra advises.