The automotive industry faces simultaneous threats from consumers unwilling to buy vehicles amid current economic uncertainty, factories operating at reduced capacity, and supply lines broken or disrupted by the virus. It has also heaped unprecedented financial pressure on an industry already buckling under the weight of investment in CASE megatrends.

Listed below are the key macroeconomic trends impacting the automotive industry, as identified by GlobalData.


The automotive industry has never faced a threat of this scale, which comes at a time when companies are already under intense pressure caused by advancing CASE megatrends (connected cars, autonomous vehicles, shared vehicle services (TaaS) and electrification).

For many auto companies, the virus has meant two quarters with almost no income from regular activities, causing automakers such as GM, Toyota and Volkswagen to draw upon emergency cash reserves and large loans to sustain themselves. In areas such as the USA which has seen a particularly bad outbreak, it is likely that the impact of Covid-19 will be felt throughout the rest of 2020 and into 2021, further darkening the forecasts for automotive sales and manufacturing in the country.

China impact

In 2018, the market took its first downturn since it began growing explosively in 1990. According to GlobalData figures, light vehicle sales fell by 0.8% to 28 million in 2018, with the fall most pronounced in the final quarter of the year. The country didn’t fare much better in 2019 with sales continuing their slide, dropping 12.4% to 24.6 million.

While China was the epicentre of the Covid-19 outbreak at the end of 2019, its strict laws meant that it could enact a lockdown faster and more effectively than the US or Europe. The country’s auto industry is also able to restart production faster than in the western world where slow lockdown strategies have caused the outbreak to last longer and spread wider.

Strategic partnerships

Strategic partnerships are becoming a key way for automotive companies to navigate the new world of mobility as they move outside of their traditional core competencies.

Ford and VW are already talking on an autonomous vehicle partnership and exploring ways to share VW’s MEB EV platform. Elsewhere, Honda is working jointly with GM and, in February 2019, Daimler and BMW announced they would work together on autonomous vehicles.

The number of strategic partnerships will grow over the next few years, but we now expect this process to be even more extensive than before due to the fact more companies will be facing financial hardships resulting from the coronavirus outbreak.

In the battery field specifically, BMW had agreed a €4bn order with China’s CATL for supply of lithium-ion batteries for the next decade. The German automaker then took the decision in November 2019 to increase this order to a total of €7.3bn. CATL is in the process of setting up a European production centre in Erfurt, Germany, from which BMW will receive the first production runs. This supplements BMW’s contract with South Korea’s Samsung SDI for €2.9bn worth of Li-ion cells. To ensure BMW’s batteries are made ethically, it will source its own lithium and cobalt and then supply it to CATL and Samsung SDI for use in its batteries.

Tesla has long been tied to Japan’s Panasonic for supply of the 18650 and 2170 cylindrical cells used in its cars. However, the automaker has now diversified its suppliers to include local giant CATL and established South Korean firm LG Chem to ensure it has enough cells to meet its lofty production ambitions.


People all over the planet are increasingly migrating to cities. By 2050, it is estimated that two-thirds of the world’s population will be living in cities.

Increasing urbanisation presents a real issue for the automotive industry. Owning personal transport in concentrated urban environments becomes increasingly complicated due to parking issues, usage restrictions, the availability of internet shopping, insurance costs, competing public transportation and increasing mobility as a service (MaaS) options.

Smart cities

With the proliferation of connectivity and sensor technology, cities are becoming ‘smart’. They incorporate banks of sensors connected via the internet of things to centralised computer hubs that parse the vast amounts of data collected to enhance efficiency, resource effectiveness and safety. GlobalData estimates the smart city market was worth $441bn in 2018 but expects it to increase to $833bn by 2030 as more cities come online.

Among the many areas of city operations that smart cities aim to improve, transport is likely the largest target. This can be achieved by using sensors that detect where traffic is in real time, along with the positions and timing of traffic lights. Artificial intelligence (AI) like systems can then crunch that data to find more effective ways of routing traffic by altering traffic light timings to reduce congestion.

As EVs develop, they are expected to gain the ability to put power back into the grid as well as draw it – this means they can become mobile grid-level energy stores, potentially reducing peak demand on power generation infrastructure. Naturally, a smart city system is needed here to manage the sharing of power between EVs and the grid effectively.

Energy prices

Oil prices are at a comparative low point presently thanks to both the US shale revolution and reduced demand under Covid-19. However, abrupt swings in prices can have a severe effect on the make-up of vehicle markets, particularly where fuel taxation is low.

For example, in the US spikes in oil price are met with surging demand for hybrid and fuel-efficient vehicles.

Emerging economies

The automotive sector is always looking for the next big volume opportunity to alleviate competitive pressures in Triad (Europe, US and Japan) markets.

The BRICs (Brazil, Russia, India and China) have long been identified as that opportunity and still provide much upside.

Markets that present long-term opportunity for incremental growth – those beyond the BRICs – have to meet a number of key criteria. Among them are a population over 80 million, and good economic growth prospects that will take GDP per capita beyond $5,000. This number is commonly seen as the inflection point at which new vehicle sales begin to take-off.

Based on the population criteria Indonesia, Pakistan, Nigeria, the Philippines, Egypt and Vietnam all look good bets to be substantial automotive markets of the future if economic growth and stability can be sustained.

This is an edited extract from the Electric Vehicle Batteries – Thematic Research report produced by GlobalData Thematic Research.

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