Automotive's Complete Reset

Expect more disruption in 2022

The automotive industry is having its cheese moved in a mighty way with the inevitable sunsetting of the internal combustion engine. But an even larger catalyst of change is the complete rethinking of revenue models and ownership of the customer.

Car and truck companies will soon make more money selling information services than they will selling steel and rubber. Their vehicles will increasingly become media centers with audiences hungry for content and interested in more efficient ways to conduct local commerce.

We see 10 key factors and events which will feed disruption in automotive in 2022. Here are the first five (we’ll cover the other five next week):

1. More tie-ups between big auto and voice content providers. We see voice as the big growth opportunity in the vehicle. The auto manufacturers have been building increasingly sophisticated microphone arrays in vehicles which allow drivers to interact with voice content. Expect more tie-ins with public voice assistants such as Amazon’s Alexa and Google Voice. Also expect to see more independent voice apps which allow the car manufacturer to control the voice experience and sell access to the audience to brands. There will be more interactive ads running on Internet-based radio stations in the car which allow better ad targeting based on a driver’s response to questions.

2. The EV focus will continue to move downmarket. - As the premium $100K+ market is saturated, expect to see a lot more electric vehicles under $40K where the largest buying base is. Also expect more micro-mobility plays - three-wheeled and two-wheeled EVs designed for commuting, last-mile delivery, and short-haul sports/pleasure. These are lightweight, minimalist vehicles suited to nimble startups which have the advantage of clean-sheet design and manufacturing plans. And, gauging from the ones exhibiting at CES early this January, they will be coming from many different countries. One challenge they face is the mishmash of rules on vehicle registration and safety between countries and even within countries. For example, three-wheelers are classified as motorcycles in some places and not others. There are also different rules for convertible/open-top versions of roofed three-wheelers.

3. Corporations, governments, and the military will become a lot more interested in clean vehicles. As the world becomes more sensitive to carbon emissions, large public organizations are being forced into long-term carbon reduction plans. These will logically include a strategy to replace all of their internal combustion vehicles over time. Just announcing a clean vehicle strategy gets you a quick stock price jump if you’re publicly traded or scores you important political points in a government or military setting. How they will execute on these strategies is another matter entirely. Bureaucracies move a lot slower than a fast-moving EV industry. It will be interesting to see how often clean vehicle specifications set in RFPs will be obsolete by the time the purchases are actually made and the vehicles delivered.

4. More non-automotive corporations will enter the EV market. Electronics giant Sony introduced its first EV at CES this year. We expect other big electronics groups such as Apple to leap into the fray too. It makes sense - an EV is essentially a big computer on wheels. Other groups motivated to get into the EV business are the big logistics players like Amazon, UPS, and FedEx. And lets not forget WalMart. All of these are essentially in the transport business and could gain an advantage designing and programming vehicles that suit their business models.

5. The computer chip crisis will ease somewhat, but it’s a long way from resolution. The immediate problem is not the growing demand for high-end chips needed for all the new EVs and semi-autonomous IC vehicles. It’s the shortage of the cheaper plain-jane analog chips needed for the less sexy vehicle functions. The big chip makers are all devoting significant portions of their capex budgets on new plants to build the higher-end chips because that’s where the higher margins and future volumes are. Exhibit A: Intel’s recent announcement to spend $20 billion on a new chip plant in Ohio and describing it as potentially the largest silicon manufacturing location on the planet. The Intel move is overdue. Asian-based chipmakers have gradually stolen market share from them in recent years and Intel’s stock price has been in the doldrums. But that still doesn’t solve our immediate problem with low-end chips. Car buyers can expect more delays in delivery of their shiny new vehicles in 2022.

Briefly

Amazon is still committed to its big order of electric delivery vehicles from Rivian. The logistics giant expects to have 10,000 of them on the road early this year in 15 U.S. cities. and aims to have 100,000 fully deployed by 2030. Although Rivan’s stock has been getting hammered lately, it’s still proving to be a good bet for Ford, which recently declared an $8.2 billion gain on its investment in the EV startup.

Old-school automaker stocks aren’t the only ones benefiting from the EV Midas touch. Paccar, the buttoned-down maker of Kenworth, Peterbilt, and DAF trucks, has seen a nice 15% pop in its stock price since late December 2021, right about the time it announced its plans for electrification and autonomy of its trucks. Paccar’s stock has been flat for more than a year as stocks in many other money-losing EV plays have been skyrocketing. Key question moving forward: Will the market recognize the intrinsic value of well-established incumbents like Paccar as we make the long transition from IC engines to electric? The winners will need to have strong financials and steady hands in management. Paccar checks all the boxes and will therefore be a safer bet than new entries like Tesla and Nikola.

The latest battery report from the Volta Foundation and Intercalation spotlights the continued downward trend in battery cost as production expands and new materials are used. We are now in the $85-100/kWh range, around one sixth of the price just a few years ago. A lot of the R&D focus has been on increasing kWh output by weight to stretch the vehicle range. This is important for all the price-sensitive smaller EVs coming to market which need the greatest range at the lowest possible price.

Deals

Sibros, a leader in connected vehicle technology, took in another $70 million of capital in a Series B round. Backers included Qualcomm Ventures and Google. The money will be used to help it to scale to meet the growing demand for its vertically integrated connected vehicle platform.

Autonomous electric plane maker Wisk Aero raised an additional $450 million in funding to help kickstart its air taxi service. The company is a joint venture between Boeing and electric plane startup Kitty Hawk Corp.

Addionics, a chemistry-agnostic battery technology company, raised $27 million in a Series A round. The company will use to scale up its efforts to redesign battery architecture to improve the cost and performance of batteries with any chemistry – existing or emerging.

Parallel Systems, maker of electric bogeys for rail cars, raised $49.6 million in a Series A round. The company is hoping to offer a cleaner, more flexible option for intermodal container freight and help railroads take more freight off trucks.

Next week: Part 2 of our disruption predictions. Subscribe below to Transport 3.0 to get the next issue in your inbox and stay on top of fast-changing news and trends in transport.

If you have a new transport-focused tech product or service to talk about or other news to share, contact us at transport30@dekenmedia.com