i3 | November 17, 2020

The Auto Industry Responds to COVID-19 with Tech Solutions

Robert E. Calem

Already in the throes of change brought about by advancing technologies and government mandates to promote electrification, the global automotive industry and its supply chains were thrown into a tailspin by the spread of COVID-19 earlier this year.

Automakers pivoted quickly to a virtual war footing, shifting their production lines to make health care and personal protective equipment such as ventilators and face coverings. And they remade the way they launch, promote and sell cars.

Now, experts say, some of these changes will have a lasting impact on the auto industry including self-driving car and electric vehicle (EV) development and sales, as well as Mobility as a Service (MaaS) and ride-hailing.

Analysts and Data

“There’s been a recognition of the need to accommodate a world that’s going to have COVID-19 for the foreseeable future,” says Roger Lanctot, director of automotive connected mobility at the global research and consulting firm Strategy Analytics. “That’s going to mean more digital retail, more touchless reselling of cars and more remote servicing,” in addition to developments like antimicrobial fabrics for vehicle interiors. “The filtration of air in cars will get more attention,” he adds. COVID-19 has renewed focus on both the automobile as a personal space and MaaS alternatives. It also will speed the transition to EVs as automakers look to retool production lines after a forced pause in making internal-combustion engine (ICE) vehicles.

“Micro-mobility” — shared scooters, for instance — “was absolutely devastated at the beginning in March and April,” Lanctot recounts. “Now there’s kind of a surge,” he says, with micro-mobility rebounding “as an alternative to public transportation and to privately owned and operated vehicles.”

Because its foundation is software, MaaS has the capacity to effectuate routes for ride-hailing or other services that avoid or minimize travel through virus hotspots, he suggests. The Whim app from MaaS Global Oy, based in Helsinki, Finland is “the ultimate MaaS vision,” he declares. It gives users access to a multitude of transportation modes.

Lanctot says, “We expect a more rapid uptake of electric vehicles in the wake of COVID-19. Since the industry took a hit of a couple of months of limited or no production of vehicles,” primarily ICE models, it was afforded “an opportunity to make adjustments” in plans and hence get a jump on EV production, he adds.

In a July presentation titled COVID-19 Impact and Recovery for Strategy Analytics’ Smart & Connected Mobility Summit, Lanctot said worldwide “light vehicle production” will be 20% lower in 2020 versus 2019, at 71 million units; battery-electric vehicle (BEV) production will fall only 8% by comparison; the falling car market will combine with a static market for ADAS (advanced driver assistance systems), pressuring development of self-driving cars and related infrastructure this year and beyond. However, EV adoption and automation along with connectivity and data as revenue drivers will propel MaaS and a “multimodal future.”

Overall U.S. car sales bottomed out in April after a “massive” decline prompted by economic shutdowns, says Charlie Chesbrough, senior economist at Cox Automotive.

Yet regardless of demand, the supply of vehicles on dealer lots was constrained, and the usual rollover to the next model year in September was delayed, Chesbrough says. In August, model year 2021 vehicles were only 0.5% of dealer inventory, Cox data show. By comparison, model year 2020 vehicles were 8% of dealer inventory at the same time last year. “It’s a situation where the recovery may be held back not by consumers not wanting to buy, but the industry unable to get them vehicles to buy,” he says.

Chesbrough also sees automakers delaying work on self-driving cars while they focus on getting their businesses in order. And although he remains skeptical that EVs will be widely successful with U.S. consumers, he concedes the launch of electric pickup trucks will be a test because of the segment’s market dominance.

Another problem for EVs is the business model, Chesbrough contends. Automakers are “asking people to buy into a technology which is evolving by the day” with a commodity that will be kept and used for 10 years or longer. “So, [industry is] asking consumers to absorb all of the technology risk of these vehicles if they buy them, and whatever evolves from there,” he says. A solution to this EV conundrum will be new financing schemes, Chesbrough proposes, “but I question what are those residual values” for a vehicle that’s technologically obsolete.

“One of the questions that the industry is wrestling with is complexity,” given all the variants of each car model produced today, Chesbrough says. In the wake of the pandemic, “it seems like it’s going to be a natural thing for the industry to get rid of this complexity,” concentrate on its mainstay products and get itself “smaller and more efficient,” he asserts.

To be sure, consumers have delayed buying new cars, there is apprehension about using public transit, and migration out of cities accelerated with COVID-19’s spread. According to a July Deloitte Consulting LLP study, 37% of respondents delayed large purchases, 47% planned to keep their current vehicles longer, and 56% planned to limit their use of public transit for three months.

But none of this is hindering the long-term trend of MaaS displacing personal vehicle ownership among Millennials, says Joe Vitale, principal and global automotive sector leader at the firm. “I don’t think that mass transportation, micro-transportation, shared vehicles or ride-hailing is dead by any stretch of the imagination,” he proclaims.

More, “we’re starting to see more willingness to pay for alternative powertrains like electric vehicles,” Vitale adds. “Consumers are on board with the electrification wave and COVID-19 will accelerate this movement.” The virus response has motivated consumers to embrace giving back to society and “electrification is a way of doing that,” he says.

With the downturn in auto sales came increased reliance on digital pathways to reach consumers who stopped going to dealerships or to auto shows which were canceled. This was a stimulus to improve Web-based configurators that spurred remote and contactless purchases, and a new emphasis on online car launches.

“The digital production values have climbed by a lot of companies learning to deal with this new way of relating” to a changed world, says James Hodgson, principal analyst in the smart mobility and automotive practice at ABI Research.

Hodgson adds, “when I’m speaking to various [automakers], suppliers or MaaS operators and trying to get an idea of what they’re expecting consumers to do, there’s a lot of conjecture but no-one really is sure” what to expect from “rational consumers” as the crisis goes on. “It’s very difficult to predict what consumers are going to do when decisions aren’t being born of a cool head.”

Automakers’ Perspectives

For many automakers, swift sales declines led to better use of data and digital platforms to spur consumer interest — in some cases speeding up changes that were already underway.

“COVID-19 was a catalyst for automotive manufacturers to accelerate plans that were in place,” says Allyson Witherspoon, vice president of marketing communications and media at Nissan North America Inc. The first reaction at Nissan, she says, was to “try to understand what people need when it comes to mobility and how can we serve that.” Thus, the next step was to study consumer conversations in social media and search trends, “and then try to use that to help develop what our communication plans were going to be.” As lockdowns were eased, “we were looking at mobility data,” she says, to decipher “what were the different levers we could pull” to entice customers to car shop again.

“It became clear that there was more comfort level in doing shopping activity at home,” she recalls, and this necessitated bringing the shopping experience to consumers. Nissan already had plans before the pandemic to beef up its e-commerce presence, but it accelerated its rollout timetable by six months and accomplished in two weeks what it set out to do: reorganize the shopping tools and remake the online “configurator” customers use to virtually build a vehicle on the Nissan website. In May the automaker launched Nissan Shop at Home, and the first week brought a 100% increase in activity and a significantly higher conversion rate to actual sales leads for dealers, she says.

Nissan experimented with Facebook Live, too, in pilots with seven dealerships that created video content to explain a vehicle’s connected tech features to potential customers. More than 100 videos garnered over 100,000 views. “It was a way for them to take what was an in-store experience and make that virtual” — and many included live question-and-answer sessions to create a “one-to-one connection that you usually have as part of the shopping process but for several reasons wasn’t there anymore due to the pandemic,” Witherspoon says. “Essentially we’re creating paths and letting consumers decide what they’re comfortable with, and ensuring that we have the technology to enable that,” she says.

Aversion to public transportation and ride-hailing caused by COVID-19 concerns has led to an ownership renaissance, with first-time car buyers viewing their personal vehicle as a private sanctuary, says Reinhard Fischer, senior vice president of strategy at Volkswagen North America. That has inspired VW to explore what alterations can be made to vehicles to oblige this mindset, and possible solutions have included using virus-resistant materials. For instance, Fischer says, a UV light could be integrated with a wireless charging pad to kill germs on the surface of a cell phone.

The pandemic also forced new car launches to online venues. Ford Motor Co. debuted its new F-150 pickup truck and Bronco SUV via YouTube, FCA (Fiat Chrysler Automobiles) held a Google Hangouts meeting to discuss its SRT brand’s 2021 lineup, and Mercedes-Benz leveraged a dedicated digital media platform named Mercedes me media to stage half-hour broadcast-quality shows under the Meet Mercedes DIGITAL moniker. Although the platform began in late 2019 to launch the GLA and E-Class cars, it gained attention during the pandemic when it hosted a mini-series of four Meet the S-Class Digital episodes — introducing the new 2021 S-Class expected to arrive in the U.S. mid-next year.

“You’re going to see this more and more,” says VW’s Fischer. It’s easy to have the presenters socially distanced from one another, “and it turns out to be quite cost-efficient to use technology to promote a new model.”

Even so, digital productions don’t induce the emotional attachment to a vehicle that driving it in the real world does, Fischer maintains. “The work really starts when the car gets to the dealerships,” he says.

One automaker attempting to bring emotion to the digital experience is Lucid Motors, a startup EV maker that aims to compete with high-end marques like Mercedes-Benz, BMW and Audi with a range of Air luxury sedans. In partnership with auto industry supplier ZeroLight, it has developed a unique online shopping tool named the Lucid Air “Design Yours” Configurator, which mimics a videogame to produce a digital twin of the customers car that is streamed from the cloud. The twin is created from the data developed in designing the car itself, which allows the configurator to be instantly updated whenever new features, colors or materials are made available.

Plus, the cloud-based solution mirrors the in-person sales experience, permitting a customer to interact with a car from home while a salesperson virtually guides him or her through its key features and configuration options, without requiring screen sharing. At a Lucid dealership, the customer can use a 4K-resolution virtual reality (VR) display to finalize the configuration. The entire solution showcases a number of “world’s first” innovations from ZeroLight, according to Lucid: the first cloud-based ray-traced rendering, cloud-rendered volumetric video environment and the first multi-user, multi-car VR experience.

Lucid’s first vehicle, the Air Dream Edition, will be built in its new factory in Casa Grande, AZ, and customers will receive their vehicles next spring — about the same time the pharmaceutical industry anticipates delivering its own world’s first, COVID-19 vaccines.

Automakers will share tech innovations at CES 2021.

Subscribe to i3 Magazine

I3, the flagship magazine from the Consumer Technology Association (CTA)®, focuses on innovation in technology, policy and business as well as the entrepreneurs, industry leaders and startups that grow the consumer technology industry. Subscriptions to i3 are available free to qualified participants in the consumer electronics industry.