There are a lot of transitions happening in the world as a whole, and that certainly includes the automotive market. Technological innovation, as well as the changes that came about because of COVID-19, are affecting the market along with a number of other factors.
The future of automotive manufacturing appears to be unfolding right now, and the following are some things to know.
1. Increasing EV Prevalence
The future of the car industry is focused on environmental sustainability. That means that we’re likely to see an ever-growing demand for electric vehicles, and increasingly these are going to be tailored to the needs of the customer.
Many companies already have electric vehicles available, but the efforts now are on making them more affordable so that they become not just an option but preferable from the perspective of the customer.
For example, Ford recently announced an all-electric pickup truck, and the carmaker is looking at the development of electric versions of their SUVs—namely, the Explorer and the Lincoln Aviator.
Ford hopes that 40% of the global fleet will be entirely electric by 2030.
It’s expected that the sales of EVs in the U.S. are soon going to go beyond one million for the first time.
In 2022, EV sales went up 66%, with 808,000 units being sold in the U.S. That means one million isn’t too far away from that figure. EVs currently make up around 5.8% of all the new vehicles that are sold in America.
2. Artificial Intelligence
Autonomous vehicles becoming part of daily life can sound far-fetched, but it’s a lot closer to reality than many realize.
There is still work to be done regarding AI and technology before autonomous vehicles are entirely mainstream, but there’s a rapid expansion of effort right now.
3. Used Vehicle Depreciation
The depreciation of used vehicle values looks like it’ll go up for the second year.
The prices of used vehicles soared during the pandemic because there was a limited inventory of new cars and trucks. Wholesale pricing peaked in January 2022 and declined by nearly 15% last year. It’s expected to fall another 4.3% by the end of this year.
Declines aren’t enough to offset the rise in prices from April 2020 to January 2022, though.
Carmakers are also likely to have to rely more significantly on their sales to commercial and fleet customers like government entities and rental car companies than they have previously to increase their total sales.
Carmakers, for the past couple of years, have been prioritizing consumer sales because they’re more profitable, but demand is expected to fall, so fleet sales may have to fill that gap.
4. Declines in Affordability
When interest rates were low, vehicle affordability was already a problem on the consumer side of things. Now, interest rates have gone up dramatically, and the average payment each month for a new vehicle is around $785. For leases, it’s $661.
The average list price for new cars and trucks is more than $27,000, and the average transaction for new vehicles at the end of 2022 was around $49,500.
These changes could mean that car companies actually move further away from affordable price points and more toward luxury. Increasingly, consumers are likely going to find a new car entirely out of their budget.
All-cash deals are also going to increase so that people can avoid those high interest rates.
5. More Demand for Connected Vehicles
It would tie in with the trend above that more connected vehicles will become the norm if car makers really do skew toward luxury.
Auto manufacturers are currently working on technology that would help them pair consumer behavior and car services. For example, these services might include knowing when a car needs gas and then going a step beyond to recommend a gas station fitting the driver’s preferences.
Around 90% of vehicles being sold right now already have connected infrastructures that allow for communication and improved safety.
6. Declines in Vehicle Ownership
Individual ownership is probably going to go down over the next decade or so. There will be more ride-sharing, and also affecting this trend will be autonomous vehicles. Urbanization, a push for sustainability, and a focus on environmental concerns and population growth could also lead to fewer private owners of vehicles.
Overall, the pandemic led to major disruptions in the car and automotive world, and there are likely to be permanent implications for that. There are exciting things on the horizon as far as technology, but also troubling trends like less production of affordable vehicles.