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What are the top five automotive trends for 2021?Pedro Pacheco offers his take on how the megatrends shaping mobility will playout in 20212021 will be an exciting year for the automotive sector, due to anacceleration of the mobility transformation seen throughout the last decade.The industry was already struggling with monumental challenges posed by thefour pillars of the CASE transformation. The inherent financial pressure hasbeen further heightened by COVID-19, leading to a priority redefinition forcarmakers. This means prioritising areas with a quicker payback period likeelectrification and connected car. In turn, other areas with a morechallenging business case get pushed down the list in terms of investmentfocus, such as shared mobility or autonomy from Level 4 (L4) onward. Finally,the transformation in the sector will also bring visible changes to theautomotive value chain, especially in terms of sales and after-sales.## Mergers and acquisitions will intensifyThe first half of 2020 was an extremely challenging period for the industryand its recovery will take several years—but some may never recover from that.This additional pressure will turn several companies into great bargains foracquisition. It will also unlock new possibilities for mergers betweencompanies experiencing difficulties. By the same token, the currentenvironment will also mean bankruptcies—especially for automotive supplierswho haven’t been quick enough to make the transition to electrification or todigitally transform their value chain.## EV growth in Europe, China and US2021 will be a great year for electric vehicle (EV) market penetration. InEurope, the pace of growth will further increase—not due to COVID-19, butmostly because of the highly stringent CO2 legislation imposed by the EU. TheChinese government will reduce incentives on New Energy Vehicles (EVs, PHEVsand FCEVs) by 20% but, at the same time, it will use other mechanisms likerestricting ICE registrations to make sure EV sales penetration will keeprising.In US, there is major expectation on what the new administration will do toboost support for EVs. No doubt this will lead to a faster growth than inprevious years, but it will take more than 12 months to introduce regulatorychanges across all states. However, there is a chance the existing EV taxrebate scheme is further expanded. In addition, the fact that EV supporterssee an ally in the Biden administration will definitely provide encouragementto further accelerate investment in electrification.The policies of the Biden administration could provide a real boost for EVs## EV start-ups and EV open platforms come to lifeThe success of Tesla has inspired many other entrepreneurs to follow on thefootsteps of Elon Musk. These new EV start-ups are already here and have showntheir products but 2021 will mark the start of production for EV newcomerslike Fisker, Lucid or Rivian. Other EV start-ups like Xpeng and Nio, whichwere facing headwinds not so long ago, are also now seeing visible salesgrowth, which is a promising sign for their future.This entrepreneurial rush to form the next EV start-up was also seen by othersas an opportunity to start offering open-source EV platforms. These wouldenable upcoming EV start-ups to easily develop a new car by simply adopting an‘off-the-shelf’ platform. In 2019 Volkswagen had already announced its MEBelectric platform would be available to other companies on an open sourcemodel. However, Foxconn and Geely are now also putting on the market opensource EV platforms. While on the long run the market won’t be enough forseveral EV platform suppliers, these initiatives will make it easy for newentrants to join the EV race.## Autonomous drive: L3 on the road, L4 in the hands of techAfter much waiting, 2021 will see the market deployment of L3 autonomy byseveral carmakers, like Daimler, Ford, GM, Honda, Toyota and Xpeng. The UN’snew regulation on automated lane keeping systems is now being rolled out to atleast 60 countries, hence offering carmakers the regulatory clarity needed tofinally move forward.However, L4 autonomy is a very different picture. Apart from Waymo’s robotaxiservice in just a part of Phoenix’s metro area, no other company is yetoffering a regular service beyond trials using shadow drivers orteleoperation. Consequently, making L4 autonomy work with full safety andreliability in the main cities across the world is a Herculean undertakingthat will take at least most of this decade. This daunting prospect, added tothe financial pressure triggered by the pandemic, will force carmakers to relymuch more on technology companies to achieve this long-term goal. The recentlyforged partnerships between Daimler and Nvidia or Waymo are a very goodexample of that.2021 will mark the start of production for EV newcomers like Lucid## Micromobility and cars widen gain over mass transitThe fear of infection caused by the pandemic saw city dwellers move frompublic transport to cars, bicycles, e-bikes and e-scooters. This trend willcontinue in 2021, not only because COVID-19 will still be quite present, butalso because several commuters have become accustomed to the new alternatives.Those who bought e-bikes to travel to work certainly won’t return to publictransport so easily. Shared micromobility companies will also see a rise inactivity: the pandemic triggered a growth in first-time users and these andother new users will keep increasing the chances of business success formicromobility.## Connected car shifts to high-value servicesTraditionally it has been difficult for legacy carmakers to demonstrate thevalue of connected car services to their customers—and, hence, justify themonthly fee. Going past connected navigation or infotainment streaming, therewasn’t much more to entice consumers. Exactly for this reason—and driven bythe successes of Tesla in this area—carmakers will increasingly transition toconnected services where it’s easier for consumers to associate price withvalue. Digital function upgrades will be one of them. In addition, carconnectivity will become an enabler to other services like connectedsubscription and leasing, where it can be used to lower monthly feesaccordingly to vehicle usage patterns. Overall, this transition will becrucial to achieve connected car profitability and turn software into the mainrevenue generator on the long run.## The revolution in retail and after-sales is starting nowTesla was the first carmaker to successfully deploy online sales, while otherplayers didn’t see much value in it. Then came the pandemic, along withdealership closures. This led to a major increased focus on online sales, withseveral carmakers like Daimler and Volvo defining targets to sell asubstantial part of their volume online by 2025.However, the motivation lies even deeper than COVID-19. As premium carmakerslead the transition to EVs and autonomous drive, they are also the first torealise this entails a substantial reduction in aftersales revenue for theirdealers. Today a Tesla does not require regular servicing intervals, whichmeans competition will soon follow the same path. Hence, 2020’s sharp EVpenetration rise in Europe is triggering the start of a redefinition processfor retail and after-sales. A lot of this will culminate in old-style costcutting, but the most innovative incumbents will transform the way they sellcars and attend to their customers’ needs. This, in turn, will entail a muchhigher adoption of holistic digital solutions to interact with these customersand increase their level of satisfaction.* * *Pedro Pacheco is Senior Research Director at Gartner.