Stephen Zoepf is the executive director at the Center for Automotive Research at Stanford University.

To kick off the forum, Stephen Zoepf, executive director at the Center for Automotive Research at Stanford University gave a presentation called “Electric Vehicles: Adapting to a Changing Marketplace” to share his insights on what future markets will look like and implications for automakers, suppliers as well as consumers.  

Here are the key takeaways.

The Future is Going to Look Very Different

According to a report by RethinkX, an independent research group, 6 trillion U.S. passenger miles will be driven in 2030, up 50 percent from 2021. Of those miles, 95 percent will be driven in self-driving, electric and shared vehicles and only 5 percent of those miles will be driven by internal combustion engine (ICE) vehicles.

The report goes on to say that autonomous EVs (A-EV) will make up 60 percent of the U.S vehicle stock, and those vehicles will be part of a shared-mobility service. As more people start to share cars, the overall number of vehicles on U.S. roads will drop from 247 million in 2020 to 44 million in 2030.

SEE ALSO: Going Autonomous: The Transformation of the Transportation Industry

The change is already happening. In 2016, shared-mobility companies such as Uber and Lyft drove 500,000 passengers per day in New York City, which is triple the number of passengers from 2015. Today, more and more automakers like Tesla and GM are also entering the shared-mobility market.

EVs are already becoming prominent in major cities around the world. (Source: Time)

The findings illustrate a future where people drive more miles with fewer cars, which are fueled by electricity, and shared instead of owned. It’s a radical visualization of the future, but one that is driven by economic forces.

By 2021, shared vehicles will be 4 to 10 times cheaper per mile than private vehicles, and American households will save an average of USD 5600 every year by switching to shared EVs from cars fueled by gas, according to RethinkX.

Zoepf shared another report by ARK investment Management which echoes the finding above- in the next ten years, people will drive three times more kilometers using half the number of cars and the number of EVs on the road will increase 10 fold.

What It Means for Car Manufacturers and Suppliers

A shrinking vehicle fleet consisting of mostly EVs can only mean one thing: a major disruption to the current automotive market.  

Right now, the average lifecycle of a car in the U.S. is 11 years. However, the majority of a car’s total mileage is driven in its early years. It’s the same for shared vehicles, but they are driven about 80,000- 90,000 km per year, 10 times the distance of privately-owned cars. What this shows is a compression of the vehicle lifespan in its first 3 to 4 years.

These statistics pose critical concerns for automakers.

Will overall vehicle sales decrease in the coming future? According to Zoepf, that’s the wrong question to ask. Instead, automakers should be asking “will I make money?” Automakers have a couple of choices. They can either adapt early on and manufacture EVs and/or A-EVs at a competitive price, or become a shared-mobility provider. Early movers such as Tesla, GM and Volvo are already shifting their business strategies to fit these models.

GM recently launched Maven, a car-sharing service. (Source: The Verge)

Another question to ask is how these trends will affect vehicle design. With shortened vehicle life-cycles, manufacturers can either design cars to last only 3 to 4 years for quick replacements, or opt for the aviation model where the vehicle will be built to last, but the interior parts, such as seats, will be replaced frequently. Whatever route manufactures choose to take, gaining a competitive edge in vehicle and service quality early on will be key.

What Will This Mean for Vehicle Material Suppliers?

If building cars to last is no longer a primary priority, will car makers downgrade their materials? The short answer is not a chance.

Through a customer survey study Zoepf conducted of 60,000 Zipcar customers, he showed that the number one factor when choosing a car is safety. However, there is no one, ideal model or type of car that is preferred in a shared mobility framework. The purpose of the trip determines the type of vehicle, and the success of a shared mobility service provider will depend on the variety of cars it can provide – all with competitive safety ratings.

POSCO ICT already has ChargEV stations set up across Korea. (Source: POSCO ICT)

The supplier’s role will be to continue providing high-quality materials that can boost the safety and cost competitiveness of future vehicles. Steel suppliers have to keep developing lightweight and high-strength steels like POSCO GIGA STEEL, and research new materials that can boost the competitiveness of EVs such as POSCO’s Hyper NO for motor cores, battery materials and POSCO ICT’s EV charging service and infrastructure.

There remain numerous challenges that lie ahead for a greener and safer future with EVs and A-EVs, and it might take longer than experts predict for lawmakers, corporations and consumers to all agree on an optimal mobility model. However, change is already underway and automakers and suppliers alike need to strategize and adapt early on to take advantage of the upcoming opportunities.

For more information on how advanced automotive steel can benefit automakers looking for lightweight and sustainable steel solutions, take a look at our infographic on POSCO GIGA STEEL or read the full report here. 

Cover photo courtesy of GOV.UK.

Contrary to popular belief, mass reduction does not automatically equal fuel savings, especially when it comes to urban driving. There are other factors that determine the fuel efficiency of a vehicle such as driving cycle, vehicle size and its powertrain. Until recently, there was a  lack of variety in engine types and powertrains, so even though automakers reduced the weight of car frames, they could not apply a complementary engine or powertrain to the lighter parts.

So, have automakers been lightweighting for nothing?

Of course not, in the past decade alone, engines and powertrains have also become extremely efficient through advancements in start-stop-systems and downsizing, and newer options including hybrids, electric batteries and range extenders that now allow automakers to capitalize on their lightweight materials.

Although there are several lightweight materials, below are 5 reasons why AHSS continues to be the lightweight material of choice for automakers:

1. Decision Makers Care About the Environment

Well, not everyone, but many countries around the world have started the process to phase out gasoline and diesel-fueled cars, including India and China, the two largest automotive markets in the world. Governments are taking serious action against climate change and it will reflect in their policies. Automakers are choosing to lightweight their vehicles for lower emission rates with AHSS, because not only is AHSS lightweight, there are no trade-offs with other vital features such as safety and cost-effectiveness.

2. Everyone’s Going Electric

Globally, automakers are investing in electric vehicles (EVs) in line with national and international environmental policies. However, EVs still have a ways to go before they become the norm. EVs will face the same safety requirements as regular cars, but with the added responsibility of protecting the battery and its flammable components during a crash.

In 2016 there were several car accidents involving the Tesla Model S, where leaked battery fluids caused fires. Automakers need to find a solution to make EVs as safe, and eventually, safer than traditional cars. As an innovative automotive material, AHSS was built for safety.

3. Safety is Always First

Safety is and should always be the number one priority for automakers, material providers and policymakers alike. Even with all the hype about autonomous driving and sensors, there is very little chance that policymakers will reverse the stringent safety regulations in place today. People want to feel safe, no matter what type of car they are getting into.  

2016 Smart Fortwo and the Mercedes S Class take part in a crash test (Source: Green Car Reports)

One possible material solution is Complex Phase (CP) steel, a type of POSCO GIGA STEEL for the vehicle’s side panels, bumper rails and door impact bars- the parts that determine the safety ratings of the vehicle. It has superior strength and shock-absorbing qualities, without the added weight of traditional high-strength materials, and that’s why carmakers such as GM Korea, Ssangyong Motors and Renault Samsung Motors all use POSCO GIGA STEEL.

4. Cost is Always Second

This goes for automakers as well as drivers on the consuming end. Drivers want lower costs without compromising safety and performance ratings, and desire fuel efficiency- a major reason why automakers are lightweighting.

Some automakers choose alternative materials such as aluminum and carbon fiber to meet lightweight requirements to find that not only are the materials more costly over steel, factories need an equipment overhaul to work with them. Moreover, there are additional costs related to training employees to work with new materials, whereas all auto manufacturers are familiar with welding and forming steel.  

Take a look at this infographic and see how AHSS stacks up against other lightweight materials in terms of cost and performance.  

5. It’s Not Over Till It’s Over

No two lightweight materials are the same when observed under the life-cycle approach, a comprehensive life cycle assessment of a material’s automotive carbon emissions from production to disposal. Often times, the process of manufacturing lightweight materials and improved powertrains result in more carbon emissions than they are saving.

The life cycle assessment can be used to determine the carbon output of a vehicle. (Source: World Auto Steel)

At the end of the day, steel has the lowest production-related emissions and can be recycled at the end of its lifecycle. Steel remains the most recycled material because it can be reapplied in different forms almost infinitely.

Automakers are increasingly incorporating lightweight materials to their new models. Although competition for the greatest market share of lightweight materials is fierce, AHSS is by far the leading material when it comes to lightweight solutions. According to McKinsey & Company’s Lightweight, Heavy Impact report, the percentage of high-strength materials used for cars will increase to 38 percent by 2030, compared to 15 percent in 2010. Steel continues to evolve according to the changing demands of the auto market, and for now, there is no other multi-solution material that can compete.

Cover photo courtesy of Hyundai.

Don’t miss any of the exciting stories from The Steel Wire – subscribe via email today.

The 2008 Financial Crisis was a blow to the global automotive industry and its suppliers. It took years to recover, but the economy did start showing signs of growth. McKinsey&Company’s 2013 report, The road to 2020 and beyond: What’s driving the global automotive industry, painted a positive picture of the global automotive market with profits projected to reach EUR 79 billion by 2020, up from EUR 54 billion in 2012, with China responsible for 60 percent of profits.

Their 2016 report, Automotive revolution – perspective towards 2030, offered a similar outlook. Overall global car sales will continue to grow, but at about a 2 percent growth rate, down 1.6 percent from the last five years. New market trends such as electric/autonomous vehicles, shared mobility and stricter environmental regulations will disrupt the market with new challenges and opportunities, but what remains constant is that the majority of growth in global automotive sales will be lead by the rising middle class of emerging markets, namely in India and China.

Thousands of vehicles are scrapped in the Chinese government’s efforts to reduce emissions. (Source: The Daily Mail)

Subsequently, China reached record vehicle sales in 2016. However, in April 2017, it recorded the lowest number of sales in the past two years for passenger cars, down 3.7 percent from 2015. This follows a national sales tax rise early in 2017 to 7.5 percent, coupled with a general decrease in demand for cars as consumption is reaching a plateau. Moreover, China’s sales tax will increase again to 10 percent in 2018.

India’s Booming Automotive Industry

Unlike China, India’s automotive market shows little signs of slowing down. India is now the world’s fastest growing economy as their GDP is projected to increase by 7.2 percent from 2017 to 2018. Their middle class is estimated to triple by 2025, reaching 89 million households.

The government of India is looking to the automotive industry to lead India’s economic growth, as outlined in its Automotive Mission Plan for 2016-2026 and “Make in India” initiative. Under such plans, the government will work towards creating an additional 65 million jobs in the automotive market and a 500 percent increase in vehicle exports by 2026.

A full parking lot of Renault cars reflects the massive automotive market in India. (Source: The New York Times)

It’s no surprise that Foreign Direct Investment (FDI) is pouring in. From 2000 to 2016, India’s automotive industry alone attracted USD 15.79 billion in FDI. For investors, India’s growing middle class of consumers is as attractive as their vast and low-cost labor.

POSCO Maharashtra in India

POSCO Maharashtra is one automotive supplier that is echoing the growth of the Indian automotive market. Their 2Q17 unaudited earnings report showed significant growth from just a year before in 2016. The reported revenue was USD 331.7 million, compared to USD 174.7 million in 2016. The company’s operating profit was USD 32.6 million, up from USD 3.5 million in 2016. Finally, their net profit was USD 22.9 million, another significant increase from USD 15.9 million in 2016.

*Earnings figures were converted from Korean won to U.S. dollars using August 22, 2017, exchange rates.

The POSCO Maharashtra Plant in India

In May of this year, POSCO Maharashtra signed a MoU with Essar Steel to supply 1.1 million tons of flat steel products during the 2017 fiscal year. This is the second year of partnership between the two companies, but the volume of steel POSCO Maharashtra will supply is 30 percent higher than in 2016.

The growing business reflects the work philosophy of POSCO Maharashtra employees: “If [we] supply quality material, they’ll come back again and again. So that’s what we’re doing right now. Although our products might be priced a bit higher in the Indian market, we are supplying quality material and our customers continue to be loyal because they understand that value.”- Chetan Waghchoure, sales representative for POSCO Maharashtra. Read the full interview here.

POSCO Maharashtra’s Chetan Waghchoure during an interview with The Steel Wire

POSCO Maharashtra is taking full advantage of the thriving automotive industry in India and continues to expand its business by reducing production and inventory costs, increasing performance and efficiency and planning to incorporate AI technology into their future production processes.

Market indicators point to India to drive the profitability of the automotive industry. India’s growing consumption of vehicles, open business environment and vast labor force will continue to attract foreign investment and new businesses. The best part is that India is not even close to being fully developed, meaning brighter prospects for future growth and good news for manufacturers and suppliers.