The saying ‘Two steps forward, one step back’ describes the overall progress of CASE — Connected, Autonomous, Shared and Electrified vehicles and infrastructures. While electrification and connected technologies arguably have each taken a step forward, funding four industry-changing secular shifts in unison was always a lot to ask. The resulting investment headwinds are not surprising, given the added impacts of COVID, microchip and labor shortages, the Russia-Ukraine war, and inflation/higher interest rates dampening vehicle sales.
Viewed from 30,000 feet, CASE’s uneven takeoff trajectory has been governed by often unproven technologies being deployed within unrealistic timelines. OEMs and suppliers have devoted billions to the development and implementation of electrified propulsion in the major developed markets. Regulations have made the ‘E’ in CASE the highest priority. This includes battery-electric vehicle development and assembly, battery chemistry R&D, cell plants, strategic materials sourcing, downstream materials recycling and the required charging infrastructure buildout. The scale of investment and risk acceptance has been staggering.
The new vehicle platforms in ‘E’ are a key enabler, along with the ability to vastly increase (beyond Tesla’s track record) meaningful over-the-air (OTA) software updates. That’s the ‘C’ in CASE — making real-time improvements to software and modify/open vehicle functionality. The potential for ‘C’ to bolster customer satisfaction/convenience aligns well with emerging electric-vehicle development.
By comparison, the initial trajectories of the ‘S’ and the ‘A’ for CASE have been problematic. Vehicle sharing (the ‘S’) is highly dependent upon improved autonomous (‘A’) capabilities and to a lesser degree, connected tech. The promise of Mobility as a Service (MaaS) as a sustainable business model depends on having driverless automation at SAE levels 4 and 5. Scores of OEMs and suppliers have reviewed the timelines and ROI for L4 and L5 MaaS and concluded that the ongoing investment, delays, and priority realignments are not worth their time. The recent dissolution of Argo AI is one example.
Some OEMs and suppliers continue to march forward on CASE’s elusive elements. But from an Autonomous perspective, the industry’s focus increasingly is on near-term deployment of Level 2 and
Level 2+ (enhanced ADAS) capabilities. Driving the strategy shift are higher and more rapid investment returns, lower development costs and reduced deployment risks.
Regular updates to the S&P Global Mobility Autonomy Forecasts over the last 12-plus months underscore the movement in raising the safety and convenience levels of new vehicles using SAE Level 2 capabilities. But the latest enhancements to the Autonomy Forecasts introduce the Level 2+ breakout as the differences in functionality, strategy and vehicle content remain meaningful for both consumers and OEMs. Level 2+ includes Driver Facial Monitoring that enables some form of eyes-on-the-road, hands-off-the-wheel capability.
The incremental "hands-off" element of driver assistance may seem trivial, but competitive differentiation in this space is fierce. OEMs reckon they can increase brand and vehicle values with the driver convenience features, improved occupant safety, faster speed to market (with upgrades coming via OTA) and cost management. In 2022, it was estimated that vehicles equipped with Level 2 and Level 2+ total 43% of total North American light vehicle production. That’s forecast to grow to at least 55% by 2030. Within this Level 2/2+ grouping, Level 2+ share will more than triple from an estimated 8% in 2022 to more than 30% by 2030.
In the end, CASE investments are both expensive and fraught with risk. Within the ‘A,’ OEMs are placing less risky, near-term bets on Level 2+ capabilities as they devote hefty investments toward the ‘E’, and reap the value of 'A' technology, with 'C' enhancements via OTA. Meanwhile, they wait for the 'S' business model to truly emerge.Continue reading »