Survival trumps investments in mobility

Autonomous, shared and electrified. Three buzzwords that once heralded the future of transportation. But, seemingly overnight, new mobility initiatives have moved into the crosshairs of an industry whose profits and forecasts have been blown up by the coronavirus pandemic.

Advanced technologies, such as those companies were promoting at CES less than four months ago, promise a future of cleaner air, safer roads and an all-around better consumer experience. But they cost billions to develop, and companies in a sudden, deep contraction must prioritize survival and focus on restarting profitable core businesses.

The headwinds are evident: Ford Motor Co. postponing its autonomous vehicle commercial services until 2022; General Motors shuttering its Maven car-sharing service.

"Some of the investment is definitely going to get delayed just because of the amount of capital [automakers and suppliers] have," said Akshay Singh, automotive principal at consulting company PwC.

Nonetheless, some say these companies will continue to slowly wade into new technologies seen as crucial to the future of the industry, and that their interest will steadily grow in the hopes of boosting profits and positioning themselves for success post-COVID-19. Moreover, the pauses by Ford and GM create opportunities for those such as Tesla that can keep making advances.

Even before the pandemic, some companies were unsure of the viability of certain mobility ventures, and the crisis could give them the kick they needed to change course.

"I see COVID as just emphasizing what was already happening," said Howard Abbey, autonomous car specialist for automotive technology research company SBD Automotive in Ann Arbor, Mich. "My advice would be remember: Long-term decisions are often hard in the short term."

Singh said it's still important for automakers and suppliers to make strategic decisions for their future product portfolios. But rather than looking decades ahead, this could mean they continue to invest in technologies that are well on their way, such as advanced driver-assistance systems, known as ADAS, and lower-level autonomous features.

Technologies that enable higher levels of autonomy could be shelved because they do not provide an immediate return on investment, parts makers said in an IHS survey of 140 suppliers and automakers in North America, Europe and Asia.

According to the survey, conducted March 30 to April 9, advanced research projects are expected to be impacted more than general product-development activities this year and next.

"For a lot of the automakers that are still developing their automated driving systems, even a Level 2-plus or Level 3, those launches that are a little bit further out … that's where we might see a little bit more flexibility and probably slower deployment as a result," said Jeremy Carlson, principal analyst of autonomous driving for the automotive team at IHS Markit. "Less wide deployment, maybe more targeted deployment in terms of packaging, trims, models and nameplates."

SAE International has outlined six levels of automation — ranging from 0, meaning no automated controls, to 5, for full autonomy.

"Where we're right to question the timeline of the return on the investment, the deployment of the technologies, is the higher levels of automation," Carlson said. "The investment and timeline for development and return on that investment in these kinds of technologies is relatively long."

Some companies are well positioned to continue development efforts and wait for the return on investment, while others are going to be scrambling.

"If you cancel all of your investments and some of your projects at this point around Level 4, mobility-as-a-service," Carlson added, "interrupting the development and the investment now might really set you back in the long term."

Even during the crisis, developers of mobility technologies still see their role as critical.

Though autonomous passenger vehicles have always been further down the product pipeline, and interest in self-driving shuttles may wane given concerns over cleanliness, investment in electrified powertrains, autonomous delivery bots and driver-assist-enabling sensors, for example, could continue after the crisis.

Sunny Lee, COO of StradVision, the 6-year-old supplier of advanced driver-assistance systems and autonomous vehicle software, remains optimistic.

"The areas that we are working on — ADAS and autonomous driving — are still pretty much in R&D phase. I don't see reasons why the key stakeholders will delay their investments unless they have significant capital and cash problems," Lee told Automotive News in March. "I believe our customers will continue to invest in autonomous driving technology."

Yakov Shaharabani, CEO of Israeli startup Adasky, which develops thermal-imaging camera technology for use in driver-assist systems and AVs, also said his company is moving toward production as planned.

"Although we are witnessing the slowdown with several OEMs, we don't yet see the impact. I'm sure there will be a short-term impact, but there is a debate on what will happen to the autonomous initiative, if it will accelerate, if it will slow down," Shaharabani said.

"And I don't know. We are ready for any situation, and I think Adasky is in a really good position. We will have to see how long it will take."

German software supplier Elektrobit says many of its customers remain interested in software development, so it hasn't seen a big slowdown. However, the company does expect to see automakers delaying some software-related programs.

"What we see is, for the sake of preserving cash, of course there is a focus on shifting some of the software programs that are not as tightly linked to near-term production," said Artur Seidel, vice president, Americas at Elektrobit.

"I do think, though, that companies will look at their supply chains, and they will also look at how solid they are, and of course, there is an ongoing discussion about the software in the car," Seidel added.

"Software work absolutely continues from what I can see."

Even so, AV development is sure to be hit harder than EV projects, according to SBD's Abbey. He said there is nothing to signal a drop-off in EV investment or strategy. "The EV market is relatively protected short term."

Ford has canceled its plan to jointly develop an electric vehicle for the Lincoln brand with EV startup Rivian, but the brand still plans to have its own EV eventually.

Industrywide, more than 100 EV models are in the pipeline over the next three years, and in a study released just before the virus struck, Boston Consulting Group estimated automaker commitment to EV development at $300 billion.

There are far more concerns, including health and safety questions, surrounding shared-transportation initiatives such as autonomous shuttles or robotaxi fleets.

"In a post-COVID world where consumers are going to have very different thoughts about sharing anything or touching surfaces, it's going to be very difficult to make the business case for Level 5," said Calum MacRae, director of automotive product development at market intelligence company GlobalData.

That could mean that "AV could be the guy standing out in the cold," said Brandon Boyle, senior partner in consultancy Roland Berger's automotive competence center.

But Boyle added: "Getting to Level 4, Level 5 AV is more of a journey than a step change. Even though people are still investing a lot, I don't think it's going to waste.

"It continues to advance the different safety and functionality that we're seeing in vehicles today. I think we're going to continue on that path."

That path is a long one, even in an industry with long product cycles. Optimists say a sharp drop in demand doesn't have to derail long-term strategies, even if it takes a year or more to make a reliable vaccine for the virus.

"You've got to think two to three years out, and most people think COVID isn't going to be a long-term thing, it's going to be a short-term disruption," Abbey said.