AutoTechInsight’s Speaking Heads Collection: Key themes for 2023


As 2022 attracts to an in depth, the AutoTechInsight apply leads at
S&P International Mobility use our new Speaking Heads sequence to seek out
out what challenges and alternatives face their domains in 2023.
The present yr has once more been dominated by the chip disaster.
Overlaid on this has been the worsening macroeconomic place due
to the fallout from the Russia-Ukraine battle, which has had
knock-on results for the business by way of demand surety. In
flip this has introduced an finish to the period of low cost capital, which has
served to sluggish the burgeoning mobility startup ecosystem. Within the
broader sense the sector appears to be like set to be heading to a part the place
demand-side issues change the present supply-side

Matteo Fini
Vice President, Automotive Provide Chain, Know-how and
Aftermarket, S&P International Mobility

If one appears to be like throughout the sector, I sense that the subject of
provider resiliency will come to the fore in 2023. The macro
setting shouldn’t be conducive to success for these suppliers who’ve
not received deal with on prices or a level of operational
flexibility to handle the headwinds. That is most obvious in

Excessive vitality prices mixed with stagnant volumes and rising
financing prices will create main pressures for suppliers within the
area. The danger components seem heightened in Germany. Smaller
tier-1 suppliers there – these with revenues between EUR100 and
EUR500 million – and tier 2 suppliers appear probably the most uncovered.

Within the final couple of months, we noticed German suppliers Ruester
(vibration/damping merchandise) and Dr. Schneider (air flow and
inside trim components) file for insolvency. Ruester’s case is sort of
fascinating as they confronted liquidity issues following two
acquisitions and rising enter prices. I’d count on this turns into a
theme in 2023.

Moreover, energy-intensive components of the worth chain, corresponding to
steel foundries, that additionally depend on volumes for returns must
navigate the maelstrom. Certainly, any firm that overstretched
itself in 2021 and early 2022 with main funding packages
contingent upon a return of pre-crisis volumes must
rethink its priorities for survival.

Jeremie Bouchaud
Director, Semiconductor, E/E and Autonomy Apply, S&P
International Mobility


The structural capability deficit will take years to resolve. Whereas
there was loads of funding in capability in 2021 and 2022 it
takes time to carry further capability on-line. The lead time for
tools elevated from one to 2 quarters to between two and
two-and-a-half yr. That signifies that a few of the funding and
CAPEX increase in 2022 is not going to lead to important further
capability earlier than 2024 or 2025.

Whereas the supply-side points will not see any quick aid the
demand facet will carry some respite. As we had predicted in
January, extra of the present capability within the sector was allotted
to automotive in H2 2022 and this can proceed early into 2023 and
this arose due to a slowdown in different chip-hungry industries
like telecoms and client electronics. Moreover, combination
demand circumstances are deteriorating globally because of the conflict in
Ukraine, inflationary pressures, and a typically moribund financial
outlook. These circumstances might masks the capability points in 2023 however
one shouldn’t be fooled. The typical chip content material per automotive is
growing at an accelerated fee due to electrification and
the capability deficit will change into seen once more as quickly as demand
from different industries picks up once more.

Analog will stay the principle bottleneck in 2023 although on account of
a number of components. First, because of the variety of analog chips per automotive
will increase sooner than the variety of MCUs. Moreover, analog
chips do not shrink in addition to SoCs or MCUs; this implies manufacturing
stays on mature course of nodes the place there’s not sufficient capability
and never sufficient investments. Lastly, the demand for analog is robust
in different mass markets – particularly mobiles telephones.

To mitigate semiconductor dangers we count on that for 2023 and
past that can rethink the best way electronics are designed of their
automobiles. They may work on growing the standardization of chips
and lowering the fragmentation/number of chips they use. For
instance, we count on them to verify their Tier 1 suppliers use
fewer ASICs/ASSPs (customized chips or chips designed for a single
purposes) and use extra general-purpose chips. In Japan we’re
additionally seeing some effort, led by the federal government there, to simplify
chip qualification throughout OEMs and Tier 1s. Lowered customization
and the usage of extra multipurpose chips will imply that OEMs can
enhance their automobile output for a given chip capability as a result of
there are fewer single factors of failure. Additionally, it’s simpler to
reallocate optimally accessible chips throughout totally different programs.

Income progress for automotive semiconductors will sluggish in 2023
to round 13%, after an estimated 22% in 2022. This can be a gentle
touchdown for the sector, however one can not rule out a more durable crash for
automotive semiconductors. A lot will depend upon how the demand for
automobiles evolves. It’s unclear how a lot of the stock shall be
burnt and when.


The robotaxi race is about to get fascinating in 2023. There’s
been a whole lot of concentrate on Ford and VW pulling out of Argo AI, however that
should not detract from what’s occurring in autonomy.

Concerning robotaxis, I imagine we’re about to see a reshuffling
of the pack. For the time being, the tech corporations like Waymo are seen
as profitable the race. However I do not see first mover standing as
essentially conferring any sustainable aggressive benefit. If we
stretch the race metaphor additional, the tech corporations – like Cruise
and Baidu – have executed an important job of reacting to the starter’s
pistol and getting out of the blocks first. However the first a part of
the race is akin to the technological demonstration. To ship the
robotaxi future, I feel the way more tough piece to execute
towards is commercialization.

Right here, neither buyers nor the capital markets will proceed to
pay the invoice if there isn’t any income generated. As we enter the
commercialization part, the challengers is not going to simply emerge from
robotaxi tech friends like Pony, WeRide and Waymo but additionally from the
automotive producers. The automotive producers have some benefit right here
in that they are already working massive fleets full with
automated driving capabilities like Stage 2+. Tesla and XPENG are
focusing on the supply of robotaxis in 2023. They’re coaching the
software program with information that comes freed from cost from the thousands and thousands of
automobiles already available on the market. In the meantime, robotaxi corporations are
burning money to gather richer information from a much smaller pool of
automobiles on the roads. Knowledge is the brand new oil. Skilled software program, constructed
on real-life information, is a extra scalable path ahead, and shall be
augmented by simulation to cowl edge circumstances. Nevertheless, that mentioned, it
has not but been confirmed that automated automobile content material might be
efficiently leveraged into L4 on-road deployment—or if these
automakers can ship on guarantees which have gone unfulfilled
earlier than.

After we take a look at the commercialization and productization points,
price self-discipline and consciousness is a bread-and-butter competency of
the OEMs. If Tesla and XPeng can reveal this method in 2023,
we’ll see extra legacy OEMs jostle for place within the
robotaxi marathon. However tech corporations like Waymo and Baidu do have
the big money reserves that shall be essential to maintain a
place within the race on the lengthy runway earlier than income takeoff.

Dr. Tawhid Khan
Director, Software program Apply, S&P International

Software program

Two key issues stand out for me in 2023. Regardless of mounting
tensions in US-China relations, there are not any indicators that Germany’s
business is able to take part in a united western entrance. The
current go to to China by the German Chancellor Olaf Scholz, throughout
which he was accompanied by German business leaders such because the VW
and BMW CEOs – Oliver Blume and Oliver Zipse respectively – has
strengthened this view. Feedback from each CEOs emanating from the
go to strengthened this view with each adamant that reworking
their corporations is reliant on the Chinese language market and with the ability to
manufacture automobiles within the nation, significantly within the EV period.
Maybe extra telling was a remark from the earlier VW CEO,
Herbert Diess who said, ‘With out the offers with China, inflation
would proceed to blow up’. Given the vitality disaster that is hitting
Europe, and Germany significantly onerous, the persevering with concentrate on
China within the face of the contradictory noises and insurance policies coming
from allies such because the US and the UK signifies that German
business will proceed to put massive bets on China. That is seen
as a strategic transfer to alleviate the pains of the vitality disaster and
the accompanying stagflation.

Second, and extra straight associated to my area, there’s the
looming query of who will win the automotive software program wars. Will
it’s the automakers, or will it’s huge tech? If not giving us an
reply, 2023 will give us extra clues as to the route the
battles will take. Customers are starting to adapt to, and
embrace, the brand new philosophy of tech-focused transportation. The
strain to ship the brand new groundbreaking applied sciences is big
for the OEMs. To ship, the OEMs require a large inflow of
gifted software program builders. The marketplace for software program expertise is
extremely aggressive – OEMs are competing with their provide base for
this expertise in addition to the tech corporations. The automotive sector
has a few obstacles in its path if it needs to develop its
personal software program ecosystems. The business is certain by course of and
laws, and this does not make the sector significantly
engaging to younger software program graduates. Discovering a solution to appeal to
the mandatory expertise to the business shall be key. The reinvention
of the business to try to win the expertise battle shall be
fascinating to look at. Already we have seen VW’s CARIAD – an try
to create firm with huge tech behaviors – battle to ship. It
shall be fascinating to see what different gamers within the sector do to
try to lure the perfect expertise to the business.

Brian Rhodes
Affiliate Director, Related Automotive and Car Expertise,
S&P International Mobility

Related Automotive

The tumultuous financial and provide chain conditions of the
earlier two years+ have put a concentrate on margin efficiency by
automakers, which have soared to file highs. This renewed focus
on margin efficiency will evolve as demand for brand spanking new automobiles faces
headwinds. Because of this, the potential for margin progress from add-on
options and providers have garnered not solely extra consideration – however
extra commitments to Wall Avenue. These linked providers and paid
updates can obtain a margin of better than 70%, which makes this
area extremely engaging for an business in search of cowl from the
cyclical nature of promoting automobiles.

A sampling of 2030 income targets associated to software program and

  • Basic Motors – $25b, software program, providers, subscriptions
  • Stellantis – $23b, software program • Renault – 20% of income, information,
    mobility, vitality providers
  • Volkswagen – 20% of income, subscriptions, mobility

2018-20 had been years of deployment, with many automakers each
standardizing connectivity {hardware} in areas that do not
historically help greater possibility pricing in addition to the discharge
of recent generations of TCU (telematics management unit) {hardware} that
will maintain a connection lively for much longer. 2020-21 noticed releases of
new revolutionary service-oriented enterprise fashions past Tesla, and
2022 was underscored by main automakers leveraging the
flexibility of those providers to regulate packaging, pricing, and
availability of options. We count on 2023 to be the launching pad
for related options, with a lot broader use circumstances, from mainstream
follower automakers. This improvement shall be vital to transferring
the idea of built-in upgradable content material from headlines to
actuality for customers with newer automobiles.

Graham Evans
Director, Battery, Charging, Propulsion and Thermal
Apply, S&P International Mobility


For batteries there are a few areas that can come extra
into focus in 2023, specifically:

  • The uncooked supplies deficit, how the business addresses that, and
    what are the extra implications for sourcing selections on the
    carbon footprint. On one hand there’s this huge have to safe
    uncooked materials provides, however they cannot be secured at any price
    as a result of ESG issues are gathering momentum. Added to this
    combine are the implicit wants of the US’s Inflation Discount Act
    (IRA), which has sparked many OEMs and suppliers into tearing up
    their battery playbooks for the US market to safe entry to
    manufacturing subsidies and buy subsides for his or her
  • Secondly, as we all know inflation is a burgeoning challenge across the
    world because of the confluence of the pandemic’s aftermath and the
    Russia-Ukraine battle. That is placing strain on customers, and
    we may see a pivot from the OEMs to deal with the modified
    macroenvironment. For instance, does this imply a swap to decrease
    tech battery options (and implicitly decrease price batteries) such
    as these with LFP (Lithium-Iron-Phosphorous) primarily based cathode
    chemistries to safe greater margins, or will it imply growing
    demand for batteries with a decrease capability and subsequently
    compromises on automobile vary?

In 2023, we’d get just a little nearer to discovering out whether or not a
couple of nascent applied sciences which were round BEVs for a
whereas have an opportunity of mainstream adoption:

  • First, there’s battery swapping and the query of whether or not it
    might be deployed outdoors China the place authorities incentives and
    geospatial points in cities have pushed its preliminary success. Nio, a
    key participant in China, is launching in Europe and already has a
    handful of stations in Norway – in order that market, as ever with EVs,
    is an fascinating petri dish for swapping in Europe. Within the US,
    it’s going to be fascinating to see if Ample, the Californian start-up, can
    drum up ample curiosity within the fleet sector it is focusing on.
    Nevertheless, swapping has extra towards it outdoors China. There’s the
    propensity for house charging, the dearth of governmental directive
    and the necessity to homogenize battery packs which might see OEMs and
    T1s give up a few of their IP.
  • The second thread to charging is wi-fi charging developments
    and its deployment by mainstream OEMs. Whereas BMW, Hyundai (each
    with WiTricity’s Halo) and Volvo (with InductEV) have already
    dabbled with wi-fi charging, widespread adoption of the
    know-how has the potential to problem the present stand-off
    between battery dimension and vary. Customers will be capable to cost
    extra conveniently at house and undertake ‘splash and sprint’ behaviors if
    dynamic wi-fi charging turns into widespread. The know-how fits
    fleet purposes nicely, corresponding to taxis, however are mainstream
    customers ready to pay a premium for such comfort know-how
    when the business has already converged on the charging plug?
  • DC wallbox chargers are additionally one thing to lookout for the in
    the home charging sphere. They provide a midway home between
    sluggish AC chargers and the superfast public DC chargers. Their wider
    deployment has potential to shift the stability within the home vs
    public charging conundrum. Moreover, there are fashions accessible
    that facilitate V2G (automobile to grid) operation, which may show
    extra interesting in these vitality acutely aware and cost-sensitive

The Euro 7 implications are essential for know-how fitment on
automobiles nonetheless fitted with an inner combustion engine, nevertheless
provide chains ramping as much as help E-motor purposes should not
with out their challenges.

  • The proposal for Euro 7 emissions was lastly introduced in
    October 2022. The boundaries had been watered down from what had initially
    been signposted. It will trigger many OEMs to pause for thought on
    their electrification plans – does Euro 7 make it price investing
    in another spherical of ICE updates? Or does it make extra sense to
    concentrate on electrification and proceed on the trail of separating ICE
    and EV companies in the best way that the likes of Renault and Ford
    have already chosen?
  • {The electrical} metal capability crunch doubtlessly has
    ramifications for the propulsion area. A scarcity of e-steel
    may imply that deliberate product combine may change within the short- to
    medium-term in favor of ICE and hybrid purposes the place there is a
    much-reduced demand for e-steel.
  • The will to squeeze extra vary and effectivity from current
    BEV parameters ought to immediate extra the within the business to modify to
    silicon carbide (SiC) inverter know-how. SiC inverters ship
    effectivity in that they are in a position to extract extra vitality from a
    battery – thus bettering vary – and permit for sooner charging and
    improved acceleration. Main energy electronics suppliers corresponding to
    Marelli, BorgWarner and Delphi Applied sciences have been more and more
    lively on this space not too long ago, growing their merchandise and
    securing orders which means that we’ll see growing SiC
    inverter adoption within the short-term.

For the thermal area one of the crucial pertinent points
presenting itself in 2023 pertains to the EU’s ruling on banning PFA
(perfluoro alkoxy alkane). The choice is predicted to be introduced
in January. Right here there are implications for the refrigerants
R1234yf and R134a, that are broadly utilized in automobile HVAC programs.
Whereas there are alternate options to PFA refrigerants they’re going to
necessitate a wholesale redesign of HVAC programs relying on the
different that’s determined upon. Along with HVAC, the
potential for a PFA ban provides complexity to EV batteries too because the
incumbent chemical varieties are broadly used to fabricate binders for
battery electrodes.

This text was revealed by S&P International Mobility and never by S&P International Rankings, which is a individually managed division of S&P International.


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