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The Future of Cars: Reinventing Transportation

The Future of Cars: Reinventing Transportation

The automobile industry’s cycle-race to embrace electric and autonomous vehicles did not include all its factories and workers. Neither did softening global auto sales help the market situation. And a change in the downward slope of the number of available job positions is unlikely, with Bloomberg predicting at least 80,000 more automobile jobs to be cut in the coming years. Still, what is certain is that the disruptive future of transportation has already hit the road.

In the last 3-4 years, it seems like the automobile industry has exploded due to technological change. Although China, Europe and the US account for around 80% of the global connected cars market, India is showing one of the highest growth rates. In India alone, connected cars are set to increase to around 1.7 million vehicles by 2022, from less than 300,000 in 2016. Automated driving and electrification are really going to change the way we think about mobility. With significant investment in the autonomous vehicles in recent years and a committed $225 billion to electrification in the coming years, Volkswagen led the way with a $44 billion “electric offensive”, a promise to abandon the development of all new fossil fuel vehicles by 2026 and sell 40% Electric Vehicles (EVs) by 2030. After years of ambivalence, Ford invested $500 million into electric truck startup Rivian, on top of at least $11 billion in new EV investments, and launched the all-electric Mustang Mach-E SUV.

As a slew of new plug-in EV models hit the road, the 2019 global market share stands at 2.5%, an increase from the 2.2% market share of 2018. If this number seems small, the rate of deployment over the last 10 years might convince you otherwise, as the global stock of electric passenger cars passed 5 million in 2018, registering an increase of 63% from the previous year. Around 45% of electric cars on the road in 2018 were in China – a total of 2.3 million –, as against 39% in 2017. In comparison, Europe accounted for 24% of the global fleet, while the United States 22%. Although auto market analysts continue to predict falling global auto volumes in 2020, especially in China, Europe, and the US, we can expect global EV market share to climb to at least 3% in 2020, secured mostly by European regulations pushing back on pollution and emissions.

Meanwhile, China is leading the way accounting for 28% of all EV investments, according to consulting firm AlixPartners. The country has also set the target of 60% auto sales to be electric by 2035. Norway’s generous incentives have pushed EV market share close to 60%. Although German carmakers have been slow to adapt to new technological trends, including self-driving cars and EVs, thanks to a big change in EVs incentives, the country still managed to pull ahead of Norway for sales of all-electric cars, putting Europe’s biggest auto market in position to become the region’s leader for the first time. From January to November 2019, 57,533 new electric cars were registered in Germany, compared to 56,893 for Norway. In countries like Germany and Norway, where car buyers enjoy generous incentives, the market is still driven by early adopters rather than the mainstream.

Volkswagen’s electrification plans, Ford’s newfound enthusiasm for EVs, PSA Group’s plans, the Tesla Cybertruck’s 250,000+ pre-orders, plus other positive news about future models and production capacity will further speedup the electrification momentum. Add to that the new-found love – the electric truck era. Even though Electric buses have long been a favourite of government agencies, the private sector is now realizing that electric delivery trucks can save them money. The highlight of 2019 was Amazon’s order of 100,000 electric delivery vans from the Detroit startup Rivian.

Tesla is leading the way in the electrification revolution, accounting for 1 out of every 6¼ global plug-in vehicle sales. The Tesla Model 3 alone accounts for 1 out of every 8 global plug-in vehicle sales and 13% of the global market. Below are the top 20 EV sold in 2019. 

Top 20 Electric Vehicle in the World (Jan-Oct 2019)

Source: CleanTechnica 

The future of work and the disruptive technology 

The drive to electrification and self-driven vehicle combined with the global campaign against fossil fuel have called for disruption in the industry. Several German automakers, including BMW, Audi and Volkswagen, as well as suppliers like Continental and Bosch, have cut tens of thousands of jobs in recent months in the face of dwindling demand and global trade tensions. A study by the National Platform for the Future of Mobility (NPM) states that 410,000 jobs connected with the automotive industry could be lost by 2030, some 88,000 of those jobs are in engine and transmission production alone. The NPM estimation is based on the fact that electric cars contain fewer parts than those with internal combustion engines – some 200 parts in an electric car versus around 1,200 in a petrol or diesel engine motor. The direct effect of those cuts will be felt most intensely in communities like Öhringen, where the local economy revolves around small and midsize manufacturers, often serving the auto industry.

Daimler AG, the mother company of Mercedes-Benz, which has nearly 300,000 global workforces, and factories in 17 countries, said it would reduce costs and employment “in a socially responsible manner”, including the use of “natural fluctuation”. This will involve cutting 10,000 jobs worldwide over the next three years, resulting in $1.5 billion in cost cuts. In addition, the possibilities for part-time retirement will be expanded and a severance programme will be offered in Germany in order to reduce jobs in the administration.

As part of restructuring aimed at bolstering profit in a slowing global automobile market, Audi AG is also planning to lay off 10% of its workforce (9,500 employees) over the next five years. The overhaul is expected to reap savings of roughly $6.6 billion through 2029, a large part intended to finance Audi’s move away from production of conventional cars towards electric vehicles.

In the US, General Motors (GM) shut down the 78-year-old Warren Transmission plant in suburban Detroit in the last week of July 2019, following the closure of the Lordstown, Ohio assembly plant and the Baltimore transmission plant. The Oshawa, Ontario plant was closed at the end of 2019, and the Detroit-Hamtramck assembly plant also faces closure, hence layoffs of 814 hourly and salary employees to start in February 28, 2020. GM has however said it will invest $3 billion in its Detroit plant which will create 2,225 new jobs. The 2,800 workers producing Chevrolet Equinox crossover at the GM’s CAMI plant in Ingersoll, Ontario, were also hit by layoffs the week of September 30, and more were slated for the final quarter of 2019.

In July 2019, Reuters headlined “Warning light flashing for Slovakia's auto industry”, describing the fate of 3,000 workers laid off at Volkswagen’s plant in Bratislava, which produces the Volkswagen Touareg and Porsche Cayenne. This announcement has sent shockwaves through Slovakia, the world’s biggest car producer per capita. On August 1, Mexico’s National Chamber of Transformation Industries (Canacintra) reported that Volkswagen had laid off 2,000 workers over the previous 30 days as a result of the termination of production of a model.

Back in January 2019, Nissan Mexico downsized 1,000 workers at assembly plants in Aguascalientes and Morelos. As the auto crisis deepens, about 350,000 automakers, parts manufacturers and dealers have been dismissed from their jobs in India, and potentially that number could eclipse 100,000 more jobs being axed.

In a latest move, Ford prepares to close or sell off six of its 24 European plants. The closure will result in the layoff of 12,000 jobs at its operations across Europe by the end of 2020. This is a continuation of a broad, global restructuring program that already has cost about 2,300 jobs in the US. The Financial Times reported that Chinese plants owned by Ford and Peugeot owner PSA are running at 11% and 1% capacity, respectively, and some 220,000 workers have lost their jobs in China’s first sales decline in three decades. The cuts announced on June 27th, 2019 also reflect a planned shift from conventional gas and diesel-powered vehicles to electric and other battery-powered cars. This shift has also affected the automobile supplier market, where a lot of people are losing their jobs due to scaling down operations. The much-reduced mechanical complexity of EVs – the electric transmission of the Chevy Bolt, for example, has 80% fewer moving parts than a traditional internal combustion engine transmission – determines Ford to tell investors that EVs could lead to a 30% reduction in labour hours per unit. This could induce the elimination of 35,000 powertrain workers in the US over the next several years, according to the United Automobile Workers. 

Full gear ahead: scaling up the transition 

The automobile industry is changing dramatically: the type of cars that people are driving, autonomous and/or electric vehicles and the transportation system will never be the same. All of these are playing a crucial role in the shift of the automobile business. With 5G in the mix, vehicles will be connected to many more devices and can interact with those devices with much faster speed. The ambition will be to enable a positive ecosystem, by including all types of people and business in the future use of cars. So, industries can benefit from the technology evolution of 5G. The advancement of EVs will bring about special security-related product and service offerings such as latency, gamification, predictive maintenance, electrification, car sharing, connected driver tools, monetization capabilities etc.

To be ahead of the curve as the connected car ecosystem expands and technologies enabling autonomy, security, data analytics, and data exchange become more complex, the automobile industry players will have to quickly adapt and take advantage of the power of strong partnerships. The growing complexity of the value chain and sheer amount of data being collected offer system integrators and enterprise software vendors tremendous opportunities to work with the original equipment manufacturers (OEMs). Similarly, the car “data tsunami” will drive the need for companies specializing in cloud storage and computing, as well as third parties who can perform analytics on this data.

The automobile industry players will have to partner with cloud platform providers, so that the connected vehicle can reach its true potential including supporting mobility systems and ultimately autonomous vehicles. Platform providers will have to provide a horizontal cloud and edge computing platform with a comprehensive set of data, Artificial Intelligence (AI) and Internet of Things (IoT) services, on top of which mobility companies can build customer-facing solutions. Both industries will have to rely on each other’s expertise to build more domain-specific solutions that meet user requirements and speed deployment.

Given that most of the features in current vehicles are supported via their own backend and their own after-market device, the future will be the development of common platform that will support all these services. Hence, connected vehicles will deliver a significant opportunity to stakeholders in the automotive ecosystem, to reach drivers and passengers in new ways. The focus of connected vehicles will move to Machine Learning and Internet of Things. Horizontal platforms and horizontal enablers will be especially important going forward. The transition to electric powered transportation will require the knowhow of cellular technology, management and monitoring solutions, and a connected marketplace. The transition will require connecting automakers, with city planners and traffic officials, with fleet owners and logistics companies to App developers, as well as service providers.

As vehicle lovers continue to be aware and conscious of the effect of fossil fuel to the climate, and government incentives to electronic vehicle continue to increase, we expect the automobile industry to continue its current trajectory towards electrification and autonomous driving. Original equipment manufacturers are already making substantial investments and developing partnerships around the new technologies. Add that to the fact that AI has changed workforce ecosystem with automation creeping into areas meant for highly trained IT specialists. Not just assembly line floor jobs, white collar tech jobs have also been affected. Robotics process automation is increasing efficiency of these jobs and saving up to 55% of the cost. With humans working closer with robots, talent management will require a rethink. A new set of specific skills and the applicable paradigms in new enabling technologies such as autonomous driving software, AI, cloud management, data analytics, and data architects will continuously be needed in order to catch up with job requirements and remain relevant in the industry. 

Photo credit:


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