Guest blog: Driving the automotive agenda: Five key trends shaping the automotive industry in 2024
The automotive industry is in the midst of a transformative era, marked by technological breakthroughs and shifting consumer preferences. Staying ahead of the curve is crucial for industry insiders. Let's delve into five pivotal trends that are reshaping the landscape of the automotive sector.
Electric vehicle revolution
As the world grapples with environmental concerns, the electric vehicle (EV) revolution has taken centre stage. With advancements in battery technology, EVs are becoming more accessible and practical for everyday use. Established manufactures are pivoting towards electric models, and new players are emerging, intensifying competition in the market. The expansion of charging infrastructure in the UK is a key enabler, addressing the range anxiety that has long been associated with EVs. Despite lagging behind toward the end of last year, in early 2023 the UK was briefly the fifth most attractive European country for EV market potential, according to the Electric Vehicle Country Attractiveness (EVCA) Index developed by Shoosmiths in conjunction with Cornwall Insight. With most European countries, including the UK, imposing a ban on the sale of new petrol and diesel passenger cars and light commercial vehicles (vans) by at least 2035, the EV market can be expected to become more established across Europe in 2024 with further tie ups in the charging infrastructure space.
Autonomous driving technology
The quest for fully autonomous vehicles continues to progress, fuelled by breakthroughs in artificial intelligence (AI) and machine learning. From advanced driver assistance systems to fully self-driving cars, the automotive industry is navigating uncharted territories. However, for the first time historic regulatory hurdles might be within striking distance. The Automated Vehicles Bill had its second reading in the House of Lords on 28 November 2023 after a four year review - a process that Shoosmiths supported by responding and helping shape the recommendations put forward by the Law Commission of England and Wales and the Scottish Law Commission in its report. The Bill will apply to technology that can drive a vehicle for some or all of a journey with no human interaction. Whilst there is no timetable for the bill to pass into law, the existence of a regulatory framework will ignite a touchpaper to innovative technology in new models. Whilst these may not find their way onto the roads in 2024, we expect to see a great deal of exciting technology being prepared for roll out.
Connectivity and smart cars
In the era of connectivity, cars are no longer just means of transportation; they are evolving into smart, interconnected devices. The Internet of Things (IoT) is playing a pivotal role, enabling features like remote vehicle monitoring, over-the-air updates, and enhanced safety measures. While these innovations enhance user experience, they also raise concerns about data security and privacy. Striking the right balance between connectivity and safeguarding user information is a priority for automakers. This last year has seen an increase in patent litigation with patent holders including Nokia stepping up their enforcement activity around their connected mobile technologies.
However, whilst there are fears that patent litigation might increase, the new 5G automotive patent pool was seen as a major step within the automotive sector. The program covers patented technologies essential for 5G but also 4G, 3G and 2G connectivity, including cellular vehicle-to-everything (C-V2X) which enables vehicles to directly communicate with other vehicles, cyclists, pedestrians, and transportation infrastructure. The Avanci 4G licensing program covered over 130 million vehicles and the advances with 5G technology mean that the number of vehicles covered by the 5G program is expected to snowball. The number of inaugural licensors and licensees in the pool totalled 58 and included the likes of Huawei. By becoming a licensee, OEMs will likely avoid some of the potential disputes around standard essential patents (SEPs) and related FRAND disputes which overlap with competition law.
Challenges for OEM subscription models
As automotive manufacturers look to leverage vehicle connectivity and the wealth of data available in relation to vehicle usage, there is a trend towards offering customers enhanced functionality through manufacturer-operated applications on a subscription basis.
The incoming Digital Markets, Competition and Consumers Bill, due to be enacted in 2024, is expected to bring a step change in relation to consumer-facing subscriptions, including those in the automotive sector. The Bill will implement robust new requirements for subscription service providers and further rights for consumers, including introducing initial and renewal “cooling-off” periods, significant pre-contract information requirements, online journey pre-requisites, and prescribed renewal and cancellation correspondence. For manufacturers already offering subscription services, the Bill is likely to require material changes to existing operational processes and customer experiences.
The risk to businesses is heightened by the strengthened enforcement powers being granted to consumer regulators, including the ability to directly impose fines (which could reach 10% of global turnover), and order website take downs for non-compliance. A wider public awareness of consumer rights will also undoubtedly increase the number of consumers seeking to rely on their rights and, depending on how effectively businesses manage their customer relationships, a greater level of customer turnover for subscription-based customers in the sector.
Change in retail trends
Traditional notions of car ownership are being challenged by the rise of Mobility as a Service (MaaS). Ridesharing, car-sharing, and other MaaS platforms are further gaining popularity, offering convenient alternatives to owning a vehicle. This trend is set to continue but it may be too early to see marked transformation in the next twelve months. Instead, we see 2024 creating an acceleration from automotive manufacturers in adopting new direct routes to market, complimenting the traditional indirect routes through distributors. Many OEMs have already made the shift to agency and many others are on route to that transition. We expect to see many of those that still depend on a distributor model placing an increasing focus on selling direct to consumers whether through agency or online.
Conclusion
The automotive industry is at a crossroads, with innovation steering the way forward. The convergence of electric vehicles, autonomous driving, connectivity, sustainability, and MaaS is shaping a future where cars are not just modes of transportation but integral parts of a connected, sustainable ecosystem. To thrive in this dynamic landscape, adaptability and innovation are paramount. As we drive into 2024, the UK automotive industry holds the promise of an exciting twelve months.
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