Looking Back at 2023 in Mobility and Autotech

The year 2023 was definitely eventful in both mobility and autotech, proving once more that this industry is undergoing a massive transformation. A great deal happened in particular in the EV and autonomous driving spaces. Let’s look at the most significant events, both good and bad, that occurred throughout the year.?

Electrification

Let’s start with the market for battery electric vehicles (BEV). By the end of 2023, global sales will have increased by about 15% vs. 2022 though the regional breakdown is very contrasted. China will see a marginal volume increase in 2023, with a BEV market share reaching about 25% — it will remain the largest BEV market. In Europe, sales will be up by about 50% to represent an estimated 14% of the market. The USA continues to lag in BEV sales though they will grow by?roughly 50% ?to reach a 7.5% market share. Moreover, a BEV — Tesla Model Y — will likely be the global best-selling vehicle in 2023.

New models were introduced across more market segments and more were announced for the coming years. However, US-based incumbents have scaled down their ambition, postponing BEV launches (e.g., three for GM) or reducing future battery capacity (e.g., Ford).?

Tesla still owns close to 60% of the US BEV market ahead of #2 GM by a 10-to-1 ratio. However, it is slipping in Europe and competing with Stellantis at about 15% market share for the #2 position, whereas VW Group leads the pack. Nevertheless, Tesla will reach about 1.8M units globally in 2023 and keep its overall BEV leadership.

Emerging US-based BEV players finish 2023 with mixed successes. In the USA, Rivian (R1T, R1S and van) recently raised its 2023 production projection to 54k vehicles whereas Lucid (Air) and Fisker (Ocean) reduced theirs yet again to 8k and 10k units respectively. In Europe,?Lightyear ?(Netherlands) and?Sono Motors ?(Germany) suspended plans to produce EVs and now focus on automotive solar roofs, and?Hopium ?(France) is in receivership.

In China, BYD and Geely enjoyed significant growth thanks in part to the introduction of new, competitive vehicles, in particular in the BEV/PHEV (a.k.a. New Energy Vehicle) space. Conversely, European and American incumbents continue to suffer and are reacting not only organically but also externally. VW invested $700M for a 5% stake in emerging BEV OEM?Xpeng ?and will use the latter’s platform to build two China-destined BEVs. Similarly, Stellantis acquired a 20% stake in?Leapmotor ?for 1.5B€ with the intent to leverage the Chinese OEM’s low-cost base to distribute its vehicles abroad.

Chinese OEMs did not only gain market share at home. They have been going after export markets aggressively in part due to an excessive capacity boost at home. A total of?2.6M passenger vehicles ?left China in the first nine months, up 70% y.o.y. Plug-in vehicles represented 28% of that volume. It should be noted that roughly 40% of China exports carry the badge of Western brands, Tesla above all with Model 3s shipped to Europe.?

Europe is indeed the prime destination for these vehicles. Chinese-build cars have reached about 6% of the European BEV market. However, export growth may taper off as the EU opened an investigation in September into potentially subsidized vehicle imports from China. This will likely result into punitive tariffs or an exclusion from local subsidies. For instance, France just revised its?EV incentive scheme ?(up to 7k€). It now takes into account CO2 emitted during production and transportation, thus favoring vehicles produced in Europe at the expense of those made in China.?

OEMs and battery producers joined forces to initiate tens of billions of dollars worth of new battery capacity in Europe and the USA. Chinese players are clearly avoided as partners in the USA given the 2021 Inflation Reduction Act. Indeed, the IRA heavily hamper EV incentives when Chinese companies are involved — they overwhelmingly dominate the global battery value chain today.

EV charging was transformed too. In the USA, Ford and then GM announced in May they would use Tesla’s charging connector (renamed North American Charging Standard or NACS) starting in 2025 and gain access to its charging network in 2024. This triggered a chain reaction whereby a dozen other OEMs announced they were doing the same. In turn, the US Society of Automotive Engineers (SAE) hurried to make NACS an actual standard. Tesla won the charging battle thanks to a widely deployed and reliable charging solutions. This will lead to higher utilization rates, thus profitability.

Nevertheless, some OEMs have taken actions to avoid that Tesla gain a hegemonic position. Stellantis, BMW Group, GM, Honda, Hyundai, Kia and Mercedes announced in July the?creation of JV . Together, they intent to install over 30k high power stations in the USA and Canada.?

How about pricing? BEV acquisition costs are still higher than those of their ICE equivalent though incentives oftentimes level the playing field. This price gap remains despite significant a drop over the past 12 months which resulted from a price war initiated by Tesla in all three major regions. In the USA for instance, the average BEV transaction price (before incentives of $5k on average) dropped from $65k at its peak in 2022 to?$53k in July 2023 ?vs. $48k for the overall market.?

In Europe, where Chinese OEMs see a large opportunity, OEMs are now racing to introduce BEVs in the 20-25k€ range to remain competitive and reach a larger population. Citro?n is just about to start selling the?C3 ?at 23300€, Renault will launch the?R5 ?at about 25k€ in 2024, and VW will sell the?ID.2 ?below 25k€ in 2025. This effort to increase affordability benefits from lower battery cost. At pack level, it dropped 14% from 2022 to 2023 to reach $139 per kWh according to?BloombergNEF .

Lastly, hydrogen fuel cell (FC) powered EV are slowly building momentum for commercial vehicle application. For instance,?Symbio ?(JV between Forvia, Michelin, and Stellantis) inaugurated an FC plant in France with initial capacity for 16,000 units per year, and?Bosch ?began mass production in Germany.

Autonomous and Assisted Driving

In the USA, Waymo has been operating a commercial fleet of robotaxis without safety operators in Phoenix since 2019. This year, we observed somewhat of a boom then a partial bust. In July, Waymo and Cruise received the final authorization to operate 24/7 a commercial robotaxi business in San Francisco without safety operators. They kicked off the service with 250-300 vehicles each — though Cruise started operating at nighttime in 2022. Rides, which I have had the opportunity use on both platforms multiple times, are competitively priced vs. Uber.

Cruise was preparing to deploy its service in a dozen US cities plus Tokyo and Dubai, doing so at in an increasing pace. At least this was the plan until something bad happened.

In October, a human-driven vehicle in San Francisco hit a pedestrian who flew in front of Cruise car. The latter stopped then restarted and drove over the pedestrian for several meters. Cruise initially omitted to show the authorities images of these last meters. This triggered the justified rage of the administration and heavily eroded the trust the latter had in Cruise, whose operating permit was rescinded.?

Cruise eventually paused its fleet across the USA. GM, which owns 80%+ of Cruise, is now reconsidering the $2B+ it spends annually on the company. Top management at the startup has been reshuffled, 25% of its 3500 employees will be let go, and an in-depth strategic and cultural re-assessment has been initiated.

This year proved difficult for other autonomous mobility players too. In Europe, Navya (shuttles) went into receivership. In the US trucking space, Embark and Locomotion closed, Waymo froze its trucking activities, and TuSimple is winding down its local operations to focus on China.

Commercial robotaxi services in China seem to have fared better than in the USA this year. Local players received authorizations to operate in more locations (with or without safety operators), reaching five cities vs. two for the USA. The leading companies, Baidu, Pony.ai , AutoX or WeRide each operate several hundred such vehicles now.?

As for the incumbent OEMs, they have by and large shifted their focus to Level 2 and 3 ADAS. In 2023, Mercedes EQS received the first ever approval for a Level 3 (hands off, eyes off) highly-assisted driving solution in the USA, namely in Nevada then in California. The function can be operated at up to 40 mph (64 km/h). It should be noted that L3 tech was first approved in 2022 in Germany (Mercedes EQS) and Japan (Honda Legend).

Other Things Worth Noting

The massive GenAI wave has started to impact automotive. Mercedes?announced beta testing ?of OpenAI’s ChatGPT in S-Class in the USA with the objective to “make the MBUX voice assistant more natural and adaptive by enabling further variance in the voice outputs.” GenAI is obviously also making its way into the industry’s back offices to increase efficiency.?

On a different note, shared scooters experienced a significant setback in the 2023. Paris residents voted to ban them in the City of Lights, which has been a major market for this solution. The use of privately-owned scooters remains possible of course as they do not clutter sidewalks and are likely used by more experienced riders, thus more safely.

A few startups are worth mentioning for their tech and commercial traction.?Basemark ?(automotive AR, Finland) is in production in the BMW iX and i7.?Sonatus ’ solutions (SW to accelerate SDV, USA) have now been deployed in 1M+ vehicles. And?UltraSense ?(touch UI, USA) is going into production with Hyundai’s Genesis with more coming.

Lastly, fund raising for startups grew more difficult in 2023 than it already was in 2022. Mobility and autotech, as many other verticals, experienced fewer deals and lower valuations in particular for later-stage startups. This resulted in significant layoffs in larger tech companies. In addition, investors remained focused in 2023 on capital efficiency (especially given high interest rates), revenue generation and a path towards profitability. This contrasts largely with the search for sheer growth as was the case until 2021.?

So many other newsworthy things happened in the mobility space which I cannot cover here. I will continue to address some of them in my?monthly newsletter ?as I have been doing in the?82 articles ?I have published to date.?

I want to end this review of 2023 on a somewhat optimistic note from COP28. The 196 countries assembled in Dubai recently agreed to “transition away from fossil fuels.” However, global leaders should have jointly concluded to phasing fossil fuels out, a step scientists say is needed to reach the 1.5°C target of the 2015 Paris Accord.

By Marc Amblard

Managing Director, Orsay Consulting