The Automotive Supply Chain and Technology team at IHS Markit recently completed a survey among automakers and suppliers across all regions to assess the impact of COVID-19 on Research and Development. The survey focused on the size of research and development (R&D) budget cuts; outsourcing vs. in-sourcing of R&D activities; the role of start-ups; the impact on various domain and technology areas; and regulatory framework changes.
Among the main findings of the survey was that respondents expected e-mobility technology—the battery, traction motor and power electronics—to be the area more negatively impacted by COVID-19 (22% of respondents). However, there there are different views on this topic between OEMs and suppliers who participated in the survey. 25% of OEM respondents indicated e-mobility as the most impacted area, while only 19% of suppliers did so.
IHS Markit suggested that this result seems linked to an expectation that fuel economy/CO2 regulations will be relaxed—particularly in Europe. The same rationale is behind ICE powertrain technology being placed at the third place of this ranking.
There was only one percentage point difference between L2+ to L5 autonomy features vs. e-mobility, however, with 21% of respondents indicating a major negative impact from the COVID-19 outbreak in autonomy deployment.
Other major findings included:
A 13% average reduction in the 2020 development budget
A 17% average reduction in the 2020 advanced research budget
An 8% average reduction in the 2021 development budget
A 12% reduction in the 2021 advanced research budget
Delays in technology deployment as the main impact (54%)
1 in 5 think the R&D impact will last longer than 12 months
Only 4% expect no reduction or delay to development projects
Respondents to the survey think the post-COVID-19 R&D environment will feature a major recourse to in-house capabilities and development, especially at large and medium-sized OEMs and suppliers. However, smaller companies believed their R&D outsourcing levels situation will remain unchanged, with some 14% of smaller companies indicating there might be actually an increase in R&D outsourcing.
Respondents expect greater winnowing og start-up companies in the supply chain space rather than OEM space. They did, however, indicate that some of the EV start-up companies that were already struggling in entering the market will not survive given market conditions.
Comments made to IHS Markit in responses also suggested that the sustained R&D investment levels in e-mobility, autonomy and connected car development are unlikely to vanish due to COVID-19, but that the financial impact of COVID-19 is likely to drive more companies to explore Merger and Acquisition opportunities in a bid to be able to support this sustained investment level.
Respondents suggested that this consolidation trend, which was already evident before COVID-19, might accelerate further.