Trends and outlook of the auto electronics industry (by Deloitte)

Since 2010, the global auto market has featured quite a polarized development. The United States has begun to emerge from the economic crisis, while European countries are facing a debt crisis and excess production capacity. The major emerging markets have entered a stable stage after one or two years of explosive growth. (For these reasons,) the auto industry is experiencing a global capacity redesign to capture the new growth markets. At the same time, OEMs are looking for new growth opportunities through improving car performance, a trend that results from increasingly strict regulatory requirements as well as technological developments, more specifically a leap in automotive electronics technology. Thanks to certain auto development trends such as lightweight materials, miniaturization, intelligence and electrification, the auto electronics market is experiencing rapid growth. The improved specialization of parts manufacturers enables them to play a more important role than OEMs in leading technological innovation in some segments. Meanwhile, penetration of cross- industry technology into the automotive industry has further intensified cross-sector competition. With the dual impact of industry-internal changes and the external economic environment, market concentration has been further accelerated. Within the automotive electronics segments, ADAS, Connected Vehicles and electronic energy are considered as leading groundbreaking technologies, promising significant growth potentials and exerting a profound impact on the automotive industry chain. • ADAS - The development of sensor technology and signal processing algorithms has laid the foundation for a rapid development of the ADAS market. With the increased safety standards and consumer demand for safety performance, the ADAS market will become the fastest growing segment - The technological barrier to entry to unmanned driving is relatively high, which provides an opportunity for high-tech companies (such as Google) to enter the automotive industry - The development of unmanned vehicles may drive efficient automotive sharing and improve vehicle utilization to result in significant reduction of traffic accidents, which will exert a disruptive impact on OEMs, parts manufacturers, car financing and insurance • Connected Vehicles - Driven by the mobile internet, connected vehicles are experiencing quick innovation and increased penetration. - Connected vehicles involve multi-functional and various resources. The different roles and positioning of the relevant companies need to be benchmarked using different success factors • Electric energy - Government incentives are considered an important driver for promoting the R&D and industrialization processes of electric vehicles - Vehicle cost, as well as battery and charging infrastructure are major concerns for the popularization of electric vehicles - The electric vehicle industry chain will involve more new companies, and the influence of traditional parts manufacturers will be further weakened

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