Impact of COVID-19 on VVT and Start-Stop System in the Automotive Industry
VVT and start-stop systems are systems in most modern cars that stop the engine when the vehicle is stationary or idling, reducing greenhouse gas emissions and fuel consumption. When the brake is released or the clutch is engaged, the engine is restarted. The VVT & start-stop system detects when the vehicle is stationary or out of gear and automatically stops it. The latest automotive innovations, such as intuitive infotainment, self-driving capabilities, and electrification, rely more on software quality, execution, and integration than on mechanical ingenuity. This transformation is occurring at such a rapid pace that automotive OEMs and other industry stakeholders are finding it difficult to keep up. The exorbitant cost of integrating and upgrading consumer features for various end services.
China is the epicenter of the COVID-19 virus had put on hold the various business operating segment leading to a downfall for the sale of three-wheeler electric vehicles. People have also become more cost-conscious as essential items have become more important. The electric three-wheeler companies have been working hard for their customers during the lockdown period. With deliveries and lease becoming critical during the pandemic and the lockdown, the maker stepped up and made sure deliveries of essentials were done. In a nutshell, all of these factors would lead to an increase in the demand for EVs because they provide environmentally friendly alternatives as well as lower delivery costs.
The Indian automotive sector was already struggling Before the Covid-19 crisis. During 2019, it experienced an 18% decrease in overall growth.
Steps to be taken by the vendor to boost the sale:
The EV vehicle maker has to form a business partnership with leading e-commerce companies like BigBasket, Ecom Express, Udaan, MilkBasket, and others that can help in providing electric mobility stack as a service. Fleet owners and ecommerce players have realized the benefits of EV for their inter-city movement.
The Lack of retail finance is a factor that had a negative impact on sales for electric three-wheelers. Due to Covid-19, many financiers financing electric three-wheelers (E3Ws) faced difficulties in the recovery of the loans extended, as the passenger 3W movement had halted or drastically reduced during the lockdown. In fact, last-mile connectivity for public transport, such as metro trains and buses, has been a key driver of demand for e-rickshaws and when public transport had been shut, this has severely impacted the movement of E3W and earnings of the drivers. As a result, financiers have been in “recovery mode” and reluctant to extend new loans. Therefore, the role of financing should be the priority to boost the sale by the vendor
In order to meet the increased demand for last-mile deliveries, the vendor should work on the software capabilities of the vehicle on the backend to enhance the capabilities of the battery pack with the controller to enable better range and load-bearing capacity for the vehicles. Further, with essential practices of social distancing, the company realized that fleet owners will now need connected vehicles to manage their fleet. The company has been working around adding several software features on the backend that helps the fleet managers to streamline their operations and be prepared for eventualities. The vehicles should be inbuilt with new features for optimizing fleet operations with real-time updates, updates on battery operations, and preventive maintenance.
Impact on Demand & Supply Chain:
During the short term, there could be difficulty in fundraising for startups in the mobility and battery compound segment. However, M&A/fund raising activities are likely to pick up in the medium and long term considering these startups are crucial for developing the EV sector.
As people become more homebound in the "new normal," there is a greater demand for home delivery of everything from groceries to essentials to non-essentials, which is driving up demand for e-cargo fleets.
The people have become more aware of the importance of clean energy and environmentally friendly alternatives as a result of the COVID-19 pandemic and lockdown. People have also become more cost-conscious as essential items have become more important.
COVID had the greatest impact on three-wheeler sales, which fell from 140,683 units in fiscal 2020 to 88,378 units in fiscal 2021. Two- and four-wheelers, on the other hand, bucked the trend, registering impressive growth during the year, albeit from a small base.
However, due to increased demand for e-commerce delivery, there is a significant increase in demand for three-wheelers designed for cargo, particularly electric ones. Electric three-wheelers are being introduced into cargo operations by e-commerce companies and their logistics divisions.
The demand for three-wheelers for passenger transportation will remain low for the next two to three months, owing to lower movement of people in urban areas, a lack of preference for shared mobility, and the non-operation of mass transit such as metro and trains, which typically required three-wheelers for the last mile.
The COVID-19 can have both favorable as well as unfavorable bearing on the EV segment with short to -mid-term favorable bearing includes Recent BSVI regulations increasing costs of petrol and diesel vehicles, making EVs possibly slightly more attractive, shift from the usage of public transport and shared mobility resulting in a surge in demand of two-wheelers including EV. An increase in demand from the rental/subscription model for EVs may also be possible. Whereas in the long term the favorable conditions include a shift in consumer mindsets toward eco-friendly vehicle models.
COVID-19, though ravaged the automotive market in an unprecedented manner during April 2020, which was possibly the first time in history that car manufacturers clocked 'zero sales' but had some silver linings. In many ways, the valuation of EV startups could become more attractive in the short term compared to -pre-COVID-19 era.
The major auto players have announced an increase in spending on the EV segment. While COVID-19 might impact the lending capability of financial institutions in the short- to mid-term, funding from strategic tie-ups and investments could possibly increase to achieve the pre-set goals and targets. The pandemic has caused widespread disruption to supply bases, assembly plant closures, and a further shift to declining consumer demand. The reliance on Chinese imports, recent Bharat Stage VI Regulations (emission standards established by the government to primarily regulate the output of air pollutants from petrol and diesel vehicles), and restrictions on migrant laborer movement have all contributed to this situation.