Toyota Archives - Counterpoint

US BEV Sales Up 57% in Q2 2023, Rising Inventories Pose Challenge

Every second BEV sold in the US in Q2 2023 was a Tesla.
BEV sales by foreign brands more than doubled YoY to 81,000 units.
Annual BEV sales are expected to exceed 1 million units by the end of 2023.

New Delhi, London, San Diego, Buenos Aires, Hong Kong, Beijing, Seoul – September 4, 2023

US passenger battery electric vehicle* (BEV) sales grew 57% YoY in Q2 2023, according to the latest research from Counterpoint’s US Passenger Electric Vehicle Model Sales Tracker. The US maintained its status as the second-largest BEV market, a position it achieved by surpassing Germany in the previous quarter. BEVs constituted more than 7% of total passenger vehicle sales in the US in Q2. During H1 2023, Tesla’s tally exceeded the combined BEV sales of the next 14 automotive groups by 122,000 vehicles.

Commenting on the market dynamics, Research Analyst Abhik Mukherjee said, “Building on the existing momentum, the US automotive industry maintained its upward trajectory in Q2 2023. Total passenger vehicle sales surged by over 16% YoY. BEV sales are on the rise, driven by the EV tax credit and increasing environmental awareness among consumers. US-based brands like Tesla, GM, Ford, Rivian, Lucid and Karma captured nearly three-quarters of total BEV sales. Among foreign-origin brands operating in the US, European manufacturers claimed the largest market share, followed by South Korean and Japanese brands. Total BEV sales by brands of foreign origin, such as Hyundai Kia, Volkswagen Group, Mercedes-Benz, BMW, Volvo, Toyota, Subaru, Jaguar and Land Rover, jumped by more than 100% YoY to nearly 81,000 units.”

The top five best-selling BEV models in the US accounted for more than 60% of the market’s overall BEV sales during the quarter. Tesla’s Model Y and Model 3 together accounted for 55% of the BEV market. The Rivian R1T emerged as the third best-selling model during Q2 2023. This is the first time a Rivian model has secured a position in the top five since the introduction of its first vehicle in late 2021.

Commenting on the market outlook, Research Director Jeff Fieldhack said, “If the current growth trajectory continues, annual BEV sales in the US will exceed 1 million units by the end of 2023. However, rising inventories are expected to become a problem for automakers. EV-related investments by auto OEMs are rapidly growing across the North American continent. These investments, which cover EV production ramps, components and battery, and charging infrastructure, have already crossed $100 billion. Most EV brands are preparing to launch new models or update existing models from 2024 onwards. To address the inventory challenges, OEMs will either need to reduce prices or limit production, both of which will hurt their financial performance.”

*Sales refer to wholesale figures, i.e. deliveries from factories by the respective brand/company.

The comprehensive and in-depth ‘US Passenger Electric Vehicle Sales Tracker, Q1 2018-Q2 2023’ is now available for purchase at report.counterpointresearch.com.

Feel free to reach us at press@counterpointresearch.com for questions regarding our latest research and insights.

Background

Counterpoint Technology Market Research is a global research firm specializing in products in the TMT (technology, media and telecom) industry. It services major technology and financial firms with a mix of monthly reports, customized projects and detailed analyses of the mobile and technology markets. Its key analysts are seasoned experts in the high-tech industry.

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US EV Sales Up 79% YoY in Q1 2023 Helped by Tax Credit Subsidy

Tesla sold more EVs than the next 18 automotive groups combined in Q1 2023.
Brands like Hyundai, Audi, BMW, Volvo and Nissan remain ineligible for the EV tax credit.
US EV sales expected to reach near 1.5 million units in 2023 if economic conditions continue to improve.

New Delhi, London, San Diego, Buenos Aires, Hong Kong, Beijing, Seoul – June 15, 2023

US passenger electric vehicle* (EV) sales soared over 79% YoY in Q1 2023, according to the latest research from Counterpoint’s USA Passenger Electric Vehicle Model Sales Tracker. This strong growth helped the US surpass Germany to become the world’s second-largest EV market, the largest being China. Battery EVs (BEV) accounted for 81% of all passenger EV sales in the US while plug-in hybrid EVs (PHEVs) made up the rest. In Q1 2023, Tesla’s sales outperformed the combined sales of the next 18 automotive groups, which collectively represent 34 automotive brands.

Commenting on the market dynamics, Research Analyst Abhik Mukherjee said, “Total US passenger vehicle sales improved YoY in Q1 2023. The US economy is showing signs of recovery with lower inflation and improving consumer sentiment. Although EV sales saw strong growth during the quarter, those of conventional passenger vehicles remained flat. One reason was the introduction of an EV tax credit of up to $7,500, which has played a crucial role in driving up EV sales. Currently, around 20 models in total offered by Tesla, GM, Ford, Stellantis, Rivian and Volkswagen are eligible for the tax credit. However, strict eligibility conditions set by the US government have excluded brands such as Hyundai, Nissan, BMW, Audi and Volvo from benefiting from the EV tax credit scheme in 2023.”

The top 10 EV models in the US accounted for 69% of overall passenger EV sales during the quarter. Tesla’s Model Y retained its title of the best-selling EV model, while it also earned the title of best-selling passenger car model globally. Apart from BEVs, PHEVs are also gaining popularity in the US.

Commenting on the market outlook, Research Director Jeff Fieldhack said, “With the US economy showing signs of recovery, the auto industry, particularly the EV sector, is being helped by government policies announced last year. Tax credits for new and even used EVs are helping consumers, while investments in streamlining the EV battery supply chain, the establishment of a robust network of EV charging stations and the setting up of battery recycling plants nationwide will all support EV sales growth. Therefore, we expect US EV sales to reach around 1.5 million units in 2023 if economic conditions continue improving.”

*Sales refer to wholesale figures, i.e. deliveries from factories by the respective brand/company.

*For EVs, we consider only BEVs and PHEVs. Hybrid EVs and fuel cell vehicles (FCVs) are not included in this study.

The comprehensive and in-depth ‘USA Passenger Electric Vehicle Sales Tracker, Q1 2018-Q1 2023’ is now available for purchase at report.counterpointresearch.com.

Feel free to reach us at press@counterpointresearch.com for questions regarding our latest research and insights.

Background

Analyst Contacts

Abhik Mukherjee

Soumen Mandal

Neil Shah

Jeff Fieldhack

Counterpoint Research

press@counterpointresearch.com

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Connected Car Sales Grew 12% YoY in 2022 With Volkswagen Group in Lead

Volkswagen Group led in connected car sales, closely followed by Toyota Group.
4G cars captured more than 95% of connected car sales in 2022.
Tesla broke into the top-10 connected car sales rankings for the first time.

New Delhi, London, San Diego, Buenos Aires, Hong Kong, Beijing, Seoul – April 24, 2023

Global connected car sales* grew 12% YoY in 2022 with the share of connected cars in the overall car sales exceeding 50%, according to the latest research from Counterpoint’s Smart Automotive Service. The US remained the strongest market for connected cars followed by China and Europe. These three markets accounted for nearly 80% of the total connected car sales globally in 2022. Despite having a relatively small share of connected car sales, Japan experienced the highest growth in connected car penetration.

Commenting on the market dynamics, Research Analyst Abhilash Gupta said, “The penetration of connectivity in cars improved during 2022 after struggling in 2020 and 2021. In 2022, new facelift versions of older models like the Honda Civic, Toyota Corolla, Ford Escape and Chevrolet Equinox were introduced with upgraded 4G connectivity and new features. Some prominent features include remote lock/unlock, remote engine start/stop, climate control, vehicle status, location tracking, geofencing, emergency assistance, in-cabin music, video streaming, and over-the-air updates. Next-generation vehicles are being introduced with various connected and autonomous features that require high-speed internet access available through 5G. However, as of now, 5G remains a niche, available only in premium cars like the Ford F-150 Lightning, Cadillac LYRIQ, Mercedes-Benz EQS, Audi e-tron GT, BMW iX and GWM Haval HG.”

Gupta added, “With consumers’ focus shifting to connectivity in the car, non-connected car shipments are steadily declining. The top five automotive groups accounted for nearly half of the connected cars sold in 2022. Volkswagen Group led the charts in terms of connected car sales volume, closely followed by Toyota Group. Tesla broke into the top 10 for the first time.”

Commenting on the market outlook, Senior Analyst Soumen Mandal said, “The shift towards digitization in cars is increasing at a rapid pace and is visible in the consistent rise of connected car penetration globally. Currently, 4G dominates the connected car market with almost 95% share. But as the automotive market is transitioning towards electrification, software-defined vehicles and autonomy, the need for seamless and faster in-vehicle connectivity will be fulfilled through 5G. By 2030, more than 90% of connected cars sold will have embedded 5G connectivity. Connected car sales are expected to grow at a CAGR of 13% between 2022 and 2030.”

* Sales here refer to wholesale figures, i.e. deliveries out of factories by respective brands, and consider only passenger cars with embedded connectivity.

The comprehensive and in-depth ‘Global Connected Car Tracker, Q1 2019-Q4 2022’ and ‘Global Connected Car Forecast, 2019-2030F’ are now available for purchase at report.counterpointresearch.com.

Feel free to reach us at press@counterpointresearch.com for questions regarding our latest research and insights.

Background

Counterpoint Technology Market Research is a global research firm specializing in products in the TMT (technology, media, and telecom) industry. It services major technology and financial firms with a mix of monthly reports, customized projects, and detailed analyses of the mobile and technology markets. Its key analysts are seasoned experts in the high-tech industry.

Analyst Contacts

Abhilash Gupta

Soumen Mandal

Peter Richardson

Counterpoint Research

press@counterpointresearch.com

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Can Chinese EV Makers Make it Big in Japan?

For an automotive market like Japan, which is the base of global giants like Toyota, Honda, Nissan and Mazda, and saw early entry of hydrogen-fuel vehicles, it is easy to assume that the country would be a big market for new energy vehicle (NEV) makers. But the numbers tell a different story. According to the latest Counterpoint Research Global Passenger Vehicle Trackers, the NEV penetration in Japan is around 1% compared to around 15% in China.

The total NEV sales in Japan from 2018 to 2021 were just 4% of the total sales in China in 2021. It is easy to conclude that Japan is not an attractive market for EV makers. But opportunities can be found when taking an in-depth look into the market. In fact, the Japanese government is now actively pushing EVs by providing subsidies to set up EV charging stations.

FCEV vs BEV: What will be the future trend?

The debate on fuel cell electric vehicles (FCEVs) and battery electric vehicles (BEVs) has been going on for years now. Many in countries like Japan and South Korea still believe that hydrogen fuel will be the future, while China has been pushing BEVs. Leading NEV maker Tesla has also bet on BEVs and made it to the top of the China NEV market by achieving almost 50% share in H1 2022.

The FCEV has many advantages but the BEV can be scaled up in a shorter time due to a more favorable infrastructure construction cost for the government and enterprises. Moreover, the BEV beats the FCEV both in terms of unit price and cost of use. Given the current macroeconomic headwinds, any plan to set up FCEV infrastructure will find few takers in the government or industry in the near future.

The Nissan Leaf BEV was the best-selling NEV model in Japan in 2021, with more than twice the sales as the second-placed Mitsubishi Eclipse Cross, a plug-in hybrid electric vehicle (PHEV).

Why BYD decided to enter Japan electric car market?

China’s BYD recently launched three electric car models in Japan – Seal, Atto 3 and Dolphin. As discussed above, Japan’s NEV market is comparatively small. So, what are the factors driving BYD’s Japan electric car market entry? We discuss them below:

Not a newbie in Japan’s vehicle market: BYD is already selling its electric buses in Japan. Furthermore, through tie-ups with Japanese companies including Toyota, Kansai Electric Power Company and Keihan Bus Company, BYD has a better understanding of the country’s consumption patterns.
Cost competitiveness: Within the same price segment, BYD can offer better vehicles in terms of mileage and other performance parameters.
Investment in charging infrastructure: Either by itself or together with the government, BYD has to increase the number of charging stations and charging points. The difference between China and Japan here is that there is a higher proportion of private charging points in China. But in Japan, more public charging points are needed due to the higher cost of land and parking slots. That is why the Japanese government is providing subsidies to set up EV charging stations.
Localization: The Japanese market has a unique taste in consumer electronics, such as the consumers here prefer to buy the iPhone SE while their counterparts elsewhere are likely to favor bigger-screen smartphones. The same is true for vehicles. The Kei car category, created by the Japanese government for the smallest permissible cars, is popular among local car users. Of the three models launched by BYD, the Dolphin is very similar to a Kei car. The key reasons why Kei cars are welcome in Japan include:
- Streets are narrow in Japan, especially in major cities.
- There are many mountain roads in Japan.
- Parking space is scarce.

China EV makers going overseas: Challenges and opportunities

Unlike the traditional internal combustion engine (ICE) vehicle era, China’s vehicle makers are big players in the NEV arena. Core NEV technologies like battery, motor and electronic control systems are all now being developed in China also. It is undeniable that China’s NEVs now dominate the market volumes globally. China’s NEV companies and even traditional car companies consider it strategically important to enter overseas markets.

Besides China, Europe and US are the other major markets with good EV penetration and growth. The rest of the markets are still in an educational phase. Therefore, some caution is needed for the NEV makers planning to enter markets like Japan.

The acceptance of the NEV: Although the safety levels of BEVs, PHEVs and FCEVs have improved and reached that of ICEVs, it still needs time for a large number of consumers to trust NEVs, especially in the markets dominated by ICEV manufacturers. But the situation is gradually improving with more and more friends, relatives or other known people using NEVs.

Cost: Many times it is the cost that triggers a purchase or replacement decision. For Chinese NEV makers, cost control is important as still many key parts are made only by a few players.

Better products: Besides the core technologies for the car’s hardware, new applications such as smart cockpit, driving assistant and driverless option are being introduced on the software side to improve the car user experience. Vehicle makers must continue to focus on removing key pain points of target consumers.

Brand power and market competitiveness: Car consumers are more willing to pay a premium for a known brand name. At the same time, many are looking for more bang for their buck. Therefore, it is important for car makers to study consumer behavior and composition of the market they are planning to enter.

Investment and policies: The NEV ecosystem in many markets is still not mature. Huge investments are required to develop this ecosystem, whether it is manufacturing units, service centers, points of sales or charging stations. With the goal of “zero carbon” in mind, many countries provide incentives to NEV makers and consumers, though the risk of policy change always remains.

Tesla Reports Record Revenue in Q1 2022; Rising Raw Material Cost a Challenge

Tesla vehicle deliveries crossed 310,000 units in Q1 2022, a YoY increase of 68%.
Revenue reached a record high of $18.8 billion during the quarter.
More than 46% of Tesla’s operational expenses in Q1 2022 went to R&D.

The initial months of 2021 were not favorable for automakers. Semiconductor shortages derailed the post-COVID recovery, affecting vehicle sales worldwide. But the shortages have eased a bit one year later and auto sales are reviving. Automakers expect to recover the losses made during the last two years, soon. However, traditional automakers are unable to cope with the rising demand for pure EVs, whereas Tesla’s ability to address this demand has rewarded it not only with higher vehicle sales in Q1 2022 but also a record revenue of $18.8 billion. Tesla has also started deliveries to car rental service provider Hertz against its huge 100,000-vehicle order, which is also a reason for high vehicle production and delivery during the quarter.

Tesla’s Q1 2022 revenue would have been more without the fresh COVID wave that has hit Shanghai and surrounding areas, affecting the company’s production there. From the second week of March, rising cases of a new COVID variant have forced automakers operating around Shanghai to suspend production.

The urge to achieve L4 autonomy by the end of 2023 and to roll out robotaxis by early 2025 can be a major reason for Tesla’s big R&D spend. Besides, Tesla could also be conducting research on developing new battery chemistry. The soaring prices of some key battery components like nickel and lithium have put the auto OEMs in a spot. Most EV makers around the globe have been forced to raise prices by a few thousand dollars to cope with the rising prices of battery-related raw materials.

After Tesla’s Shanghai plant became operational, the company’s sales boomed globally, especially in China. In 2021, China remained its top market followed by the US and Europe. Apart from vehicle sales, Tesla has a strong network of charging stations and insurance services. Till Q1 2022, Tesla had 3,724 superchargers and 33,657 supercharger connectors worldwide.

Q1 2022 Financial Results

During Q1 2022, Tesla delivered more than 300,000 units of vehicles, an increase of 68% YoY. Model 3/Y accounted for more than 95% of deliveries.
Total revenue stood at $18.7 billion, an 81% YoY increase. Nearly 90% of the total revenue came from vehicle sales.
Tesla’s other services like energy storage, charging and insurance contributed to the remaining 10% of the revenue. Revenue from energy-related services and insurance services saw YoY growth of 24.7% and 43.23% respectively.
Keeping parity with vehicle sales and revenue growth, Tesla’s gross profit during Q1 2022 reached $5.4 billion. Compared to the same period last year, the gross profit grew by a whopping 146%. Gross profit from vehicle sales saw a jump of 132% YoY.
R&D cost has also been on the rise. During Q1 2022, it stood at nearly $1 billion, a 30% increase YoY. More than 46% of the operating expenses were incurred in the R&D segment, implying Tesla is working seriously on some new technology under the hood.
Vehicle inventory for Tesla is quite different from other OEMs. During Q1 2022, Tesla delivered more vehicles than it produced, putting the quarterly inventory at -1.5%. This implies that Tesla has been clearing older stock that remained unsold during 2020 and 2021. Tesla keeps a delicate balance between production and deliveries, which helps it to maintain an image that its vehicles are in high demand.

Market Outlook

Tesla’s future seems strong as it never stops innovating and keeps providing better and newer features to its customers. But within a couple of years, Tesla will face strong competition from traditional OEMs like Volkswagen, Toyota and Stellantis, which released their ambitious vehicle electrification plans last year. Though it will be difficult for them to overtake Tesla sales any time soon, Tesla will witness a reduction in its share across major markets. The reason behind this is the price band in which Tesla operates. It mostly operates in the high-to-premium price band, whereas the traditional OEMs are planning to launch vehicles in the budget segment. The rising cost of a few key raw materials and inflationary impact on production have pushed Tesla to increase its vehicle prices worldwide a couple of times. This might play against the sentiment of new customers, which will, in turn, affect the next quarter’s financials.

Price Hikes Slow Automotive Industry Recovery

The global automotive industry has been in turmoil since 2020. The industry and its supply chain were initially disrupted by COVID-19, and then by supply chain chaos when the sector was unprepared for the demand rebound.

With the semiconductor shortage beginning to ease, 2022 was expected to be a better year, as indicated by increased sales during the initial months. But Russia’s invasion of Ukraine and fresh COVID waves in China have further delayed the industry’s recovery. Restricted supplies of critical raw materials procured from Ukraine and Russia are causing new supply chain impacts, driving up raw material prices including that of lithium, cobalt and nickel – the latter by 60% – as well as aluminium and, to some extent, steel. Furthermore, gases used in the production of semiconductors are also impacted – although the overall effect is unlikely to be immediately material. To cope with these cost increases, automakers across regions have reluctantly increased their vehicle prices, despite the likely impact on demand.

China

The Chinese automotive sector is contending with a double whammy – subsidy cuts and sharply increasing materials prices. The country’s government cut subsidies on NEVs (New Energy Vehicles) by 30% in 2022. This was long planned but will impact demand right at the point where escalating costs are increasing prices:

Tesla increased the price of its cheapest Model Y by more than $2,000 in March. The recent inflationary pressure on raw materials and logistics forced Tesla to then make a further price increase, the second time within a week, which looks like bad planning or miscommunication as much as a forced price increase.
Leading Chinese electric vehicle (EV) manufacturer BYD increased prices by $500-$1,000 depending on the model and specifications. BYD is developing and producing LFP batteries in-house but still increased prices twice this year.
Xpeng, a rising Chinese EV start-up, followed in the footsteps of larger OEMs to increase prices by $1,500-$3,000. Smaller OEMs may find it harder to control costs and compete with larger OEMs as they have less control over supply chains.
Other important auto OEMs such as Chery, SAIC, Hozon Auto and Wuling Motor also announced price increases for NEVs.
ORA has been forced to stop taking new orders due to a shortage of chips and other core components.

US

The US recently released its EV policies which are designed to push up EV adoption rates. But the Ukraine crisis and geopolitical tension with China may hinder the country’s plans. The US imports a major portion of its rare earth metal requirement for vehicle production.

To become self-sufficient and to keep the EV adoption progress on track, President Biden may include these rare earth metals under the Defence Production Act, which will enable the country’s mining industry to extract and refine these metals. Mining in the US has been restricted due to its environmental impact. Any resumption of broader domestic mining activity will eventually lead to price decreases, but this is not a quick fix.
Automakers are increasing prices to deal with supply chain situations and simultaneously building inventories as a hedge against future supply chain shocks. The largest EV manufacturer in the world, Tesla, increased prices by $2,000-$12,500 depending on the model from the third week of March. Ford has made significant price increases across several models. The F-150 Raptor was subject to the biggest increase ($3,300).

Europe

The ongoing Ukraine crisis has forced European automakers to halt production lines as the supply of critical auto parts has been severely hit. Moreover, in solidarity with Ukraine’s fight against Russia, automakers have withdrawn from Russia.

Auto OEMs such as Volkswagen, BMW and Porsche temporarily shut down plants to deal with the supply chain disruption. European automakers are dependent on Russia and Ukraine for the supply of raw materials for battery production, wire harness, neon gas and more. However, the level of dependence isn’t so high, which is one reason European automakers haven’t increased prices compared to other regions. There may be another reason, like profit margins, which are higher for European automakers and can absorb some of the extra costs.

Inflation across Europe reached 7.5% in March 2022, up from 5.9% in February. Though no OEMs operating in Europe, except Tesla, have announced price increases so far, we expect them to do so soon. The rising prices of petrol and diesel in Europe have created a favourable market for EVs, so automakers don’t want to disrupt EV demand by increasing prices.

Japan

The Japanese government removed most-favoured-nation (MFN) treatment for Russia over its invasion of Ukraine. This increased import tariffs by 3% to 10%. The demand for aluminium for automotive applications is rising due to the growing demand for lighter-weight products in line with the shift towards electric mobility. For these reasons, the Japan Aluminium Association is also concerned about price hikes, which may slow down BEV adoption in Japan.

German automakers Volkswagen and Mercedes-Benz raised prices by an average of 2% and 1% respectively. Jeep increased prices by 13% from March.
Japanese automakers including Toyota and Honda are resisting price hikes for now, while Nissan is reducing optional equipment and vehicle grades to cope with increased costs. For example, it is eliminating manual transmissions and narrowing the combination of best-selling models.

India

India’s government had extended its Faster Adoption and Manufacturing of Electric vehicles-II (FAME-II) program by two years until March. This initiative is further supported by the Production Linked Incentive (PLI) scheme for Advanced Chemistry Cell (ACC) battery storage. India is trying to become a world-class manufacturing destination and more self-reliant in terms of production. As India’s automotive industry is dependent on other countries such as China and Japan for automotive parts, it is becoming difficult for automakers to control input costs.

Indian automakers are also reacting to raw material price hikes by increasing car prices by at least 2%. KIA Motors has increased prices of all its vehicles. Maruti Suzuki, India’s largest passenger vehicle (PV) maker, has also increased the average price of its cars by 8.8% since January 2022. Toyota, Tata Motors, Hyundai and MG Motors have also increased prices for their vehicles across ranges. Even premium vehicle brands such as BMW India, Mercedes-Benz India and Audi India have announced at least a 3% increase in their vehicle prices.
Due to the low EV adoption, high prices of lithium and cobalt have not directly impacted the industry. The price hikes in India are mostly due to the rise in the price of steel. Steel is used in manufacturing vehicle chassis and body. Nickel-containing stainless steel is used in some drivetrain components.
In addition to rising materials costs, fluctuating exchange rates and rising operational costs are other factors driving price increases.

Counterpoint’s Take:

The recent cost increases have already affected the EV industry. 2021 saw EV sales rising by more than 200% but price increases are likely to put the brakes on a continuation of this fast growth. However, while EV sales will slow, sales of conventional ICE vehicles will see more significant declines due to the global fossil fuel price inflation. For 2022, we expect global passenger vehicle sales will be around 72 million, some 5 million units lower than our earlier projections.

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u-blox Makes a Strong Comeback in 2021; Modules Contribute Most of Revenue

u-blox, a global leader in wireless and positioning technologies, has announced its 2021 financial results. The company made a strong rebound after the strong decline in 2020. Revenue reached a record $453.1 million in 2021, an increase of 27.6% from the previous year.

u-blox achieved strong growth across all segments in 2021. The automotive segment grew 41% YoY due to higher demand for navigation and infotainment applications, especially for electric vehicles. The industrial and consumer segments grew 24% and 51% from 2020, respectively.
In 2021, the revenue from Americas increased 37.6% YoY driven by strong demand for navigation, infotainment and industrial automation solutions after the decline in 2020. The strong recovery in the automotive sector and consumer telematics helped EMEA revenue to increase by 30.1%. APAC revenue increased by only 11.8% as China’s revenue remained flat due to COVID-19 and supply chain shortages. However, strong demand for industrial automation, navigation and automated driving helped Japan and South Korea in the APAC region to register significant growth. Recently, u-blox’s LTE-M modules got certified by KDDI in Japan and LGU+ in South Korea, which also pushed growth.

This year, 81% and 18% of the total revenue came from modules and GNSS chips respectively. u-blox made many design wins for its IoT modules which helped its IoT module business to witness continuous growth.

GNSS module market

u-blox is one of the top players in the GNSS module market. The company shipped nearly 25.3 million units of its GNSS module in 2021. The GNSS module revenue is contributing more than half of the total module revenue. u-blox’s GNSS modules are used a lot in automotive applications.

Some GNSS module design wins for u-blox in 2021:

Xpeng Motors selected u-blox’s F9 high-precision GNSS technology for smart electric vehicles.

Wi-Fi/BT module market

In 2021, u-blox shipped nearly . Most of the u-blox Wi-Fi/BT modules are used in industrial and healthcare applications.

Some Wi-Fi/BT module design wins for u-blox in 2021:

Bluetooth module NINA-B406 used for smart lighting with Douglas Lighting.
u-blox’s ANNA-B112 Bluetooth 5 sip used for a headset for chronic pain treatment with EXSURGO.
u-blox’s NINA-B306 standalone Bluetooth 5 low-energy module used by (greenTEG) CORE to communicate wirelessly.

Cellular IoT module market

According to Counterpoint Research, u-blox’s cellular IoT module segment grew 12% YoY to reach $125 million in 2021. u-blox accounted for 2% of the global cellular IoT module market while Quectel, Telit and Thales remained the top three vendors in 2021 in terms of revenue.

The cellular IoT module market remains highly competitive and u-blox has played to its strength while prioritizing GNSS and BT/Wi-Fi module business segments over cellular IoT modules.

u-blox launched 4G Cat 1 module LARA-R6 and 4G Cat 1 bis module LENA-R8 in 2022 to strengthen its cellular IoT module portfolio. With LARA-R6, u-blox wants to target North America, EMEA, APAC, Japan and LATAM markets with applications like telematics, smart meters, point of sales, asset tracking, healthcare and smoke detector. With LENA-R8, it will target EMEA, APAC and LATAM with telematics and asset tracking applications. u-blox is the third player among international (outside China) module players after Sequans and Thales to launch a Cat 1 bis module. We expect these modules to help u-blox regain its share in the cellular IoT module market.

Some cellular IoT module design wins for u-blox in 2021:

Modmo, an e-bike sharing company, used u-blox’s 4G cat 1 module LARA-R211 to provide connectivity in its e-bikes.
Digital Matter preferred u-blox’s 2G module SARA-G350 for its asset tracking device.

GNSS chip market

u-blox shipped nearly 47 million GNSS chips in 2021, which contributed $82 million to the total revenue. Besides using its GNSS chipset in its module, u-blox also provides it to other GNSS module vendors like Navisys and YIC.

Some GNSS chip design wins for u-blox in 2021:

iGPSPORT used the u-blox M10 platform to deliver ultra-long performance for the latest cycling computer.

Market outlook

We expect u-blox revenue to continue to grow more than 20% YoY in 2022 supported by increasing demand from the automotive and navigation segments across all regions. u-blox is on a mission to build its ecosystem with its ‘silicon to cloud’ journey. It wants to use its chipset in its module and connect its module to its cloud platform. u-blox acquired Thingstream, an IoT service platform, in 2020 to provide data and security services to its customers. Further, it took full ownership of Sapcorda, a GNSS augmentation service provider for centimeter-level positioning accuracy, in 2021. These strategic investments are also expected to help u-blox in increasing both product and service revenues, especially in the GNSS segment.

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Will Foxconn Shake EV Industry?

Apple supplier Foxconn, with an aim to diversify its business and reduce overdependency on Apple for revenue generation, is betting big on electric vehicles (EVs). During the Hon Hai Tech Day 2020 (HHTD 20) event on October 16 last year, the company launched MIH, an “EV software and hardware open platform”, with an aim to position it as the “Android system of the EV industry”.

Foxconn is not new to the automotive industry. It has already entered partnerships with Yulon Group and FCA Group to produce EVs, provide parts and handle supply chain management. But will the self-declared aim of becoming the Android system of the EV industry make it a threat for traditional automakers? To find the answer, we will have to understand the extent of Foxconn’s ambitions in the automotive space.

MIH to target both software and hardware ecosystems

With the global smartphone industry maturing, Foxconn is looking for an alternative business opportunity. EVs and autonomous vehicles (AVs) perfectly fit into this strategy because here Foxconn can use its existing expertise in automotive and smartphone component manufacturing. However, Foxconn has no plan to make cars under its brand name. Instead, it will manufacture cars for its partners, just like it assembles phones for Apple.

Most of the automakers are using a closed system for developing cars. But Foxconn is aiming to build an open EV platform where any automaker can alter the design to meet specific requirements. Tesla is using its own platform to build EVs, just as Apple does in the smartphone industry. Since Tesla has come a long way in the race for EV industry dominance, Foxconn wants to become the Android of the EV industry. Getting into a partnership with a major automaker will be a challenge as such automakers may not be interested in sharing their core expertise with an open platform.

In the age of AVs, the software will play a crucial role. Foxconn is trying to tap this segment by having a software system that allows automakers and service providers to offer unique features.

Right partnerships to drive success

Foxconn has entered a partnership with Chinese EV start-up Byton, which is facing insolvency, to revive its EV brand. Foxconn is targeting to produce the M-Byton model starting 2022.

Foxconn has inked another partnership with Geely Holding Group to provide customised consulting service to automakers working with CASE (Connected, Autonomous, Shared and Electrified) technologies.

Apple is in talks with Hyundai Motor to build a pure electric autonomous car from 2024. It will be interesting to see how the iPhone maker and assembler compete in the same segment. Or will Foxconn start manufacturing cars for Apple as it does for its phones? the next couple of years, we may also witness more smartphone makers entering this space.

Whatever may be the situation, right partnerships with ecosystem players and the presence of an experienced leadership team will play a vital role in the success of the business.

Industry veterans to aid in faster development of MIH

Foxconn has hired an experienced leadership team for the MIH platform, which indicates that it is serious about this foray. Jack Cheng, who is a co-founder of NIO, ex-MD of Fiat China and chairman of XPT, besides earlier working with Magneti Marelli and Ford Motor, has been appointed as the CEO of MIH platform. William Wei has been appointed as the chief technology officer (CTO). He has more than 20 years of experience in internet and mobile computing which can help Foxconn build a software-powered car like Tesla.

MIH has already more than 400 partners, with ecosystem players like Amazon Web Services, Mediatek, Qualcomm, ST Micro, Texas Instruments, Eaton and Dana. Foxconn also launched an EV developer kit technical specification on January 31, 2021, displaying seriousness about following the declared timeline.

Foxconn’s aim goes beyond EV platform

As part of a new strategic plan, named 3+3= ∞, Foxconn is focussing on three emerging technologies: EVs, digital healthcare and robotics.

As part of a long-term plan, it is trying to become a key supplier for the EV and AV ecosystem. It is already working with CATL and SES to develop its solid-state battery by 2024, while aiming to get a 10% market share in the EV component and services industry by 2027.

Foxconn is also trying to build a state-of-the-art battery management system (BMS), powered by cloud-based artificial intelligence (AI) to improve battery efficiency.

Some airport shuttle buses with Level 3 autonomy and one of the smallest LiDARs (A15) in the world are supported by Foxconn technology. The MIH platform is being readied for 5G, 6G over-the-air (OTA) update and vehicle-to-anything (V2X) communication. Therefore, Foxconn is preparing for the connected and AV space in future. However, it may face strong competition from Qualcomm and Microsoft in this segment.

Counterpoint’s take

As Foxconn is not interested in building its car brand, it may not be a threat to major automakers. But EV component suppliers may face stiff competition from Foxconn. Scalability and price will play a key role in the selection of component players by EV makers.

Large automakers with a clear goal of electrification may not be interested in an open platform as it may raise questions of security and intellectual property. However, small players and start-ups will be more interested as a shared open platform will require less investment.

COVID-19 Impact Scenarios on China’s Automotive Industry

The COVID-19 outbreak continues to develop fast. There are signs of successful containment in some areas in China, while fears grow accelerating infection rates in other countries – Japan notably. How the situation develops over the coming days, weeks and even months remains uncertain, creating a risky business environment.

Automotive OEMs and Component Supply Chain

Though information is limited, several Chinese vehicle assembly plants had extended their seasonal shutdowns and the automotive component supply chain has been disrupted with some industrial areas in lockdown. A few automotive plants have reported resumption of production since the week of February 10^th, while others remain shuttered. Major affected carmakers in the region include Dongfeng, GM and PSA.

Several component suppliers in Wuhan and Hubei provinces have already alerted their OEM customers they are unable to maintain supplies. Problems have already emerged in Korea and will likely spread to other countries and regions as well. Examples of recent disruptions include Hyundai, Kia and SsangYong in Korea having temporarily closed plants, and Nissan has announced a day of production loss at its Kyushu plant in Japan. Jaguar Landrover in the UK expects parts shortages to force capacity reductions from the end of February.

The situation is likely to intensify, causing ad hoc interruptions in the supply chain, with each OEM, plant, and model expected to have different levels of exposure, requiring different countermeasures. Evidently, some automakers in China such as FAW, Toyota and Honda, had also earlier undertaken stock reduction actions towards the end of 2019 with the lower projected growth for 2020 and will, therefore, face relatively earlier stock outs than might have otherwise been the case.

Outbreak Scenarios

While the rate of infection seems to have stabilized before reaching an exponential growth phase, there are differing views among virologists whether COVID-19 can be contained or will become a full-blown global pandemic. Counterpoint Research has considered the following optimistic, most likely and pessimistic scenarios:

Optimistic: Epidemic bought under control in Q1

With effective Government interventions initiated, the epidemic situation is expected to be bought under control by end Q1. The government would ease clampdowns progressively between mid- April. We could expect component makers and OEMs working overtime from April to recover the Q1 output loss within Q2. We can also expect industry stakeholders seeking, and receiving, favourable government incentives and subsidies in the short term to stimulate production and demand. In this scenario, expect the industry to drop between at 3%.

Most Likely (Base Case): Epidemic bought within control in Q1

With people back at work following the lunar new year annual holidays, widespread dispersal could continue to surface over March, with the epidemic continuing into Q2. The automotive impact would spread widely outside the Hubei Province, disrupting component supply chains. Ongoing official control efforts and damaged consumer confidence will impact consumer demand, dropping GDP growth to around 5% from an earlier estimated 6%, impacting the vehicle production dropping by 5% from the prior year.

Pessimistic: Epidemic continues into Q2, possibly even into Q3

In this situation, the automotive impact would spread widely elsewhere in the world, with China being the key supplier to many countries in the region. In addition, the eventually lowered consumer confidence will impact the economy harder, resulting in overall weakened automotive demand. Should the outbreak, with further mutations possibly, continue beyond H1, the situation could cause an economic meltdown, affecting several industries and service activities. If this were to happen, the decline in vehicle production would be sharper and last longer. In our estimates, the lowered GDP could result in vehicle production dropping by 11% compared to 2019.

Exhibit 1: China Vehicle Production in Various Scenarios

2020 China PV Production Outlook

At 5% YoY drop as the base case, Counterpoint analysts project the vehicle production outlook will be around 24.4 million units in 2020. The situation, however, remains fluid, and further revisions will be made as more clarity emerges.

Why is Toyota Partnering with Panasonic to Make EV Batteries?

Background

In January 2019, Toyota and Panasonic announced they were forming a joint venture (JV), to manufacture prismatic batteries for electric vehicles (EVs). The new company, Planet Energy & Solutions Inc is now active.

The company, headquartered in Tokyo, will commence operations from April 2020 with 5,100 employees, including 2,400 at a subsidiary in China. Toyota owns a 51% stake in the JV, with Panasonic the rest. The aim of the JV is to mass-produce solid-state lithium batteries with much higher capacities compared to those used today. This insight looks at why Toyota is forming the JV and the benefits for both companies.

Exhibit 1: Win-Win Situation

Toyota

The JV syncs well with Toyota’s plans for developing and launching its future range of fully battery operated EVs. While Toyota ranks well globally in terms of fuel efficiency with a relatively high share of hybrid vehicles in its product mix, the company lags competitors in battery or pure electric vehicles (BEV) and plug-in hybrid electric vehicles (PHEVs). In the last couple of years however, Toyota has become more aggressive with its BEV plans, primarily to comply with stringent emission regulations, and more specifically to qualify for NEV credits in China, which requires automakers to manufacture a mandated share of EVs in its total production.

With Toyota having announced plans to sell 5.5 million EVs by 2030, the high cost of batteries, which accounts for around 40% of the vehicle cost, remains a pain point. In partnering with Panasonic, Toyota will not only share in the R&D investment to develop advanced solid-state batteries, but also secure competitive pricing and steady supply for its future EV models. Batteries also open a new revenue opportunity for Toyota, supplying to partners, like Suzuki and Mazda among others.

It can also pitch to other global auto OEMs through Denso, the leading Tier1 supplier, in which Toyota has around a 25% share.

Panasonic

While Panasonic is currently among the world’s leading EV battery manufacturers, it is seeing tough competition from South Korean players – Samsung SDI and LG Chem, and Chinese players, especially CATL which has won supply contracts with key automakers including BMW, Daimler, Volkswagen, and Volvo. With its assured long-term supply contract to Toyota, Panasonic can further diversify its revenues from consumer durables to the fast-changing automotive sector.

Panasonic Reducing Dependency on Tesla

Until recently Tesla had been the key customer of Panasonic batteries. Having relied solely on Panasonic to source its batteries since 2014, Tesla has been broadening its battery suppliers to include LG Chem and CATL. It is also considering developing and producing its own batteries, acquiring Hibar Systems, a high-speed battery manufacturing company, and Maxwell, best known for ultracapacitors. The JV supports Panasonic’s strategy to reduce long term reliance on Tesla and realize future growth opportunities in the global automotive industry.

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FCEV vs BEV: What will be the future trend?

Why BYD decided to enter Japan electric car market?

China EV makers going overseas: Challenges and opportunities

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Counterpoint’s Take:

MIH to target both software and hardware ecosystems

Right partnerships to drive success

Industry veterans to aid in faster development of MIH

Foxconn’s aim goes beyond EV platform

Counterpoint’s take

Related Posts:

Automotive OEMs and Component Supply Chain

Outbreak Scenarios

Optimistic: Epidemic bought under control in Q1

Most Likely (Base Case): Epidemic bought within control in Q1

Pessimistic: Epidemic continues into Q2, possibly even into Q3

2020 China PV Production Outlook

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Panasonic

Panasonic Reducing Dependency on Tesla

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