Drake Star Partners has published its latest study called “State of the Advanced Mobility Industry Report 2021,” which focuses on the great acceleration of vehicle electrification and autonomy, the effects of COVID-19, and their respective recoveries in its aftermath. The global investment banking firm serving the technology, media, and communications sectors, focusing on M&A and corporate finance for its clients. It completed over 360 transactions since 2004, 70% of which are cross-border, so it is a closely watched observer of the new-mobility industry.

“2020 was a year like no other with COVID-19 having a profound impact on the automobile industry,” said Vitaly Golomb, Partner, Drake Star Partners. “A year later with widespread vaccinations underway, there is cautious optimism for a return to normalcy. Electric vehicles look to regain momentum as a new U.S. administration commits to an environmental focus, while autonomous vehicles face a more challenging path ahead. This report provides a comprehensive look at both industries, where they currently stand, and where they are headed in the future.”

The report focuses on the pandemic’s macro-level impacts on the auto industry, the changing urban mobility preferences as a result of COVID-19, and how major auto players have had to adjust. It identifies the likely winners and losers from the pandemic and how tech and VC will potentially play a role in the recovery for EVs (electric vehicles), AVs (autonomous vehicles), and an extensive look at more than 50 global corporations working on them.

According to Golomb, COVID-19 is one of the most unprecedented shocks to the modern economy. The traditional automotive industry is one of the most hardly affected industries by the pandemic, as automakers and suppliers face stock market volatility, a sharp decline in vehicle sales, public transit use, and factory shut-downs. At the height of the crisis, over 90% of the factories in China, Europe, and North America were closed.

In this environment, automakers and mobility tech startups have to adjust their business models. Many micromobility and car-sharing players have suspended their services. Corporate players had to reevaluate their strategic priorities and investments in emerging technologies. Economic uncertainty resulted in pulled-back investments from financial investors to early-stage mobility tech startups.

The pandemic is having a substantial negative impact on the automotive and mobility space, according to Golomb. However, not all segments have been affected in the same way, with some benefitting from the opportunities created by the crisis.

Among the industry winners:

  • Electrification: Although the impact of COVID-19 will vary in different countries, the overall sentiment of the segment is expected to be positive. The main drivers include local, crisis-induced financial incentives and increased environmental awareness.
  • Private micromobility: This segment was hit by pandemic early on; however, the post-lockdown use of privately owned bikes and e-scooters rose globally. This should be further elevated as cities create more bike lanes and governments offer incentives.
  • Last-mile delivery: This was an already growing segment, but the pandemic further accelerated its market penetration due to a massive boost in e-commerce and home deliveries. Many incumbents increasingly invest in last-mile delivery technologies, while micromobility providers are pivoting to provide delivery services.
  • Autonomous cargo transportation: The pandemic-driven rise in e-commerce and the social distancing measures should drive more investment in AV tech for deliveries both on roads and sidewalks.
  • Digital platforms: The direct-to-consumer mobility companies have been less affected by the virus, as they continued to operate and sell vehicles. The pandemic has pivoted consumer preferences from traditional dealers to pure online sales and contactless deliveries.
  • Dealership tools: As consumer preferences revert to online to browse and shop for products, most traditional service providers are adapting quickly to match the direct-to-consumer online platform models like those of Tesla and Carvana. Companies involved in digitalizing processes for car sales and services will benefit.

Among the not-so-fortunate segment players:

  • Automotive supply chain: The supply chain is a clear loser. As auto incumbents face plummeting sales, they have to reduce costs and revise budgets. According to a CLEPA (European Association of Automotive Suppliers) survey, 90% of the auto suppliers expect revenues to fall in 2020 and 84% plan to cut investments.
  • Shared micromobility: At a rise of the pandemic, micromobility providers had to reduce or suspend services, facing a massive drop in valuations. However, once the industry manages to control strict hygiene protocols, it will regain traction as it remains an effective solution for urban transit.
  • Ride sharing, car sharing: Ride hailers have experienced declines of up to 60-70%, as riders have reverted to personal cars, walking, or biking. Vehicle operators are implementing the hygiene standards, but with limited effect as it is difficult to deploy standardized rules to protect drivers and riders.
  • Passenger AVs: As OEMs cut R&D costs, they will prioritize electrification, software integration, and ADAS (advanced driver assistance system) safety. AV startups have yet to become profitable, and so they have been struggling the most. However, mature companies will continue to forge ahead as AVs remain in the future of transportation.
  • Public transit: Ridership has fallen 80-90% worldwide and remains heavily impacted. A consumer survey conducted by BCG (Boston Consulting Group) showed that 40-60% of respondents would be using public transit less or much les­­s frequently.
  • Shuttles and robotaxis: In the near/mid-term, these vehicles will likely suffer from less investment in AV technologies and social-distancing measures. The more mature players generate revenue from pilots and limited commercial deployment, which will be restricted in the coming months.

Although the mobility field faces near-term challenges and disruptions, he concludes that the long-term view on the market is bullish. There will be a lasting impact on mobility, as the pandemic has triggered a change in the macroeconomic environment, regulatory trends, technology, and consumer behaviors. Consequently, as the mobility space emerges from this crisis, he predicts that the industry is likely to see a new normality with new disruptive products and services including ride-sharing and -delivery platforms, shared scooter and bike services, and connected and autonomous vehicle technology.

For more information on Drake Star Partners and to download a copy of the report, visit www.drakestar.com.