Adrian has been conducting research on, and managing teams of analysts covering, the technology industry for over 20 years. He has pioneered many data analysis techniques and methods that are used widely by analysts today, as well as having created frameworks for measuring numerous technology markets from industrial automation products to semiconductors.
Our Research Methods
The traditional approach of Interact Analysis’s Manufacturing Industry Output (MIO) tracker has been to use a wide spectrum of historical data to predict trendlines in the various industry and machinery sectors we cover. In that way we can equip industrial strategists across the world with a comprehensive data-driven tool enabling them to make informed decisions. However, because COVID-19 has been such an unprecedented global shock, for this edition of our MIO, we have completely reinvented the way we forecast, looking specifically at the impact of the virus from region to region, assessing the extent to which each region’s constituent industries have been affected, and predicting the likely trajectory of their recovery. This has been a challenge for us since there are few indicators to go on to inform these predictions. We have endeavoured in this report to outline some key thinking in arriving at our figures.
If you find this content interesting, we have decided to make the full report available to all companies for free. Click here for more information. We are all trying to help each other by giving a little back during this crisis, and this is our way of doing that. We hope that this information contributes to companies making sound decisions to better cope with how they are managing their businesses during this crisis.
Below are a few reflections which arise from our latest report, and some additional thoughts.
The Automotive and Commercial Vehicle Production Sectors: Badly Shaken, and Slow to Recover
The automotive industry has been hit hard. Lockdowns across the globe have inevitably reduced traffic on the road, the knock-on effect being lower demand for garage services, parts, and new vehicles. COVID-19 has significantly increased unemployment rates, depleting disposable income and people’s ability to make major capital purchases. Interact Analysis predicts that the industry will take years to recover from these demand-side problems. In fact, by 2024, we are predicting automotive manufacturing output levels will still be below those achieved in 2019 – see Fig. 1. Some governments have recognised the scale of the problem and promised action. Recently, France 24 reported that President Macron has promised billions of Euros of aid to prop up the French automotive industry, in the face of a collapse of sales of new cars. Turning a negative into a positive, COVID 19 may yet prove to be a watershed moment for vehicle electrification as such aid has been attached to EV incentives, targeting French output of over one million hybrid and electric vehicles per year within five years. More on this later.
Fig. 1: By 2024, Interact Analysis predicts automotive manufacturing output levels will still be below 2019
The commercial vehicle production market is suffering in a very similar way, and again commercial vehicle manufacturing output levels by 2024 will still be below the 2019 levels (see Fig. 2). This category includes trucks and buses, off highway vehicles, and ships and trains. The bus and train sectors have been severely affected, with huge declines in passenger numbers due to social distancing – in Germany, bus passenger numbers have declined by 40-60%, for example. The crisis has afflicted the road haulage industry as well, despite most countries designating haulage as a key industry and thus allowing it to continue. For example, in the UK, a recent Parliamentary Review reported that almost half of the UK’s truck fleet was off the roads because of COVID-19.
The off-highway vehicle market, a topic Interact Analysis conducts dedicated research on, is experiencing mixed fortunes depending on vehicle type and region discussed. The US market is most severely impacted, although this is largely due to COVID-19 emerging during a down cycle, further exacerbating the scale of loss.
Industrial Robots: Short-term Slump, but Likely Longer-term Revival
Robotics will be a casualty of COVID-19, as several important industrial robot end users, such as the automotive sector, take a hit on the demand-side. This slump is predicted to be a short-term phenomenon, however, and in the longer term, the pandemic is actually expected to accelerate automation, as manufacturers strive to virus-proof their shop-floors. Recent research from Interact Analysis shows that, while industrial robot revenue will be down 8% in 2020, there will be a strong rebound in 2021. A recent report in ($) tells much the same story, predicting that key industrial robot suppliers, such as Yaskawa and Omron, will experience a boom in orders. Demand for industrial robots, which was clearly growing anyway, will be further boosted by the need to allow for effective social distancing of the workforce. In many countries, some measure of social distancing could be in place for a year or more, and repeated outbreaks of the virus are hardly out of the question. So, any company which needs to build new production lines in the next 12-24 months will be giving deep consideration to higher levels of automation. Even Toyota, which has expressed fears that rapid automation will result in a loss of skills among the human workforce, has conceded that COVID-19 is likely to speed up the shift to robotics in factories.
The huge boom in e-commerce caused by the pandemic is likely to be another catalyst for the robotics industry. Major retailers such as Amazon and Walmart took on thousands of new warehouse operatives and delivery drivers during the pandemic. It is widely assumed that the virus will be habit-forming where online shopping is concerned, and that demand online is likely to continue after the virus has subsided. As with the industrial shop-floor, social-distancing measures are likely to fuel the demand for automation in retail warehouses. There is also the added factor that the use of robots and other automated equipment in these environments increases efficiency and speed of supply of goods to consumers.
The Planet at a Crossroads: COVID-19 and the Climate Emergency. Is Electrification Part of the Answer?
Continued concerns about climate-change were brought into sharp relief as COVID-19 shut down large parts of global manufacturing and emptied the roads. People in lock-down in previously polluted cities woke up to a much quieter world, with clear skies, fresh air, and the sound of birdsong. Nature showed us how it could recover from polluting human activity in a relatively short time. There is a fear, now, that as the world emerges from the pandemic the resultant economic crisis will cause a loosening, rather than a tightening of environmental controls. This could be opposed, however, by a shift in consumer attitudes towards sustainable transport, brought about by nature’s recovery during the pandemic, which has already been evidenced in Western Europe where EV sales jumped 57.4% in the first quarter of 2020. With his proposed increase in the financial inducement for private citizens to purchase electric cars, France’s president Macron may already have recognised this. Another likely winner could be the electric bus market, ushering in a new generation of environmentally- and consumer-friendly vehicles. A recent poll of RATP (Paris) customers had 93% of respondents in favour of electric buses.
The above-mentioned boom in online-shopping could prove another major opening for electrification, in the form of electrified last-mile delivery vans, replacing the thousands of ICE vans we have seen on our roads during the pandemic. Parcel delivery service, UPS, already has a programme to roll out a fleet of 10,000 electric Arrival vans, across the UK, the EU, and the US between 2020 and 2024. The Royal Mail is currently trialling Arrival vans in London. Ideal for short runs of, say 150 miles per day, that can be recharged back at base.
Conclusion….and an After-thought…
The term ‘winners’ might not be the best way to describe sectors which benefit from the COVID-19 crisis. We have all in many ways been losers, after all. And the future is uncertain. But some sense of normality will eventually prevail, and it might even be a better normal.
One final consideration: Much has been said about global supply-chains during the crisis, particularly in relation to the global scramble for personal protective equipment. There has been talk of re-shoring production, and that will most likely come about, particularly in relation to items where security of supply is important. Medical supplies, including PPE, will most likely now fall into that category. But in the main, companies will build resilience by ensuring they have a range of suppliers in diverse geographical locations. After all, if you put all your eggs in one basket, and the wolf gets the basket, all is lost.