A year ago, previews of 2017 would have pointed to potential renegotiations of the North American Free Trade Agreement (Nafta) and Brexit as two of the most obvious threats to global free trade and the smooth-flowing automotive supply chains that have become so embedded across the wider regions of North America and the European Union.
Unfortunately, the outcomes of both of these negotiations, including just how severe the resultant restrictions on trade will or won’t be, remain largely unresolved – and so both discussions remain two of the biggest events to watch in 2018.
Despite an initial delay in getting past the divorce part of the negotiation, the UK has recently agreed to certain conditions that should allow it and the EU to move towards trade talks early in 2018. However, given a weak political position for the British government at home and the complexity involved, finding agreements that satisfy prime minister Theresa May’s own government ministers and members of parliament may prove even harder than working out trading terms with Brussels.
In the Nafta region, US demands seem to have gone beyond the initial talk of merely modernising the 24 year-old agreement, after the country was reported to have proposed much greater local content requirements for motor vehicle production, including for a higher percentage of required parts from the US specifically. Canada and Mexico have opposed the proposals and if a compromise is not reached, the US could pull out of the agreement, which would lead to tariffs and barriers across the continent.
Presidential elections in Mexico may also play a role in delaying any meaningful progress in the talks during 2018.
Ups and downs
A growing global economy could help the supply chain. After a 4.2% increase in the volume of trade in goods and services in 2017, the IMF is predicting similar growth in 2018, which would see the number outpace GDP for a second straight year. However, the WTO and others have pointed to the risks to global trade posed by the Nafta and Brexit negotiations.
According to data from PwC Autofacts, global light vehicle assembly is expected to continue to rise in the coming year. Having grown by about 1% in 2017 to 94m units, the number is expected to reach 98m units in 2018, an increase of 4%. However, the headline growth masks difficulties in big markets like the US, Europe and Japan, where sales are expected to remain stagnant or decline; low single-digit growth is expected in China.
Stronger increases are expected in India. Manufacturers and logistics providers should also see a boost from the Goods and Services Tax (GST) that was implemented in 2017, which should help to enable a freer flow of goods across the various state borders. At the Automotive Logistics India summit recently, Amit Bhardwaj, senior research officer for transport at the National Institution for Transforming India, said some states had already removed borders and that major states would have taken them down by the beginning of 2018.
Brazil, which finally saw strong recovery in 2017, may not keep up the pace. Despite a 25% increase in production in 2017, the domestic market is forecast to grow only slowly in coming years.
The EV revolution
The growth of electric vehicles is set to continue, thanks to a number of new entrants and the more traditional OEMs ramping up their respective plans, as well as a shift away from diesel vehicles. With this growth comes more activity in building battery cells and lithium-ion batteries, which involve complicated supply chain procedures.
EV sales set new records in 2017. According to estimates from Macquarie Bank, November saw the 100,000 global sales mark breached for the first time in a single month, including 80% growth for battery electric vehicles and 90% for hybrids, compared to the same month in 2016. While OEMs have announced a series of significant investments for EV and battery production in Europe and the US, China will drive most of the growth in 2018, and probably for longer than that, thanks to changes in regulations and incentives. This will have implications for the entire global supply chain.
Deeper into the connected era
For global automotive logistics, the adoption of new technologies and digitalisation should continue to grow in 2018. Cisco’s internet of things (IoT) director of strategy, Theresa Bui Revon, says that while IoT and big data intersected “in a big way” in 2017, the industry will move into what she describes as a “new era” in 2018.
This, she says, will be “one that requires figuring out who gets access to that data, how it can be used and who owns it”. “And with only 1% of IoT data actually being used today, it is now critical to determine which data is actually valuable and actionable to help drive real results,” she adds.
Revon also believes 2018 will be the year that most major automotive companies will commit to a percentage of their fleets being used as part of a ride-sharing service, with transport-as-a-service going mainstream. “Some will invest in existing ride-sharing services, while others will introduce their own branded offerings,” she predicts.