The Effects of the Changing Automobile Industry on Energy Resources and the Economy

15.09.2021 14:19:00 - Enes Güneyli - Ekonomi
The Effects of the Changing Automobile Industry on Energy Resources and the Economy

The Effects of the Changing Automobile Industry on Energy Resources and the Economy

The automotive industry is the business sector that designs, develops, manufactures and markets motor vehicles. As of 2007, more than 73 million motor vehicles were produced worldwide. The automotive industry is considered to be the locomotive of the economy in all industrialized countries. The reason for the drag-locomotive effect of the sector in the economy is its very close relationship with other branches of industry and other sectors of the economy. Automotive industry is the main buyer in basic industry branches such as iron and steel, petro-chemistry and rubber and is the driver of the technological development in these sectors. All kinds of motor vehicles required by tourism, infrastructure and construction, transportation and agriculture sectors are provided with sector products. Changes in this sector closely affect the entire economy. The automotive sector is an industry that produces Motor Vehicles. Automobile production constitutes approximately 70% of the total mass production of motor vehicles in the world.

This ratio is also valid in Turkey. Automobile production is made in much higher numbers than other motor vehicles. In this way, automobile production also supports the production of other vehicles by creating a strong sub-industry. Therefore, automobile production is the basis of the automotive industry. In the last 10 years, global car manufacturers have achieved their growth mainly in emerging markets such as China, Brazil and Mexico.

Major brands have built capacity not only for the Chinese market but also for the surrounding Asian countries to scale up in terms of efficiency. In a sense, they used China as the "Hub" of the region. Today, China is the country that produces the most cars in the world and this situation is expected to continue. One third of the vehicles produced in China and 57% of light commercial vehicles belong to foreign brands. In addition, foreign brands have large-scale R&D centers in China, in addition to their production. In such a case, if the Chinese State changes its legislation regarding foreign capital, it will have a great impact on the sector. The direction of change will determine the direction of the sector. Another example is Brazil; In 2012, the Brazilian Government increased industry taxes (IPI) by 30%. In addition, it set rules to encourage fuel efficiency, use of local production, and local R&D.

The İmportance Of The Automotive İndustry

The automotive industry, which requires the most complex technology after the aerospace industry, requires a multi-disciplinary technology that includes major engineering fields.

  • Motor vehicle; It emerges with the production and assembly of approximately 5,000 parts, which differ in quality, material structure, process, technology and production place, with a common quality management and efficiency approach.
  • In order for a motor vehicle to be produced and put on the road, its compliance with around 50 global technical regulations related to safety, traffic and the environment and its certification are obligatory. This legislation is constantly renewed depending on the developments in technology. Especially the preparations for new legislation on the environment put the sector under great pressure.
  • Due to the intense competition in the market, customer satisfaction can only be achieved through technological development. For this reason, intensive R&D and continuous development are essential in the sector.
  • Apart from the automotive sector, it creates a large business volume and employment in the marketing, dealer, service, fuel, finance and insurance sectors that enable and support the delivery of raw materials and sub-industry and automotive products to the consumer.
  • The automotive sector is the basis for the development of the defense industry in the country and the rise of the technological level. There is still a great technological development potential and power in this industry branch. Due to these features, the automotive industry, as a strategic industry, attracts the attention of the Governments and a special planning is made for this sector. Especially in this rapidly globalizing sector, competition is gaining great intensity and special policies are implemented in industrialized countries and economic unions such as the EU and NAFTA to protect this sector and improve its competitiveness.

The automotive sector, which directly affects production, employment and technological development, has a strategic importance for the economy. It positively affects many sectors not only with the added value it produces but also with forward and backward connections. The automotive sector, which benefits from productions in fields such as iron and steel, glass, plastic, electronics, electricity and software, provides a more efficient operation in areas such as construction, tourism, transportation and agriculture. The automotive industry also gets its share from the global wind of change fueled by advanced technologies, sustainable policies and differentiated consumer behaviors.

It is predicted that innovations such as autonomous driving, electric motors and connectivity will structurally change the automotive industry. With the emergence of these innovations, it is understood that there will be many changes in terms of both manufacturers and drivers. It is estimated that the market shares of these models will increase, especially in developed countries, as models that provide more energy efficiency and are equipped with new technologies come to the fore instead of existing models. On the other hand, it is seen that it is difficult for electric cars to increase in number and become widespread in a short time due to reasons such as the high selling prices of electric cars, which stand out in terms of environment and energy costs, and especially the short distance to be traveled on a single charge. However, depending on the progress in battery technology, it is predicted that electric cars will increase in the near future with the decrease in costs. The automotive sector, which has started to experience a serious technological disruption on a global scale, is also of critical importance for the Turkish economy. Turkey's total car production increased from 431 thousand in 2000 to approximately 1 million 696 thousand in 2017, and the average production rate in the said eighteen-year period increased by approximately 8 percent on an annual basis. Turkey has managed to become an important base in automotive production thanks to its advantages such as its geographical location, infrastructure and human capital. The automotive sector, which is an R&D-intensive industry, has been the sector that exports the most in Turkey for the last ten years.

While many professions are disappearing, we are experiencing radical sectoral transformations in which new professions enter our agenda. While there are close to 40,000 parts in internally patched engine vehicles, only 50-60 parts are sufficient in electric autonomous cars. In addition, these vehicles are produced using artificial intelligence and advanced robot technologies. When we examine the 2030-2040 sectoral perspectives of the companies, it is a possible prediction that especially those who produce spare parts and sub-industry products will be unemployed. In the first six months of 2021, electric vehicle sales in Europe increased by 122% from 221 thousand 514 to 492 thousand 21 units. By making a very appropriate decision at this point through the private sector, with the government incentives of Turkey, "Turkey's Automobile Initiative Group" (TOGG) is taking an important step with its domestic and national electric car brand, making a serious breakthrough. Turkey has great advantages due to its geostrategic location and its ability to quickly reach markets in Africa, the Middle East and the Balkans. In this systemic transition period, by analyzing all the developments in the world, it will be seen how wrong taxation policies negatively affected the sector when the Brazilian example is examined. For this reason, it is extremely important for legislators to work hand in hand with sector representatives in order to plan the future of the automotive industry in Turkey.

In coordination with the change in the automotive sector, a natural transformation will occur in energy resources. In other words, the gasoline and oil we use in motor vehicles will be replaced by batteries used for electric autonomous vehicles from now on. The most important raw material of these is lithium. The importance of lithium mines is increasing day by day. The realization of this transformation in the periods until 2030-2040 is seen as a natural necessity. In the future, Turkey, China, Germany etc. Countries that are likely to be global automotive actors have significant breakthroughs in these areas as well. This change to be experienced in the field of energy, boron and so on. If the necessary R&D studies are carried out in strategically important mines, it is very likely that Turkey will have an advantageous position.

As a result of all these changes, another important issue is the possibility that the US dollar will disappear as an international currency. Because today, one of the most important elements that add value to the US dollar is the petro-dollar index. Due to the fact that petroleum is not used in electric autonomous vehicles, it is discussed extensively in important financial circles that actors with new energy resources may become advantageous with the weakening or collapse of the petro-dollar index. Therefore, it is an inevitable result that new financial formulas may emerge over virtual currencies in accordance with the new rules of the global system.

In this process of change, which we witnessed in the 21st century, all of the giant brands prepared their electric autonomous vehicles. The biggest brands of the sector are increasing their electric vehicle investments day by day within the scope of EU laws and Paris climate agreement in order to zero the share of fossil fuels in carbon emissions. Automotive giant Germany's Economy and Energy Minister Peter Altmaier recently stated that by 2030, 80 percent of the vehicles to be registered to traffic will consist of electric vehicles. On the other hand, Germany's energy consumption in 2030 is expected to increase to 645-665 terawatts/hour, 15 percent more than previous assumptions, especially with the high electricity demand of electric cars. Important Automobile brands announced the deadlines for releasing internal combustion engines as follows.

MERCEDES

Daimler, the German manufacturer of Mercedes, stated that 40 billion euros will be invested in electric car technology between 2022 and 2030. The company plans to switch to fully electric car production by 2030.

VOLVO

Swedish car company Volvo announced that it will focus on the rapidly growing electric car market and will phase out fossil fuel engines, and that by 2030 all the company's cars will be electric.

AUDI

German automaker Audi has announced that it will cease production of diesel and gasoline cars by 2033 as part of its zero carbon emissions target.

Audi CEO Markus Duesmann announced that as of 2026, Audi will only launch fully electric car models, while it plans to phase out the production of internal combustion engines by 2033.

BENTLEY

British luxury car manufacturer Bentley Motors plans to introduce rechargeable hybrid and electric vehicles to the market by 2026 and to switch to fully electric vehicles by 2030.

JAGUAR LAND ROVER

Jaguar Land Rover has announced that luxury car brand Jaguar plans to produce fully electric vehicles by 2025.

RENAULT

Groupe Renault aims to offer a fleet of more than 65 percent electric and electric-assisted vehicles by 2025, and up to 90 percent by 2030.

MINI

Operating under the German giant BMW, Mini plans to make all brand cars 100% electric by 2030.

FIAT

Fiat stated that it plans to produce all-electric vehicles between 2025 and 2030.

FORD

Ford, one of the major auto manufacturers of the USA, stated that they will increase their investments in electric vehicles to over $ 30 billion by 2025, and said that they plan to have their vehicles completely electric by 2030.

BMW

Another German car company, BMW, announced that 50 percent of the vehicles it will sell by 2030 will be fully electric.

VOLKSWAGEN

German automobile giant Volkswagen will make 70 percent of its vehicle sales in Europe completely electric by 2030.

OPEL

The German automobile company Opel, which continues its activities within Stellantis, stated that by 2028 it will stop using internal combustion engines in its cars in Europe and aim to switch to fully electric vehicle production.

HONDA

Japanese automotive giant Honda has given the latest date among the companies that have announced the date that they will switch to 'all-electric' sales so far.

Honda announced that it will not sell fossil fuel vehicles by 2040 and said it will only sell electric models.

GENERAL MOTORS

Pointing out that the US automaker General Motors (GM) is working with the Environmental Defense Fund to develop a common vision for an all-electric future, the company said that it aims to produce only electric vehicles by 2035.

References

“Re-inventing the weel Scenarios for the transformation of the automotiv industry “ OICA

WEC, Global Transport Scenarios 2050, (World Energy Council, London: 2011).

Pişkin, Automotive Sector Report, p. 21.

The Change of the Global Automotive Industry and the Future of the Domestic Automobile Project Nurullah Gür, Yunus Furuncu

Mike Wall, Automotive Industry Outlook: Navigating the Waters in a Post-Recovery Environment, (IHS Markit, London: 2016), p. 4.