Future of the Automotive Industry

1964 was the year when Ford took center stage to capture the public’s imagination with its Ford mustang. They brought out a car of total performance for a young America, out to have a good time, selling as much as four times what they estimated that first year. Over the years cars have traveled through being the freedom machines, being the means of transportation, being a branding of personal expression. It has gradually formed an ecosystem of regulations, infrastructure, industry, and economics around it. This transformation has seen the automobile find an identity in each of the time periods.

This has also been influenced by the perception of mobility among the users, which has seen tremendous change in the last years with the arrival of strong digital infrastructures and the rapidly growing needs and expectations.

“Our view is that the automotive industry will see more disruption in the next ten years than it has seen in the last 50 years” — Ashutosh Padhi, Mckinsey

The automotive industry is already being referred to more broadly as the mobility industry with the next generation of products and services enabling the transportation of people with changing business models around the eco-system, tending towards shared ownership, immediate user-centric services, and looking at it as a community space.

The Backbone Trends

So what are some of the trends that are transforming the way the mobility industry is seeing itself and creating new business opportunities while changing the way the user and we see the automobile: McKinsey says the key factors constitute the ACES. It stands for autonomous, connectivity, electrification, and sharing.

In the recent World Automotive 2019, Oct 17 conference (839 senior officials from 20 countries) that took place in Istanbul it became increasingly clear that the players involved in the industry are paying increased attention towards customer-centric, agility for innovation, partnering with non-traditional players, focus on connectivity and data and finally addressing autonomous and electric vehicles that seem to go hangs together.

These trends are each by themselves very disruptive but taken together have redefined the transformation. Mckinsey argues that the traditional revenues from traditional business models have peaked and non-traditional players are emerging from the technology space. This transformation is so fast that there is a huge Urge for the traditional players to find real quick solutions, build expertise to stay alive in the business. To just give a reference, a car is going to have 200 million lines of software code in the future. All of Facebook in comparison today is roughly about 50 million lines of code. This sort of massive change requires a lot of expertise and a strong vision of how we see the automobile. OEMs are ready to buy secure software functionalities, and customers are keen on customizing features. Is there space for disruptive innovation? Yes.

How do we see the car of the future?

In the new emerging mobility industry, the consumers will engage their vehicles. The car is no longer just a utility, it’s a third living space as Arda Bafra, Executive Director of Design, Automotive, Maxim Integrated, describes the car. He presents it as the third environment we will live in.

It a place where passengers can use their time to prepare for their meetings, play games, use their phones, engage in social activities, watch a movie and the only engagement is to tell the destination and the system is smart to ensure the functioning. The automobile is no single element but a part of an entire interconnected ecosystem that is constantly communicating with each other and is able to monitor the status of each automobile from a single node in the urban infrastructure. The security and data generated are the keys for the OEM. These offer a great possibility for new business areas as well. For the users, they no longer have to own, maintain the car. All they have to think about is engaging with the shared network and pay for these services. Drivers do not need licenses and the responsibility of the car and vehicles are shifted.

The car of the future will be connected claim a majority of the stakeholders — it will be able to monitor in real-time its working parts meaning the diagnostics and maintenance will chunk down with strong AI modules. The safety conditions of the environment will also be constantly communicated with other vehicles and with an increasingly intelligent roadway infrastructure this could solve a lot of traffic congestion issues creating better flow. In case there is a breakdown, the cars will be able to automatically optimize and redirect their pathways miles away and all of them constantly real-time. Too much traffic, too many cars, lousy driving, public transport, very few parking spaces, air pollution.

The main transformation in the industry

Figure 1 shows the general flow of the investment:

Figure 1: Investment landscape in the transforming mobility ecosystem, Ref: McKinsey

Connectivity: Connectivity is when you think of the automobile as a computer on wheels sharing data constantly into the cloud and every automobile integrates itself into this cloud. It has become increasingly familiar to the consumer with the already available systems such as the On-Star, GM’s popular help button that provides directions to emergency services.

Smart mobility: Uber, Ola and Lyft have already changed customer engagement in the vehicle. Users today can use seats from any vehicle in the area and only focus on the destination. Most of the traditional OEMs are evaluating how this will impact new development and design and how this model could be used to build their businesses. This has led the development to be increasingly customer-centric and had brought the big OEMs much closer to the end-user skipping the dealers. This has also led the OEMs to invest more in smarter infrastructure and look at the ecosystem as a whole and not just the car itself. This will result in changes in the physical development of vehicles and the software that’s inside them.

Autonomous vehicles: The argument behind the autonomous vehicles is the increased safety and reduction of collisions due to human errors. By 2016 already, industry observers and consumers became more aware of the safety issues and technological challenges involved in the autonomous evolution. There are 5 levels of autonomous driving from level one to level five, with level five being a driverless car that can operate in any part of the world and even though some of the technologies have achieved autonomous driving to quite an extent the political realities and the likely regulations, necessary standards, and market acceptance are yet to be shifted. By 2030 the prediction is that certain cities might achieve this autonomous system. Figure 2 show one such example of the maturity already available.

Figure 2: Collision avoidance maturity, Ref: McKinsey analysis

Electrification: With improved batteries and huge move towards climate change conscious technologies, emissions standards becoming tougher, consumers are demanding better clean technology. The growth towards EVs has been steady, but slower than proponents of the technology. Electrification is the shift away from the bedrock of the industry, the oil and gas industry, which has been the internal-combustion engine to a whole range of battery applications. A lot of investments from mainstream OEMs because if game-changers like Tesla coupled with government regulation like in China and India where it is tougher to buy an IC engine vehicle and increased battery research will lead to full EVs very soon.

Future Outlook

The Integration of data to and from a vehicle is key to the future of the automobile. Personalized preferences in the car to future services like “predictive maintenance” options to monitor and warn consumers about the health of the vehicle and services provided would be important elements of the new model.

With this type of integration, personalization takes on an element of productivity. With the heavy media attention and high levels of consumer interest in autonomous vehicles and the connected car, the automotive industry will continue to make increasing investments as it tackles the issues surrounding personal data security, privacy, and safety.

This also makes sure that the manufactures and technology suppliers completely rethink the from a customer-centric view of the car. Connected devices, agility in innovative processes, B2B collaboration, and User-centric approach in the design are topics that will gain high prominence.

Software and data will become and are already essential to develop both local and global strategies.

Katharina Hopp talks about the importance of an ‘agile mindset’ for driving innovation. It is good for quick adaptation, by listening and understanding, to consumer needs. Partnering is an absolute buzzword for the future of the industry. The importance of partnerships between start-ups, major companies, local and central governments can’t be lightly stated. There is a huge room for a lot of progress and collaboration might lead to unique solutions for unique problems.

We are far from the 1964 vision of the Ford Mustang, we have a society prepared for something very different, perhaps more exciting. The future of the automotive industry is fast progressing, exciting, open to those who embrace the change.







Published by stanishgunasekaran

Hey there, thanks for being here. I am an Entrepreneur and a creative problem solver.

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