The automotive industry is currently in a vast turmoil, thus nobody is able to predict the future as well as to forecast which technologies will have the biggest impact on the automotive industry. Nevertheless, it’s inevitable that a technological wave is disrupting the industry and car companies are forced to react (Blackman, 2019). Besides providing a brief glance on the most impactful changes in the automotive industry, I would like foster a vital discussion, asking for your opinion on the most important technologies and the future of the automotive industry.
First, passing by the technology of electrified cars is impossible when analyzing the current automotive industry. It is more than just it`s propulsion technology but rather a step towards cleaner roadways and carbon reduced emissions. Therefore, it comes by no surprise that sales of electric cars are peaking at around 5.1 million cars in 2018 (IEA, 2019) , while being at around 200 000 in 2013 (Kane, 2016). Moreover the rise of importance is underlined by the fact that electric vehicles will amount up to 35% of all global new car sales by 2040 (Bannon, 2016). Secondly, the invention of vehicles that are not in need of any human intervention is called autonomous driving. To my mind the impact for the future of the automotive industry are tremendous as the list of advantages are endless. For example, traffic death could be reduced by around 90% or 60% less carbon emissions due to reasons as decreased traffic congestions and increased efficiency of fuel use (Goldin, 2019). Last but not least, the interconnectivity between cars and/ or with traffic infrastructure could create increased revenues, reduced costs, boosted safety and create value opportunities of around 750$ billion until the year 2030 (Bertoncello, Husain and Möller, 2018). Furthermore, advantages are seen in time-saving and increased productivity as accident alerts, traffic conditions and live route optimisation including shorter routes are available (Fernandez, n.d.). Additionally, interconnected cars increase the safety standard as they are able to communicate with road infrastructure or other cars. Therefore, there are forecasts which predict that there will be 380 million connected cars by 2021 and a new ecosystem in the automotive industry. Wait … a new ecosystem?
Of course, electrification, autonomous driving and interconnectivity are shaping the car industry as just a few technologies ever did before. But are those the most impactful changes to the automotive industry? To my mind those technologies are “only” the enhancers for something that is bigger than those technologies – a new ecosystem in the automotive industry which is boosted by interconnection, automation, electrification and smart algorithms. It´s not about selling cars anymore, but rather about cooperating with new partners in order to deliver the best, most convenient and sustainable mobility service for a new generation of high demanding customers. What are your thoughts – are those really the most important technologies at the moment? And are the technologies just the enhancers for the new ecosystem or is the new ecosystem just an overrated buzzword?
References:
Bannon, E. (2016). E-vehicles to be 35% of sales by 2040 thanks to falling battery prices | Transport & Environment. [online] Transportenvironment.org. Available at: https://www.transportenvironment.org/news/e-vehicles-be-35-sales-2040-thanks-falling-battery-prices [Accessed 10 Sep. 2019].
Bertoncello, M., Husain, A. and Möller, T. (2018). Setting the framework for car connectivity and user experience. [online] McKinsey & Company. Available at: https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/setting-the-framework-for-car-connectivity-and-user-experience [Accessed 10 Sep. 2019].
Fernandez, T. (n.d.). 6 Key Benefits of Adopting Connected Car Technology | Autotrip. [online] Autotrip. Available at: https://autotrip.com/connected-car-technology-benefits/ [Accessed 10 Sep. 2019].
Goldin, P. (2018). 10 Advantages of Autonomous Vehicles | ITSdigest. [online] Itsdigest.com. Available at: https://www.itsdigest.com/10-advantages-autonomous-vehicles [Accessed 10 Sep. 2019].
IEA (2019). Global EV Outlook 2019. [online] Available at: https://www.iea.org/publications/reports/globalevoutlook2019/ [Accessed 10 Sep. 2019].
Kane, M. (2019). Plug-In Electric Car Sales Visualized From 2011 to 2015. [online] InsideEVs. Available at: https://insideevs.com/news/329358/plug-in-electric-car-sales-visualized-from-2011-to-2015/ [Accessed 10 Sep. 2019].
I definitely agree that autonomous driving will come. Especially for commuters it just offers so many time-saving advantages and who would not rather already get some work done instead of driving one hour stop-and-go. I do have to say that I think it will take a while until Level 5 (where no human interaction is needed at all) will be here, whilst I think Level 4 (where drivers can nod off in between rides) won’t be too long.
However, I am not quite sure about electrification. It is definitely on the rise – as we can see in all parts of mobility, not just in cars. But do you think we actually will be able to build the infrastructure around it to allow everyone to drive electric? I am personally quite hesitant to imagine such a wide-scale evolvement. What users would want is a charging infrastructure that is not too expensive and foremost, easily accessible. Imagine how much energy and thus, how many charging stations you would need let alone in a normal street filled with households of around 2 cars per house. You might want to have a look at this article (https://www.belfercenter.org/publication/charging-future) which finds a utilisation level of 10% of commercial chargers which, therefore, are not seen to be economically profitable.
On another note, I think this industry is not just about economics etc. but that there is a serious shift in the society happening. In my opinion, there is a tendency to move away from owning cars which, considering brands like BMW or Porsche represent status symbols, is quite significant.
Hi Alex,
It was about time someone mentioned the automotive industry on here, great blog entry! First off, I feel like this is a very emotional topic and the sector is currently undergoing tremendous changes which impact the fundamental business model of OEMs. Previously, automotive firms were focusing on improving engines and design to deliver the best driving experience possible, with various models to cater to every customer need. Today, capabilities in software engineering are vital for auto companies to fight disruption by tech companies such as Google’s Waymo. Waymo is about to launch a system software for autonomous driving (named Google Chauffeur), which could consequently be adapted by every car make and model. So depending on the advancements of the software, autonomous driving level 3 and 4 are more realistic than ever before. This would leave companies like Fiat Chrysler or Toyota in the “supplier quartile”, losing out on profits (Weil & Woerner, 2015). Moreover, the automotive industry is facing serious threats from innovators like Lyft and Bolt, offering mobility services that make the mere ownership of a car in urban areas obsolete.
So coming back to your question, I believe the automotive industry has realised that their traditional business model is coming to an end and various new players are entering the market. And we are no longer talking about automobiles but mobility and transportation solutions. This is also why we can observe rivals like Daimler and BMW joining forces to develop mobility apps families. Not just for ride-sharing and hailing, but they are also trying to build an ecosystem of services, for instance with automated parking solutions (ParkNow) or a charging station locator (ChargeNow), to enhance customer value and collect insightful data on customer behaviour.
Personally, I see two problems here. The first one being the shift in core capabilities which automotive companies need to master, and the entire organisational transformation it entails. The second one being that profits form apps and data only scale with a large customer base, which is currently not reached by the services offered. In other words, most ecosystems or platforms built by OEMs are not meeting revenue expectations as only a limited number of potential customers can be reached.
Cars (wether electric and/or autonomous) will always be needed as means of transportation, the question is only who will manufacture and run them? Do you think we will still see the same players in the market 5 years from now?
Weill, P., & Woerner, S. L. (2015). Thriving in an increasingly digital ecosystem. MIT Sloan Management Review, 56(4), 27.
Interesting take on how technologies have (and will) change the face of the industry! I agree that the four changes mentioned (interconnection, automation, electrification and smart algorithms) are indeed vital in shaping the future of the automotive industry. However, I think that we have been too focused on cars as a means of private transportation. I wonder if these changes can also be expanded to public transportation.
Imagine how these autonomous cars can drive its users to the nearest airport transfer, which is an autonomous bus. The bus have already consent from users to access their travel information, allowing the users to be dropped off at the most convenient spot in the airport, on the most convenient time! Also imagine how this changes can affect trucking industry. An autonomous lorry carrying a container full of supplies can drive all night without making a stop. Furthermore, it’s smart algorithm will ask the autonomous lorry to drive slower in busy roads or drive faster where it sees fits.
These technologies and its applications are not just buzzwords. It will change the industry landscape and its applications are endless.