Six trends transforming the automotive industry now – and how to respond to them
At a time of rapid change for the automotive industry, here are six of the most important trends you need to know about - and how to turn them into opportunities.
Safer, connected driving and the wealth of innovations that are bringing this to reality may sound like they are great things for the automotive industry.
But a PwC report found the Bill of Material (BOM) for car manufacturers will increase by 44% by 2030.
That is partly down to the new technologies which consumers increasingly demand, including automation and electrification.
Digital disruption is transforming the automotive industry.
Added to that is the fact that most western countries have reached peak car already. “Car sales have declined significantly in 2020, because of COVID. But beyond that they are expected to flatten out in Europe and North America," said HERE's Head of Industry Solutions Carsten Hurasky, speaking at HERE Directions 2020. China stands out as being one of the few significant territories where car sales are still growing.
It could all paint a bleak picture as far as car manufacturers are concerned. How to make money in a market which is diminishing, while the product itself gets more expensive to make?
Car sales have flattened out in Europe and North America, leading to talk of “peak car".
“Looking at how peak car is becoming a reality requires looking at establishing new business models to extract value over the life cycle of the car – not just at the point and time of purchase" – Carsten Hurasky, HERE Head of Industry Solutions
In his session at HERE Directions 2020, Carsten laid out some of the important trends shaping the industry, and how they can become opportunities rather than threats.
Aiming for the CASE car of the future – connected, automated, shared and electric – can open new streams of revenue just as the old, traditional ones seem to be dwindling.
“Looking at how peak car is becoming a reality requires looking at establishing new business models to extract value over the life cycle of the car – not just at the point and time of purchase," Carsten added.
From bricks to clicks
People are moving away from buying cars from a physical salesroom, and towards buying their vehicle online. This digital transformation may be a radical change for a traditional industry. However, it is also an opportunity to cut costs, since advertising and selling cars in this way is much cheaper.
Manufacturers can see the rise of digitization and connectivity as an opportunity. As automation in cars increases, there is an opportunity to monetize the in-vehicle experience, through infotainment and advanced driver assistance systems (ADAS), for example.
“The big topic in automotive is the innovation towards zero: zero accidents, zero contamination, zero security breach, and zero error," Carsten said. While that may seem a tall order, zero emissions targets are an opportunity for electric vehicles. Car sales in 2020 were hit globally by COVID-19, but “exceeded expectations" in some territories.
When it comes to avoiding accidents and errors, automation can often make better decisions than the driver.
“For instance, in the area of automated valet parking," Carsten said. “[The car can] anticipate changes as soon as they happen, as soon as a parking spot becomes available. Because it has more and better information, the driver can find its parking slot."
Information like this can also be used to help the driver make safer decisions on the road.
Automation can make better decisions than the driver.
From ownership to usership
Car sharing is a trend that has been talked about for some time. Alongside this, subscription models for certain vehicles have become more common, as younger people are less interested in owning a car outright. “Generations Y and Z value the car in a different way," Carsten said. Urban mobility trends are focused on multi-modal journeys rather than using a car for every trip, even in the age of COVID-19. This does not mean that cars will not be wanted in the future, but new business models, particularly in the way people pay for their vehicles, are emerging and flexibility is key.
Eventually, ride-hailing services will be provided by driverless cars, taking the move from ownership to usership even further. But Carsten said this is a long way off. “We see some pilots happening around the world. But it's certainly 2025 and beyond before we will get a broad rollout."
Waymo has begun tentatively offering driverless ride-hailing services to the public in Phoenix, but it may be some time before this is widely available.
Enhanced user experience
While the move from ownership to usership is one path, another is creating an incredible user experience for the driver. Increased automation brings with it a host of possibilities. “With growing automation, the time a driver actually drives the car is going down. Suddenly, this time is getting freed up for new experiences, because the driver doesn't have to keep an eye on the road," Carsten said. That leaves the way free for those extra services such as in-car entertainment, extra ADAS services or even advertising if it is done in an unintrusive way. Those extras can be charged for on an on-demand basis. “It is an invitation for new entrants to generate value and generate revenue from the consumer in the time where the person is actually a passenger in his own car," Carsten said.
Digital sixth sense
Most drivers with modern ADAS systems are used to getting some form of guidance from their vehicle, whether that help with parking or lane discipline. As the technology develops and vehicles are able to communicate more with each other using sensors, the car will be able to warn the driver of obstacles which are not even visible to them. “This is about vulnerable road user detection and alerts for vehicles approaching from behind. It's like an additional sensor that can look around the corner and knows that there's an ambulance coming because of vehicle-to-vehicle communication," Carsten said. This use of the car as a data exchange point, both receiving and providing data to others, has a high value. It can in turn be used to create more services. “We're just at the beginning with this category of data exchange services, and with more data being exchanged, more services will evolve. And the developer ecosystem will create new functionalities," said Carsten.
Greater than the sum of its parts
We might think of in-car navigation systems, entertainment inside the vehicle and automation as separate entities, but that will change.
Drivers want to be informed about changes or updates on their desired route, such as a lane closure or traffic jam. In the case of automation, the driver will need to be informed that the car will do certain maneuvers and then transfer responsibility to the driver when conditions change. All of that should work seamlessly together.
It is up to manufacturers to provide a scalable platform with headroom for updates and upgrades, in terms of the hardware, the software and the connectivity.
“The set-up in the car needs to allow for future enhancements and future technologies, and new services," Carsten said.
“Every consumer expects a seamless integration between the physical and virtual world."
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