Car companies are evolving, they are no longer just vehicle producers, but mobility providers, and electrification, connectivity and autonomous technology are the driving forces behind the change.
The automotive industry is reluctant to be revolutionary, it’s why the basic technology that powers our vehicle has changed very little since the first combustion engine was integrated under the bonnet of a car.
Yes, complexity has increased in an attempt to gain greater efficiency from burning fossil fuels, but the process – igniting fuel to provide motive force – hasn’t changed. But change is being forced on the industry.
Carbon dioxide, nitrogen oxide and particulate matter, and the need to reduce how much is produced by cars, is having a huge impact on the industry. That, combined with peoples clamour to remain connected even when they are behind the wheel, and the growing investment in self-driving cars is changing the way the automotive industry works.
It’s no longer possible to simply produce cars from a factory and sell them to private buyers, that’s an archaic business model. Car companies need to adapt to their surroundings and become mobility and service providers.
“It is a known fact that electromobility has a great transformative impact on the business process of incumbent OEMs and suppliers, but it’s also becoming obvious that dynamic business models are a key success factor for long-term competitiveness,” said Prof. Wilfred Funk, from Albstadt-Sigmaringen University in Germany, when he spoke at the CTI Motor Symposium in Berlin.
Electrification isn’t cheap. Compared to combustion engines that have had over a hundred years of development and now benefit from huge economies of scale, using electricity is incredibly expensive, as seen by the sticker price on most electric vehicles. So car companies need to change business models to help them absorb this cost and make the technology more appealing to consumers.
That would be an enormous challenge on its own, but it isn’t the only one facing the industry. Connectivity has become so engrained in our way of life that stepping into most vehicle cabins is like stepping back in time, cut off from the outside world. The race is now on to make vehicles as connected to the wider world as the devices we keep in our pockets.
But it doesn’t’ end there. With the electrification of the vehicle powertrain and greater levels of connectivity the door is opened to self-driving technology and the ability to make our cars fully autonomous – you can’t stay connected and drive a car, so why not let the vehicle take control. And while the incumbent car companies are developing these systems, they have been somewhat blindsided by new players, from firms as large as Apple and Google, to new start-ups developing technologies in Silicon Valley, not forgetting the likes of Tesla, and its Chinese equivalent BYD. All firms that can adapt quickly, and don’t currently suffer from the slow development cycles in the automotive world – a new car can take up to eight years to engineer.
So what do companies such as Ford, Audi, Volkswagen, Honda and others do to maintain their position in the market?
Continue to produce vehicles, of course, but they will shift away from private ownership, hoping to tap into the mobility and service market, offering subscription services where consumers can use vehicles as and when they need them. So rather than having a car sat idle on our driveways, we’ll hail one when the need arises. Not only this, but they can also tap into the data being collected from users of these highly connected vehicles and that taken from embedded sensors on the cars, to offer different services, display advertising in the vehicle and broaden the number of revenue streams open to them.
It will impact suppliers too. Firms are already developing systems that can display information across the entire windscreen, and can even track a person’s eyes to see where they are looking. So if they look at a particular billboard, more information can be beamed into the vehicle’s cabin.
“One characteristic element of this transition is that transversal co-operations become more important because of the product’s complexity, growing competition and the increasing digitalisation of industrial processes and products. Another important point is that the traditional OEMs as well as the suppliers see themselves forced to extend their original business models from pure manufacturers and deliverers to become innovative service providers in the emerging market of electromobility,” said Funk.
There are an estimated one billion vehicles on the roads worldwide, that’s a lot of data to feed into the IoT, that can be monetised and used to offset the cost of the electrification process, increasing connectivity and making autonomous vehicles a reality.
The automotive industry has very rarely been revolutionary, proven by how long the basic combustion engine has remained our primary form of propulsion, but that is changing. Regulatory pressures to reduce emissions, and technological advances in other industries are having a wide reaching impact on car companies. It won’t be an overnight change, but vehicles of the future will be very different to what we currently know – they’ll be electric, autonomous and highly connected.
Are carebots the solution to the elderly care crisis?
To enable comments sign up for a Disqus account and enter your Disqus shortname in the Articulate node settings.