As outlined in our Where to Play 2021+ Report and the subsequent Masterclasses on our COFIM methodology, the end-to-end innovation process requires a thorough, intentional environmental scanning process. Identifying the pertinent trends and technologies impacting your business environment translates to potential for optimizing operations, resonating more deeply with customers, and gaining strategic advantage.
Our series of industry reports provide a starting point; how are the technologies in our portfolio affecting specific sectors, and how can businesses harness these solutions and demand drivers to create tangible value?
An industry-specific lens provides the needed context for identifying and assessing the driving forces shaping the future. Using an evidence-based approach, we analyze the tectonic shifts in the social, technological, economic, environmental, and political (commonly referred to as STEEP) spheres. Our previous blog covers the banking and finance sector, highlighting the interconnected STEEP forces acting upon this industry.
This week, with our latest industry report, we turn the focus to the automotive industry. Around the globe, several driving forces are set to change the automotive industry irrevocably. Vehicle purchasing habits reflect the need for a variety of flexible options which center on consumers’ needs. Sustainability and the move away from carbon-emitting fuel are vital and must be baked into businesses’ supply and value chains. Disruptive technologies and new players entering vehicle manufacturing cannot be ignored; data-led, IoT-infused solutions in the automotive industry reflect a landscape whereby both trusted incumbents and disruptive entrants will exploit new business models.
In this blog, we’ll present some of the forces shaping the future of the automotive industry, along with the key trends, game-changing technologies, and practical industry applications, highlighting how organizations are finding and leveraging innovative opportunities.
Forces Shaping the Future of the Automotive Industry
1. The Ever-Changing Consumer
Consumer choice and flexibility will be at the heart of new automotive business models. Mobility-as-a-service (MaaS) and subscription models for vehicles are expected to grow in the coming years. At the same time, dealerships must balance customers’ need for in-person due diligence and the rising demand for virtual showrooms and engagement. Remote work and a new generation of consumers are altering perceptions of vehicle ownership, usage, and mobility in general, while preferences trend toward flexible vehicle financing and personalized multimodal journeys.
Technologies affecting the Ever-Changing Consumer will incorporate ‘distance commerce’ and Extended Reality (XR) to provide online showrooms and test drives.
Product-as-a-Service highlights the shift from ownership to usership. The changing relationship between consumers and vehicle ownership needs to be understood in conjunction with Redefined Luxury; a younger and more diverse consumer cohort prioritizes high-end experiential offerings, premium access, and sustainable usage over outward-facing status symbols and obsolescence. The Me Commerce trend further underscores the need for personalized vehicle financing and flexible Mobility-as-a-Service (MaaS) products for the Ever-Changing Consumer.
Inspiration: TechCrunch Research from 2021 shows a sharp rise in micro-mobility subscriptions, moving away from ownership to flexible product use. TechCrunch highlights companies such as Swapfiets, which offers monthly subscriptions to bicycles and e-bikes around Europe.
2. Sustainability Regulations
The automotive industry faces increasingly stringent sustainability regulations. Governments will play a vital role in promoting sustainable business practices through both “carrot” and “stick” approaches and time-bound goals linked to international environmental agreements. Independent regulators are likewise setting higher standards for vehicle manufacturers in terms of greenhouse gas (GHG) emissions and fuel economy. In accordance with these mounting sustainability regulations, expect R&D in green innovation and ESG (environmental, social, and governance) investments in the automotive industry to grow.
Trends such as Radical Transparency highlight the need for automotive companies to ensure the integrity of their value chains. Policy-makers and consumers alike expect unimpeachable evidence that sustainability is embedded in corporate strategy and results in meaningful action. Expect a rise in the net-positivity discourse in the industry as novel technologies emerge to meet the demands of the sustainability imperative.
Inspiration: British automaker Land Rover has developed a prototype of its Defender SUV entirely powered by hydrogen. This FCEV model is a part of Land Rover’s initiative to explore alternatively fueled powertrains to deliver on the company’s ambitious goal of zero tailpipe emissions by 2036.
3. Embedded Connectivity
Connected vehicles are expected to represent about 95% of all new vehicle sales by 2030—up from 50% currently. This embedded connectivity generates vast amounts of data, enabling, and in some cases compelling, automotive manufacturers to move toward data-driven business models. With new opportunities for data-driven revenue streams and the promise of greater insight into customer behavior, established ICT companies and startups are entering the automotive industry. Incumbents will need to keep pace with enhanced customer-centricity and product optimization by investing in and leveraging their own data science capabilities.
Vehicle sensors can collect real-time data on usage, performance, electric vehicle (EV) charging habits, and traffic conditions. Technologies like Edge Computing, Internet of Thinking, and Predictive Maintenance make it possible to turn this data into actionable insights that improve the driver experience, mitigate congestion and downtime, and make roads safer.
Diversified Value is a trend that encapsulates the encroachment of tech companies pivoting into other industries, including automotive, by leveraging historical data to provide personalized user experiences. Other trends such as Data Ethics highlight that even as innovations in vehicle interconnectivity are set to revolutionize the automotive industry, consumers are still highly skeptical about how their data is used, shared and stored.
Inspiration: Singapore-based startup Carmen uses predictive analytics to monitor vehicle health. SMS alerts are sent to users via a mobile app or online dashboard to ensure timely service maintenance. The analytics system works through a connected in-vehicle Bluetooth dongle that collects diagnostic data and uploads it to the cloud for analysis.
4. Cities of the Future
Cities of the future will rely on smart mobility infrastructure that reimagines private and public transportation. Advancements in IoT, smart sensors, and edge computing make it possible to collect, process, and share vital data that prioritizes safety and sustainability. Solutions include car- and ride-sharing platforms, autonomous vehicles and unmanned delivery, the rollout of electric vehicle (EV) charging stations, and real-time predictive analytics informing users of traffic, navigation, and multimodal transportation options. Alliance building between governments and businesses will be critical in implementing seamless mobility ecosystems.
Technologies such as 5G Mobile Network and Internet of Behavior will play a complementary role in molding Cities of the Future. High-speed internet will enable real-time communication between transport modes, reducing congestion and accidents. 5G connectivity coupled with the extraction of critical consumer data from sensors and IoT-empowered devices will kickstart the smart mobility revolution in the years to come.
Inspiration: Texas-based transportation equipment manufacturer Trafficware expands its TidalWave service to nine cities across the US. TidalWave is a real-time traffic management solution powered by edge computing and machine learning. Its superior technology provides high-resolution and accurate live data for traffic locations, including predictions of future traffic conditions.
5. Intelligent Manufacturing
The automotive industry is quickly adopting intelligent manufacturing processes that rely on digital supply networks embedded with technologies like industrial IoT, 5G, artificial intelligence, and digital twins. However, many challenges remain, e.g., the high cost of retrofitting older factories, technology skills shortages, security concerns, and cultural resistance associated with job loss arising from automation. While implementing smart factories comes with a high degree of complexity, there are several gains to be made in productivity, customization, response times, energy, and overall cost.
Intelligent Manufacturing will aim to augment real-time feedback mechanisms from both vehicle production and driver behavior. The use of digital twin technology will continue to enable predictive analytics as well as enable international collaboration. The growth of Intelligent Manufacturing will catalyze OEMs to develop new business models and provide adjacent services from enhanced data harvesting activities.
Again, consumer insights will play a prominent role in this innovation area, and trends such as Data Secure by Design will be vital to ensure that information security and privacy are integral to product development, service deployment, and core business operations.
Inspiration: Ride-sharing company Ola partners with Siemens to build a state-of-the-art manufacturing facility. The agreement will see Ola leverage Siemens’ ‘Integrated Digital Twin’ solutions, kickstarting predictive maintenance and more efficient design processes.
Sales of EVs are predicted to overtake internal combustion engine (ICE) vehicles by 2030. While this shift is partly driven by the market pull of government incentives, ESG standards, and consumer demands, the other force propelling EVs forward is investment into technology and infrastructure. Zero-emission fuel alternatives and next-generation batteries promise longer ranges, faster refueling and recharging, and reduced vehicle costs. Simultaneously, cities around the world are deploying electromobility options and infrastructure. Together these changes are making electromobility a sustainable and viable alternative for a growing segment of consumers.
Advancements in Next Gen Batteries provide consumers with a variety of options to participate in the EV economy. These technologies have given rise to the purchasing of battery-electric vehicles (BEVs), hybrid electric vehicles (HEVs), and plugged-in hybrid vehicles (PHEVs) by socially aware consumers who also have the spending power to invest in these vehicles.
Expect an increase in trends such as Behavior Shaping, whereby consumers are incentivized to consider alternatives to pollutant-emitting ICE vehicles.
Inspiration: United Kingdom-based EV service Onto, known for its all-inclusive subscription model, is partnering with Shell to give its users access to charging stations. The partnership will provide Onto customers access to 3,400+ Shell Recharge charge points in the UK.
Want more? Download our Where to Play: Game-Changing Technologies for Automotive Report to read more about how these forces are influencing the landscape of technologies in the industry. Embark on your organization’s technology scouting by exploring the technologies that hold the most potential for impactful innovation in the industry.