The Next Element: The Challenges of the Automotive Industry
One of the important issues that the Mobile World Congress 2017 showed us is the impact that mobility is having in so many industries. One of them is the automotive industry, in my personal opinion, the main character of the amazing event.
The connected car using 5G tech and Big Data will influence market trends and automakers’ relationships. Features like safety sensors, detailed engine maintenance signals, and smartphone integration are already becoming common in new upmarket vehicles.
Industry leadership will shift, in some cases, to new players, while conventional original equipment manufacturers (OEMs) will be pressed to substantially accelerate their drive for innovation — not just in technology, but in their cultures, merger and acquisition approaches, management styles, and recruitment of talent.
The Automotive industry is undergoing momentous transformation in two important directions:
▪ Connected cars: Cars that have access to the Internet and a variety of sensors, and that are able to send and receive signals, sense the physical environment around them, and interact with other vehicles or entities.
▪ Autonomous vehicles (also known as self-driving cars or robotic cars): Motor vehicles that operate without a human driver which reduce the cost of transportation and improve convenience and safety and is also generating the new concept the “car as a service” or the “on-demand car”.
Automotive Industry´s Trends:
🚗 The 5G Connectivity, Cloud Applications, Big Data, and Analytics services: Technological innovation is accelerating, particularly the quality of connectivity (based on fifth-generation wireless technology able to stream data from the cloud in near real time and the capacity for processing the data). Additionally, the evolution of complex low-cost sensors that can make a car act as a smart car capable of knowing what is happening around it also allows the development of new business areas and new business models using these kind of technologies.
🚗 New high-tech entrants accelerating innovation: Nontraditional tech companies are offering more than new services as add-ons to automobiles. They are gaining traction in the very technology that makes cars run — and in so doing, they are disrupting the traditional vehicle technology value chain. Apple is reported to have invested as much as US$5 billion in its own car; Google is working on an entire operating system for connected and autonomous cars. Google’s own self-driving cars have already driven more than 1.5 million miles; Uber and Tesla are exploring new ways for autonomous transportation. The main characteristic all these companies have is that they are new entrants, coming from a different industry and operating differently from traditional automakers and suppliers, with a greater willingness to test new ideas and speed up product development cycles.
🚗 New mobility concepts and increasingly urban customers: Motivated for “urbanization of the population”, potential car buyers are undergoing a substantive shift. Urban residents in Western markets appear to be losing interest in owning their own cars, a trend exacerbated by their desire to move to urban areas, where cars simply aren’t a requirement, and where public transport and ride-sharing apps can easily fulfill their needs. Also we need to consider.
all these trends with respect to regulatory issues For example, countries like Japan have been considering only having self-driving cars in 20 years, eliminating the human factor. Other countries, with the intention of reducing pollution have been considering banning cars older than 10 years or non-electric cars.
Why it is important to change the automobile industry model?
The connected car or the smart car is not a product. It is a set of technologies that will change the core business model. It will require a corresponding change in the automotive company. For example, whereas a typical new car has a seven to ten year development cycle, cloud-based services are routinely developed in months and deployed in real time to customers globally.
Another example is how the car today includes services as Internet- and cloud-based digital services that add to the driving experience, social platforms, healthcare — adaptations of services consumed outside the car.
Another example are the “smart mobility services,” which are more specific to auto travel, and may be part of a bundled option. They include ride sharing, car sharing, and navigation-related services, such as finding recommended nearby hotels and booking rooms there.
The combination of all these services and data allows for instant, and sometimes customer-led service innovation. Moreover, cloud infrastructures allow for the separation of hardware, services, software, and data, increasing the innovation capacity in this industry.
The real business is not selling cars, it´s selling data
In many industries, such as Telecom retail, banking, and airline, companies have long used the data they gather from customers and their connected devices to improve products and services, develop new offerings, and market more effectively. The auto industry has not had the frequent digital touch points to be able to do the same. The connected and the smart car change all of this; The car can generate an incredible amount of data that can be used to sell insurance on demand, generate information about traffic, determine driver behavior, and more. All this data is probably more valuable than the cost of the vehicle.
Uber is a great example of this. In 2016 alone, this company was capable of managing 1,5 million transactions per day generating a lot of information about road, customer and traffic.
Concepts of mobility, mobility-on-demand, and service-oriented business models will evolve out of the trends of connectivity, alternative power sources, mobility services, and autonomous driving. The customer benefits and value added are low when these trends are considered in isolation. However, in the next 5 years the 5G, the Big Data, new innovation and business dynamic will arise out of the convergence of these trends, generating completely new customer benefits in the world of mobility and beyond, and creating a high probability of disruptive change. These trends will bring about a virtuous circle of self-energizing and self-reinforcing innovation activity. Certainly the industry is never going to be the same.