The automotive industry, like many industries, is being impacted by technological breakthroughs.
Given my keen passion for cars and innovative automotive technology, I have articulated advances in mobile Internet access, electric-powered vehicles, self-driving technology, Internet of Things (IoT). More are all beginning to impact the automotive industry and this article will explore six of these trends and how they will generally impact the organisational workforce.
Internet of Things (IoT) Redefining The Auto Experience
IoT development has forced car companies like GM and Ford to look at the automobile with a new perspective. Consumers, especially millennials and Gen Z, want experiences while on road trips. They want to access their content (music, news, podcasts, sports, etc.) right from their dashboards. They also want the ability to power up their mobile devices.
Hence, Ford and GM are having to work with Apple and Google, the two most prominent mobile operating system companies, to install the appropriate software technology so that mobile users can access their content from within the car itself. Similarly, car companies have had to shift their revenue models to include more shared mobility and data-connectivity services, a 2016 report estimates to be about $1,500 billion in 2030. They’ve especially had to shift those models because consumers are adopting the connected car more quickly than expected according to a Business Insider June 2016 report; 380M+ connected cars could be on the road by 2021.
Tech Companies Potentially Manufacturing Future Cars
Not only has GM and Ford had to work with Google and Apple on installing their mobile operating systems in their vehicles, but they’ve also had to prepare for both of those tech companies entering the automotive industries themselves. There have been several reports of Google and Apple considering manufacturing their own vehicles with their own mobile operating systems installed.
While both companies would be new to the auto manufacturing scene, both have much financial capital and influence to where they could catch up quickly. Plus, they both have the inside knowledge about their own operating systems to where they could seamlessly fit the technology into their automobiles, something that isn’t as seamless in autos produced by the likes of GM and Ford.
Even if Google and Apple decide not to manufacture their own autos, the traditional automakers have still faced disruption from Tesla. Tesla, financed largely by noted entrepreneur Elon Musk, has disrupted the automotive industry because it manufactures many of its own components, whereas most auto companies outsource as much as 80% of its components to suppliers, as noted by Goldman Sachs in February 2016.
Electric Vehicles Gaining Ground In Auto Production
Arguably, Tesla’s biggest impact on the automotive industry is the fact they produce electric vehicles and they are selling directly to consumers. Thus, traditional automotive companies have had to focus more on their electric vehicle lines such as the Chevy Volt and not put as much focus on gas vehicles as in the past.
As noted by Musk himself, Tesla is using a business model that is often utilized by the technology industry:
– Sell an initial high-end expensive automobile to the affluent market.
– Use the sales from it to develop better battery and electric technology to lower the costs to sell to mid-range market.
– Use sales from mid-range market to fund further developments to lower costs further so that future Tesla models can be sold to virtually the whole consumer market.
This has also forced traditional automakers to put more research and development into electric vehicles and their technology. The fact consumers are becoming more conscious about the environment and the impact gasoline emissions can have on it, as well as the improving mileage of these vehicles, is also impacting the growing demand for electric vehicles.
Autonomous Vehicles Will Take Over The Road In Future
As companies such as Tesla and Google continuing experimenting with vehicles that can drive themselves, the future will likely involve cars driving themselves on side roads and public highways. Thus, traditional automakers have to reconsider their perspective of a human driving the vehicle; the future will likely involve a vehicle driving itself, while the human is on his/her smartphone, accessing content via the dashboard, or any other activity besides actively driving.
There are technological and regulatory issues to be resolved before that future comes to pass, but according to the aforementioned 2016 report, commercially available fully autonomous vehicles could be for sale as soon as 2020, and 15% of 2030 car sales could involve fully autonomous vehicles.
Gasoline-Powered Vehicles Must Have Better Gas Mileage
Stricter regulations in the US and around the world are requiring better gas mileage from gas-powered vehicles. Via PWC’s 2016 report, by 2025, these vehicles must average 60 MPG. Experts believe that gas-powered vehicles’ fuel economy could be improved by up to 75% with combustion breakthroughs that maximize engine efficiencyand recover energy from waste heat. Due to the short time frame and much lower current average, automakers must commit to more monumental changes, especially toward the traditional internal combustion engine and powertrain.
Ford did this when they replaced the steel in its popular and highly-profitable F-series truck with lighter-weight aluminum in an effort to improve fuel efficiency. This move paid off, as the 2015 F-150 had the best mileage of any gas pickup vehicle, plus was the best-selling US vehicle of any type. Mazda, Fiat Chrysler, BMW, and others are taking a similar approach in redefining the shape and construction of the automobile and internal combustion technology advancements to improve fuel economy.
Auto Sales Slowdown in Emerging Nations
As noted in the aforementioned report, 2015 auto sales in China, Russia, and Brazil have fallen from recent years, while India’s remained essentially flat. Whereas these countries presented an opportunity for growth as recently as 2012-2014, the future is less certain, especially when it comes to China. This is because China’s largest cities will restrict vehicle ownership registrations due to the heavy smog present in these cities, especially Shanghai and Beijing. Russia and Brazil both have fragile economies that could also hinder future sales. As a result, slumping future auto sales from emerging nations will make technological advancement, improved fuel efficiency, and lower emissions even more critical for future sales in countries around the world.
The mobile and IoT revolutions are forcing traditional automakers to look at their vehicles as not just a transportation device to get from point A to point B, but as an experience platform that consumers can tap into for content while on-the-go. Automakers must improve the fuel efficiency of their gas vehicles because of regulations and consumer demand. Traditional automakers have had to handle new competition from upstart Tesla, as well as possible entry by noted tech companies Google and Apple. These trends and others will continue to impact automotive organisations as the IoT and mobile revolutions take hold on the auto industry.
So, What Does This Mean To The Consumers and Automotive Workforce?
These trends will force automotive organizations to be adaptive to the changing needs of consumers in the future when it comes to their automobiles. Whereas the style of the automobile was once the main focus, now, how well the automobile’s mobile platform accesses content, what source of power it use to operate, and how far it can go on a single tank or charge are more paramount to today’s consumer and must be reflected in the vehicles traditional automakers produce in order to maximize sales and maintain and improve market share. With tech companies such as Google, Apple, and Tesla already or potentially manufacturing their own vehicles, traditional automakers must step up their own manufacturing efforts of vehicles that have similar capabilities in order to not lose considerable market share to traditional tech companies and their new vehicles.
This also means that Leadership in the Automotive Sector Firms must be cognizant of the fact that technology, including artificial intelligence, will become more involved in the production of these vehicles as time advances. Thus, they must prepare their workers now by developing strategic innovative and transformation goals, a number of interventions which include knowledge sharing, training in the information technology, development and maintenance, as well as workflow procedures necessary to effectively operate ‘new’ processes, tools and machines. This approach will help to produce the vehicles of the future that will enable these traditional automakers to effective collaborate with Original Equipment Manufacturers (OEMs), Tech companies like Google, Apple, and even with pioneer auto firms that specialize in green technology.
The innovative trends in automotive sector are rapidly rising, which will have an impact on firm’s topline growth, and we will see firms in the sector beginning to strategically:
- Evaluate, redesign value proposition and shape for the future by testing new scenarios
- Establish transformation goals and drive enterprise-wide change
- Build and execute an ‘enhanced’ organization to adapt to the innovation demands