How The Digital Age Is Driving Auto Industry Transformation

Chet Harter

Few companies are more dependent on technological sophistication than those in the automobile industry. As fast as digital technology is developing, savvy consumers still want more. But consumer demand is just one of the drivers pushing this transformation to digital. Others include Big Data, itself. Mobility and connectivity also play major roles as transformation drivers.

Consumer behavior

From design to retail sales, the auto industry is transforming faster than ever. Consumer demand drives this rapid transition through digital marketing. Consumers have access to this marketing anywhere and anytime at their discretion. When they feel ready to dig deeper, consumers can research vehicles online. They can even set up the vehicle purchase online through franchised distribution channels.

As Big Data makes more information available to them, consumers can take part in communication and collaboration all along the value chain. They can take advantage of value-added services from adjacent industries like the travel industry. And most important of all is their fascination with in-car connectivity and vehicle telematics.

Connectivity

Today’s consumers enjoy high levels of connectivity. These levels stretch the limits of innovation. New vehicle buyers are experienced with social media and smart devices. They want and expect these things in their cars. And not only are consumers connected, their vehicles are connected, too. Today’s cars share connectivity with their drivers and with other vehicles. They are connected to external networks such as General Motors’ OnStar monitoring service. This trend will only continue to develop further.

Our cars can now diagnose their own problems and warn us of them as the problems develop. Vehicle insights and analytics create and protect value for the consumer. As these are demanded by consumers, they also create value for the companies producing the vehicles.

KPMG, a professional auditing service in The Netherlands, conducts an annual survey of auto industry executives. Their 2016 global survey indicates that connectivity is one of the three most urgent imperatives for industry decision-making.

Connected consumers have access to a range of new technologies and information. This connectivity creates an omnichannel of seamless experiences in-car, online, and everywhere in between. We are rapidly moving toward a time when we will have connected fueling, connected parking, and automated payment systems. We will have connected electric vehicle re-charging, vehicle reservations, and payments.

The U.S. Department of Transportation (USDOT) estimates that vehicle-to-external connectivity could prevent 70 percent of vehicle crashes. And revenue from connected vehicles is expected to grow to $36.6 billion by 2025.

Digital data

Data itself is driving much of this transition. Big Data provides information on a wider scale. And vehicle data drives a need for sensors and in-car electronic monitoring devices. Portable computers interface with the consumer’s vehicle for data recording and transfer. And our vehicles are rapidly moving toward a time when the vehicle itself will be an extension of data. They will be data-connected vehicles in an automotive network of information. We are already seeing subscription services based on multi-channel access.

Autonomous vehicles are on the horizon. They are already warning drivers and taking control when it is necessary. They are monitoring and relaying information in real time on safety issues. They offer predictive data about other vehicles and traffic situations. In-car technologies already include cameras, maps, software, GPS, radar, and lasers. When enabled, automated driver assistance systems can take over in emergency situations.

The end point in this progression lies in the self-navigating driverless vehicle. These are not far off in the future. The multinational management firm, Boston Consulting Group, says the market for these cars may be worth $42 billion.

Mobility

Intelligent and agile transportation networks have changed the auto industry’s concept of mobility. There has been a shift in focus from products to services. We are seeing increasing demand for services that bundle mobility with other ancillary service offerings. These integrated mobility services become shared experiences, shared services. Mobility is now just-in-time and on-demand. We are beginning to see individualized mobility for both short distance and long-haul situations.

International management consulting firm Oliver Wyman predicts that there will be up to $100 billion potential value in mobility services.

The future: Where is this taking us?

Is there a down side to all of this? Yes, there is, but it is just one of many hurdles that the industry is fighting to overcome. The idea of driverless cars is not attractive to people who enjoy driving their cars. This, however, is just one factor in a volatile market situation.

But the upside is considerable. There will be tremendous improvement in traffic safety. Traffic deaths will plummet. The insurance industry will save billions of dollars in costs.

Besides, there is no stopping this future. The automotive industry value chain is already in transition to a digital network. It is already approaching the next-generation ecosystem. The logical prediction is that fairly soon, at least some vehicles will be driverless. To meet these growing industry demands, automotive companies are re-imagining their business models. They are looking to the future.

To learn more about digital transformation in the automotive industry, click here.


Chet Harter

About Chet Harter

Chet Harter is a member of SAP's Digital Innovation team. For over 15 years, he has helped many SAP automotive and manufacturing clients apply new technologies to address current business issues and opportunities. Prior to SAP, he spent 12 years in various positions in materials and production management for large tier 1 suppliers in the automotive industry. He can reached at chet.harter@sap.com.