New Automotive DNA: How IoT Is Transforming The Automotive Industry

Uli Muench

Digital technology is transforming virtually every aspect of what it means to be an automotive manufacturer, OEM, or supplier. From autonomous cars to electric vehicles, the automotive industry is crossing the threshold of reinvention. This new automotive DNA is a paradigm shift for the industry, moving it away from the internal combustion engine, petroleum, and mechanical linkages and toward fuel cells, batteries, hydrogen, electricity, and electronic systems and controls. The use of new electronic-based architectures, systems, and software in vehicles creates new design challenges and opportunities.

At the same time, consumer-use models for vehicles are also evolving. For example, connected vehicles are creating new urban mobility opportunities such as vehicle sharing and usage-based insurance (UBI). Connected cars are generating massive amounts of data that can be monetized in other ways. The Internet of Things (IoT) is the powerhouse behind all the transformations.

This makes the automotive industry an especially compelling use case for how IoT is transforming discrete manufacturing to meet new market demands while continuing to achieve traditional business objectives. IoT is most impactful on four key value drivers in the automotive industry: design and ideation, service enablement, resilient lean, and product lifecycle revenue.

Design ideation

IoT makes it easier to manage the product lifecycle by accelerating product and engineering timelines. This results in a faster time-to-market and improved customer/product satisfaction. IoT helps reduce manufacturing costs by identifying non-value driving components and removing these components from future vehicles. Future design ideation opportunities include applying machine learning to past product performance information and using this information to augment the design and ideation process.

Service enablement

Today’s vehicles have at least 10 million lines of mission-critical software code, creating an enormous need for ongoing code management and service. Streamlined service enablement is the most common scenario for IoT in the automotive after-market. IoT is improving customer satisfaction via aftermarket quality assurance and upgrades, while also increasing revenue from aftermarket services.

Connected technology is making it easier for manufacturers not only to track product defects and maintenance needs, but also to communicate proactively with consumers about these service updates and notifications. Thanks to IoT, manufacturers have the luxury of pushing out software updates or even software upgrade offers. This is revolutionary as manufacturers seldom have any relationship with the end user.

Resilient lean

Process automation via IoT data and analytics is one of the top priority improvements for manufacturers. Factors pushing auto manufacturers to adopt a resilient lean manufacturing approach include shorter time-to-market cycles, rapidly changing demand, highly complex products, and processes, and increasing material considerations around light-weighting and 3D printing. IoT is enabling this adoption with real-time scheduling to meet changing demand and more efficient, flexible manufacturing processes—including material optimization.

Platform revenue

A virtual treasure trove of data including information on consumption patterns and preferences, demographics, and location usage is produced every moment a car operates. Manufacturers are turning to IoT and advanced analytics to gain insights from this data and create new revenue-generating opportunities. Key opportunities include increasing aftermarket revenue via upgrade and content monetization, and improving overall customer satisfaction through experience enhancements. Companies can leverage usage and engagement information to send content, such as paid software upgrades and infotainment, to the consumer.

Next steps: Selecting an IoT partner

As the new automotive DNA transformation demonstrates, today’s competitive market demands that manufacturers offer integrated products, services, and business models that enhance the customer experience. At the same time, manufacturers must also stay focused on traditional objectives including increasing uptime and throughput in the plant and closely managing operational costs.

Whether a scenario can be implemented today or on your roadmap for the near future, your business must get the right technology and IT infrastructure in place or risk being outperformed by the competition. When selecting the right IoT partner, your business should consider the following: integration, scale, ecosystem, and trust. Your IoT solution should allow you to integrate business systems, digital platforms, and industry clouds—ideally providing a common foundation for all three. IoT partner should be able to scale digital activities as your business grows and offer your company access to a robust third-party developer community to meet your evolving needs. Finally, your partner of choice should be willing to co-innovate.

The digital transformation in the automotive industry and across the entire manufacturing sector is well underway. Time is of the essence. Your company must act now to realize the tremendous value and competitive advantage offered by IoT, including new business models and new customer relationships.

Learn how to bring new technologies and services together to power digital transformation: download The IoT Imperative for Discrete Manufacturers: Automotive, Aerospace and Defense, High Tech, and Industrial Machinery. Explore how to bring Industry 4.0 insights into your business today: read Industry 4.0: What’s Next?


Uli Muench

About Uli Muench

Uli Muench is Global Vice President of the Automotive Industry Business Unit at SAP.