5 Automotive Trends That Are Scaring Automotive Companies
It’s no secret that the automotive market is quickly evolving. What once used to be a steady, slow-changing industry that offered stability and security is now caught in a full-speed race to the first fleet of fully-electric, autonomous vehicles. This rapid disruption is completely revisioning the design, functionality, technology, and manufacturing of a vehicle—leaving many auto companies worried about where they will stand when it all shakes out.
If you’re in the auto industry, here are 5 trends that should be worrying you:
#1 – Traditional automaker business models are changing
The auto industry is changing in many ways. Not only are we pushing toward fully autonomous electric vehicles, but OEMs are betting that we will see a sharp decline in private automotive sales in exchange for Robo-taxis, ride-sharing, and autonomous shuttles in place of public transportation.
Many within the OEMs believe this could be the “great shakeout” of the automaker business model and shift focus to building the digital and connected user experience necessary to compete with new entrants like Waymo, Uber, and Shift. Mobility as a Service (MaaS) will be the future of the urban automotive environment, and it is changing the automotive industry today.
#2 – Fewer people will be needed to build a car
New battery-electric vehicles (BEVs) are simpler and require fewer parts (24 for a BEV) than the traditional automobile (more than 125 typically). Currently, GM has 550 engine and transmission combinations. When they reach their all-electric future, they will have 19 skateboard variations. This complexity reduction means fewer people are needed to design, develop, manage supply chains, and put them together.
Last year alone, OEMs announced more than 65,000 layoffs, a trend that will inevitably spill over into the supplier world. Daimler CFO is planning for a significant workforce reduction in the powertrain organization in early 2021. Everyone from engineers to mechanics can expect to feel the ripple effects of the changing industry, requiring them to adapt or get out.
#3 – Tech will rule the industry
As we speed away from the Mechanical Age and into the era of BEV, auto suppliers will face extinction in the face of major tech companies and the new electrical architecture.
Tech companies have a significant advantage in the world of BEVs, with a level of electrical expertise and large-scale production capabilities that are simply unmatched by their mechanical competitors. And if you don’t believe this takeover is coming, just look at GM’s Chevy Bolt BEV, which utilized LG for 56% of the total vehicle content—all at the expense of traditional suppliers like Borg Warner, American Axle, and Dana.
#4 – Privacy concerns will rise
As technology grows, our privacy seems to shrink with it. The move to autonomous vehicles (AV) is no different. Cameras are a critical component of an AV. External cameras are used to detect the car’s external environment (and can soon be used to enforce laws such as speeding violations) while in-cabin monitoring systems, such as those used in GM’s Supercruise, monitors driver engagement and ensures a safe auto-pilot style driving. These cameras will also observe a driver’s state and will be able to determine if drivers are under the influence. Thus, here is the debate, is this all to make us safer, or is this an invasion of privacy?
Now imagine that these vehicles will easily produce 25GB of data a day, which will be extremely valuable to third-parties and hackers hoping to cash-in on the insight. The addition of digital data is certain to bring up issues of ethics and security.
#5 – The industry is changing rapidly
The industry is changing at a pace that was unforeseen just a couple of years ago. The move to electrified, connected, autonomous vehicles is undeniable. Although it is hard to predict the future with certainty, one thing is clear, the organizations who are unwilling to change will face certain death. Turning your head to alarming automotive trends will only ensure the haunting end of your business. Instead, automotive players need to focus their attention on the future and build strategies to capitalize on changes and place them ahead of the competition.
Navigating The Changes
As a strategy consulting firm focused solely on the automotive industry, we understand precisely what there is to be scared of. We help auto suppliers, start-ups, and private equity firms worldwide navigate the rapidly changing environment and build strategies that ensure their success now and in the future.
If you have questions specific to your company, don’t hesitate to reach out. Schedule a consultation with us today.