1,000,000,000. Today there are 1 billion vehicles on the road, most of which are using unoptimized and inefficient technologies. Auto companies have been making gasoline and diesel engines for decades, largely focusing on four types of vehicles:

  1. Conventional Gasoline engine-based
  2. Hybrid Electric (having a gasoline engine and a battery-operated electric motor)
  3. Plug-in Hybrid Electric
  4. Electric


Yet the next generation does not want to buy cars. Instead, they would prefer to share or rent them, signaling a monumental shift from car ownership to “car as a service.” This change poses a very relevant question for companies like Volkswagen, Toyota, Renault-Nissan, Hyundai-Kia, General Motors, Ford and Honda: how to navigate this radically unpredictable marketplace? In the short- to medium-term, they need to continue to focus on their core competencies – namely, making gas-engine vehicles. These core businesses are generating cash that’s vital for the companies’ existence. But what next?


To cater to this next generation, auto companies are actively investing in digital technologies. Recent research points to the automobile industry spending $225 billion through 2023 on electric car technology, while spending on autonomous cars will grow $85 billion through 2025.


Digital Transformation for Auto Manufacturers


This disruptive change comes in multiple fronts; namely C (Connected), A (Autonomous), S (Shared & Services) and E (Electric):


The Connected segment of Industry X.0 has brought many opportunities, from vehicle-based technology to manufacturing. For example in connected cars, new technologies include:


  1. Navigation and Infotainment Systems. These are often a combination of Artificial Intelligence-backed voice-enabled touchscreens, touchpads on the center console, and touch-control buttons on the steering wheel.
  2. Connect Mobile Apps. Driver’s smartphone apps have become an extension of the connected car.
  3. In-Car Electronics. Electromagnetic compatibility (EMC) vehicles have approximately 200 control units with two miles of wires.
  4. MIMO (multiple input, multiple output) Antennas. Electric cars are equipped with antennas for radio broadcasts, mobile communications, navigation, WLAN, Bluetooth etc.
  5. Car-to-X (Transportation Infrastructure) Interface. Electric cars can now communicate between vehicles and with the transportation infrastructure. This enables real-time information to be relayed between and to cars within a certain vicinity. Similarly, transportation infrastructure can broadcast information such as alerts or warnings to cars within a specified area.


Connected trucks have also seen technology advancements, including:

  1. Optimization. Applying the concept of connected cars, connected trucks enable optimization of truck usage by monitoring the vehicle’s route and operations.
  2. Maximizing Fleet. Leveraging the power of IOT, trucks, vans and cars transport 65 billion parcels around the world, but 25% of delivery vehicles have spare capacity. Technology can help overcome this challenge through geospatial analysis, Big Data, AI and Machine Learning backed by powerful graphic processing unit computing power.
  3. Capacity as a Service. Just-in-time capacity information available via a mobile marketplace can help small businesses and entrepreneurs use this capacity to improve their business.


Technology investments can be seen well before these vehicles ever hit the road. Namely, through a Connected Factory, often considered part of “Industrial IOT.” For example:


  1. Intelligent Assets and Digital Twins. Auto manufacturers get a new level of asset awareness. IT/OT Convergence enables asset utilization optimization. Replicating an asset digitally allows manufacturers to virtualize assets. This digital-physical merging allows companies to create digital twins, thus allowing OEMs to hasten their time to market by leveraging digital twins during testing and certification.
  2. Intelligent Workers. Smart wearables can help ensure the safety of workers and the work environment while adhering to factory processes. Extended reality, meanwhile, can provide on-the-job training, creating an efficient, right-skilled and smarter workforce.
  3. Intelligent Supply Chain, Inventory and Warehouse. Real-time supply chain visibility, and track-n-trace ensure end-to-end real-time visibility of parts and finished goods. RFID-enabled smart labels also allow every part to be tracked from receiving and stocking to picking, installation and inspection.


The Autonomous aspects of Industry X.0 have evolved considerably during the past several years. Autonomous driving started with cruise control and automated parking but has now graduated to autonomous driving on highways and cities. The Federal Statistical Office of Germany states that more than 98% of traffic accidents in Germany are caused by humans, while the U.S. National Highway Traffic Safety Administration (NHTSA) reports that 94% of traffic accidents in the U.S. are caused by human error.


Autonomous vehicles leverage the power of deep learning and anticipating conditions and events, therefore minimizing traffic accidents caused due to human error. Autonomous vehicles can also enable increased productivity (as the driver can focus on other tasks), relaxation or collaboration (driver and passenger working together).


Digital Technology Enablers for Auto Manufacturers


Shared & Services is an intriguing aspect of Industry x.0. Research indicates that cars are parked 95% of the time. This means people only use their cars for about an hour, which makes car-sharing not only convenient, but something that makes perfect business sense.


Car-sharing is easily recognized, as car rides on-demand have been revolutionized and entered the mainstream by Uber, Lyft, didi, Ola and FreeNow. Initiatives like car2go and DriveNow are also gaining traction with millennials.


Services for Cars are broader in scope. Charge Now provides information on charging stations globally, while parking on demand is enabled by numerous players after Smart City initiatives began providing real-time availability of parking space. Companies like ParkMobile, ParkNow and ParkMe are leaders in this space.


Other services include “tires as a service” through entities like Michelin Fleet Solutions, which charges for tires by the mile, and usage-based insurance (UBI), a type of auto insurance that tracks mileage and driving behaviors. The result has been the growth of several UBI variations, including Pay-As-You-Drive (PAYD), Pay-How-You-Drive (PHYD), Pay-As-You-Go, and Distance-Based Insurance. Indeed, Metromile charges per mile driven.


The fourth aspect of C.A.S.E. is Electric cars, trucks and buses. The adaption of electric cars has been slow mainly due to the high cost of lithium-ion batteries. Another innovation is fuel cell, wherein cold combustion, a chemical reaction between hydrogen and oxygen creates energy to be used by the vehicle. To leverage the B2B space, various automakers are focusing on making electric trucks and buses, the most noteworthy being Daimler Trucks and BYD.


Next Steps for Auto Manufacturers


C.A.S.E. has bought forward an opportunity for auto manufacturers to rethink how they manufacture and to account for consumer preferences and demand. To prepare for the future, auto manufacturers need to:


  1. Focus on emerging markets where more green filed innovation is taking place
  2. Continuously engage in a very structured service design approach; the old model of “selling” a car no longer works
  3. Ramp up their R&D centers to focus on digital technologies and enablers.
  4. Create strategic partnerships with system integrators to co-innovate and co-develop outcome based digital transformation
  5. Invest and/ or acquire startups
Namit Bhargava

Namit Bhargava

GM & Head of Digital Sales, Digital Transformation

Passionate for results, Namit Bhargava brings innovative strategic perspective on Digital Transformation and Industry X.O themes for superior Customer Experience. Namit is a thought leader for CXO conversations for topics including digital strategy, transformation, new business models and innovation.

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