The rapid pace of digitalisation is transforming the component hardware-driven automotive sector to a software- and solutions-focused industry. In future, all aspects of the mobility value chain will be digitalised: From the shortening of product life cycles due to higher software dependency, over the transformation of car dealerships to the actual sales process and maintaining the relationship with the user – everything will be coined by the opportunities and challenges digitalisation offers. Digital Transformation of the Automotive Industry, recent research from Frost & Sullivan’s Future of Mobility Growth Partnership Service program, breaks this overall trend down into five pillars: The Future of Mobility, Industry 4.0, connected and autonomous car, digital retailing, Connected Supply Chain and Mobility as a Service (MaaS).
“Digital transformation will affect the entire automotive value chain, including design, production, distribution and retail, reshaping the traditional automotive business model. New models will consider data, connectivity and cybersecurity,” explains Frost & Sullivan Mobility Senior Consultant Sriram Venkatraman. “As a result, the drivers of digital initiatives will change from CEOs, CIOs and the IT departments; by 2020, Chief Digital Officers will steer the strategic and digital initiatives across luxury and economy brands.”
Car manufacturers and suppliers will seek partnerships with technology vendors and specialists for cloud computing, cybersecurity, telematics, connectivity and 3D printing solutions. Robert Bosch, Harman International, Continental, Magneti Marelli and Denso are focusing on digital initiatives. Companies such as Ford, GM, Tesla, Volkswagen and Toyota, which focus on connected cars, autonomous driving, and mobility, will compete with technology, semiconductor manufacturers and mobility companies.
Frost & Sullivan shares other upcoming market developments including:
- Robust technology investments from automotive companies to realise recurring revenues from new services; IT spend will increase from $37.95 billion in 2015 to reach $168.8 billion in 2025
- Investment focus on electric vehicles, new mobility services, multi-modality, artificial intelligence, and autonomous vehicles
- Disruption of automotive industry supply chain as more than 1,700 new digital startups enter the market
- Enhanced security across both horizontal and vertical business layers as businesses integrate IoT and big data analytics
- Country-specific, digital retailing strategy for new/used cars in addition to aftermarket and servicing
Digital transformation of the automotive industry set to pave way new revenue streams
“Autonomous cars only will account for a 84 billion dollar market by 2030”, estimates Franck Leveque, Frost & Sullivan Partner Mobility. “50 percent of these 84 billion Dollars will be software related, which exemplifies perfectly how the mobility sector converges with other industries,” he continues.
Similar trends can be observed for retailing. By 2020, the retail store footprint will be 15 to 20 percent less than the current average store size and future garages will incorporate technology at various levels. The goal is an engaging digital experience to increase loyalty.
Today already 40 million people use app-enabled carpooling services, and the usage of ridehailing apps has grown rapidly to over 70 million users. Frost & Sullivan’s mobility research has highlighted the continued trend of the automotive industry investing in dedicated collaborations. “As information services, in particular, become more sophisticated, the potential to integrate and aggregate mobility services is increasing,” explains Shwetha Surender, Program Manager Mobility. This allows users to plan, book and pay for their journeys on the smartphone in real time. To make this effective, partnerships between both private and public transport providers are essential. The revenue potential of such digital mobility services is expected to rise to ~$2 trillion by 2025 globally, explaining the continued interest from the private sector.
The evolving digital lifestyle expectations and demands for new and innovative services will affect all components of the digitalisation of the industry. However, according to Frost & Sullivan, it will be most visible within the emergence of Mobility as a Service (MaaS). Increasingly, a readiness to combine different modes of transportation is shaping the industry. The lines between public and private transport are becoming blurred in favor of a multi-modal integrated transportation system encouraging the emergence of models such as smart ticketing, multi solutions and aggregated booking.
“By 2030, the digitalisation roadmap in the automotive industry will move from digital services to car-as-a-service (CaaS) to MaaS, making vehicles an element of a connected living solution,” notes Venkatraman. “Automotive companies adopting custom digital initiatives after thorough analysis will be able to successfully leverage their software investments, access new markets, and easily adopt best practices.”
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