Digital transformation to affect entire automotive industry

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Early adoption is crucial as it will strengthen their position in an expanding ecosystem of connected cars, internet of things (IoT), autonomous technologies, and the impact of smartphones on in-vehicle experience and intensifying regulatory and safety mandates. Selecting the most suitable incremental technologies to optimise valuable resources, however, will be most crucial.

Digital Transformation of the Automotive Industry, recent research from Frost & Sullivan’s Future of Mobility Growth Partnership Service programme, finds that spend on digitalisation will transform the component hardware-driven automotive industry into one focused on software and solutions. Investments into digital automotive are expected to reach $82.01 billion in 2020.

Five key pillars

The study explores business activities, process improvements, and the development of competencies and business models across five key pillars:

• connected supply chain;
  
• industrial IoT (IIoT) and Industry 4.0;
  
• connected and autonomous cars;
  
• digital retailing; 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 customer centricity, along with cybersecurity,” said Frost & Sullivan Mobility senior consultant, Sriram Venkatraman. “As a result, drivers of digital initiatives within the industry will change from CEOs, CIOs and IT departments; by 2020, chief digital officers will begin to steer both strategic and digital initiatives of OEMs across luxury and economy brands.”

OEMs and tier 1 suppliers will seek partnerships with technology vendors and specialists for cloud computing, cyber security, telematics, connectivity and 3D printing solutions. Robert Bosch, Harman International, Continental, Magneti Marelli and Denso are already focusing on digital initiatives. OEMs - like Ford, GM, Tesla, Volkswagen and Toyota that focus on connected cars, autonomous driving, and mobility - must now prepare to compete with technology and semiconductor manufacturers, as well as mobility companies.

Other upcoming market developments

Other upcoming market developments include:

• Robust upstream and downstream technology investments from automotive companies will realise recurring revenues from new services; IT spend will increase from $37.95 billion in 2015 to reach $168.8 billion in 2025, exhibiting a compound annual growth rate of 16.1%.
  
• An increased investment focus on electric vehicles, new mobility services, multi-modality, artificial intelligence, and autonomous vehicles.
  
• Disruption of the 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 begin to integrate IoT and big data analytics more.
  
• A country-specific, digital retailing strategy for new and used cars, in addition to aftermarket and servicing.

“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,” noted Venkatraman.

“Automotive companies adopting custom digital initiatives will be able to successfully leverage their software investments, access new markets, and easily adopt best practices.”

Other topics recently covered under the Mobility Growth Partnership Service include: Cloud and the Car - Use Cases, Business Models and Impact Analysis; Automotive Industry IT Spending - Key Focus Areas, Trends and Future Outlook; Automotive Dealer Management System (DMS) Market—Growth Opportunities and Digital Transformation, Forecast to 2022; State of Automotive Cybersecurity: Key Trends, Solutions, OEM Activities and Vendor Profiles; Disruptive Satellite Communication in the Automotive Industry; and Strategic Analysis of the Automotive Keyless Access Systems Market.