The Expert view: Innovation in the automotive sector

The Expert view: Innovation in the automotive sector

There has been more change in the automotive sector over the last three years than in the last 50, said Juergen Maier, chief executive of Siemens UK, at a recent Business Reporter Breakfast Briefing at the Goring Hotel in London. He told an audience of senior executives from the automotive industry that he saw a lot of denial at the pace of chance several years ago but that was no longer in evidence. The industry has accepted digitization is changing everything.

Drivers of change
Several forces are behind the change affecting the automotive industry. Attendees said legislation and corporate social responsibility efforts are pushing car manufacturers towards electric vehicles, whilst consumer desire for greater convenience is leading to demand for autonomous vehicles and, in the meantime, taxi services such as Uber.

Young people in particular seem averse to owning or driving a personal vehicle. One attendee said his company’s research found that the number of new driving licenses in the UK has fallen by 6% per year over the last three years. While cars are still a necessity in rural areas, populations worldwide are becoming more urban and those populations are happier to be passengers.

The trend towards mobility-as-a-service has a knock-on effect for brands: if you are getting a car from Uber or Lyft, do you care who manufactured it? If your self-driving car has a full tank of fuel, does it matter what brand of fuel it is?

Finally, the growth of data is affecting the entire industry. Everyone, from car manufacturers to cab services to cities, needs access to data but too often it is siloed and hard to share. Progress will be slower without easy access to data, attendees agreed.

Self-drivers of change
Autonomous vehicles are particularly data-hungry. Companies need huge amounts of data to train them to navigate the road. So great is the demand, in fact, that companies require simulations because it isn’t feasible to wait for actual vehicles to accumulate the necessary driving hours.

Aside from the data they generate, autonomous cars will benefit from the data of surrounding vehicles and infrastructure so that they can, for example, route themselves around road works or warn the car behind of an approaching pothole.

They will vastly improve safety, attendees agreed, because they are less error-prone than human beings. And freed from the need to mind the wheel, commuters will be able to work – or doze – in the car on their way to the office. However, as one attendee noted, younger workers trend towards remote working and presence in an office is no longer what it was. Commuting demand might decrease.

It would be good if it does, because otherwise our cities face an even bigger congestion problem. As one attendee explained, take a bus-full of passengers and put each in their own autonomous vehicle and you have increased traffic enormously. City planners will have to carefully consider how to encourage people to travel in a way that benefits everyone.

Mobility-as-a-service needs to be re-framed into transport-as-a-service. One attendee pointed to an emerging trend for apps that allow people to buy credits that enable them to complete their journey in whatever way makes the most sense. Sometimes that will be a car and other times it will be a tram, a bike or a bus.

Revving or reversing?
While OEMs are grappling with a shift to autonomous vehicles, electric vehicles and cars that are data-hubs, they must still remain profitable. Those attendees who work at car manufacturers emphasised that this is not an easy balance to strike. Car manufacturers are very aware of the change but – in common with many industries undergoing digital transformation – must try to change without destroying their existing business.

One attendee argued that the incentives for OEMs must be re-thought if the industry is to make progress. Currently they profit by selling more cars, which means they have little incentive to maximise the life of the vehicle. Once sold, keeping the car running is the customer’s responsibility. A shift to a mobility-as-a-service model would incentivise car makers to build vehicles that keep running for a long time.

Summarising the briefing, Mr. Maier said that the discussion had identified three broad market segments that would shape the future of the industry. First, there are the ‘race horses’ – the sports car manufacturers who will continue to have a small, dedicated customer base that want the thrill of driving their own high-performance car. Second, there are the mobility-as-a-service companies that will replace many of the owned and owner-driven cars on the road. And third, there are the OEMs, who will increasingly find their products shaped by demand from the mobility-as-a-service group.

The latter two groups, said Mr. Maier, will become platforms with modules built on top. Above those will be the software interface. The challenge is to successfully navigate the period of change that leads us into that future.

Copyright Lyonsdown Limited 2021

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