If there is such a thing as a perfect storm, automotive manufacturers are facing four mighty big ones that will shake up the industry like never before.
There is ahead of us what I would call “four mega-disruptors”:
- Autonomous vehicles
- Shared mobility-think robo taxis
- Human-machine interface/Infotainment
One disruptor would be challenging. All four running in parallel and gaining pace is nothing short of a revolution in the industry. Forget evolution. Disruption is speeding up and is caused by technological advancements in each area.
There will be winners from this disruption. The biggest winner will be the consumer in terms of choice, comfort and driving experience (if you can call not driving, driving). In fact the relationship a person has with his or her vehicle could be very different in less years than you may think - imagine the vehicle being able to produce a radically different experience for the users.
The other big winners will be small and medium technology businesses and their owners, who will find themselves rocketed from start-up to tier one suppliers to global manufacturers in record time and will turn the supply chain of manufacturers relationship on its head.
Advances in the technological capability of vehicles and their components are at the heart of all the R&D behind these four disrupting forces, and AI and big data will be at the centre of engineering in increasing degrees going forward. The adage that you will now plug in a car rather than lift up the bonnet for diagnostic analysis has never been more literal and the amount of computing technology in vehicles is increasing exponentially.
It’s hard not to feel both anxious and sympathetic for the manufacturers who are having to cope with all this disruption. The changes they are having to face are being driven by great motivators such as the improvement of the environment, making it a safer world, avoiding congestion and giving greater consumer choice. However, it must be a scary place and arguably the regulatory framework being set by governments and legislators fails to give sufficient weight to the very real challenges it imposes on the original equipment manufacturers (OEMs).
Let’s also not forget how important these OEMs are as contributors to global GDP. The Alliance of Automobile Manufacturers, A US association with members representing 70 per cent of the car and truck manufacturers of USA, as well as the likes of BMW and JLR from Europe, are keen to stress how many billions of dollars the various manufacturers contribute to revenue and the millions of jobs that are directly and indirectly reliant on a profitable car and truck industry. Their public agenda is to dampen expectations or at least inject a degree of reality, suggesting that government declarations on the likes of electrification will be almost impossible to fulfil within the desired timescales.
Back to the drawing board for manufacturers?
Implementing the four disruptors means going back to the drawing board organisationally for most manufacturers and their supply chain and may lead to the industry looking very different in the relatively near future. Just looking at the various simultaneous challenges the manufacturers are under they need to figure out:
- The shape and composition of vehicles. For example, there are currently three variations of battery shape for electric vehicles (EVs), which depend on whether the vehicle is designed from scratch (a “native design”) or working with an existing design, whether supplementing a combustion engine or a hybrid powertrain.
- In relation to autonomous and shared mobility vehicles, there is an overriding need to master sensor technology and machine learning, hence why JLR, with partner WAYMO, have, for example, tested an autonomous JLR EV for over 5,000,000 miles.
- For increasingly sophisticated human-machine interface or infotainment systems going into vehicles, this leads to connectivity challenges and an imperative to be able to convince consumers that it can ward off cyber-attacks. For this it needs to demonstrate a mastery of data storage and processing if the vehicle is to be a mobile office or an extension of one’s home, depending on the choice of the users.
- In relation to electrification, much has been written regarding the challenges such as cost, weight, life expectancy and range anxiety. All I would add is that in my opinion, the race for acceptable range has been run and the next marathon is for the development of mass market EV, not just the current quirky or high-end vehicles in production. The cost of production of these mass-produced fleets has to be at levels that can be sustained so manufacturers can make profits and are able to continue to reinvest these profits into future design and R&D.
Much of this can only be achieved with agile working models that get manufacturers access to the capabilities and partnerships they need in order to cope with the rate of change. Manufacturers do come in different shapes and sizes, with bigger or smaller in-house teams and this is definitely no one solution that fits all situations.
Collaboration is key
Collaboration is likely to become vital, especially as the Internet of Things and the need for vehicle to vehicle communication makes it necessary for a much more symbiotic approach.
You can envisage some of the smaller producers becoming predominantly responsible for assembly, hollowing out their current shape, with third party partners providing much of the technical content of the vehicle. That way a number of stakeholders will be able to have access to the multiple sources of investment finance available, rather than all the eggs sitting in one basket in the hands of the manufacturer, who is reliant on its next model launch being a big hit, with all the pressure that this brings. In this rapidly changing environment this becomes an increasingly precarious over-reliance on one party in the chain.
SMES are going to be able to access equity funding and other sources of development finance, which is in abundance but not available to monolith manufacturers. This is because they will be more agile and will create a new round of wealth creation as value is shared down the supply chain.
So much transition is needed in the short-term to meet these very real and radical pressures. I for one am excited by how the driver experience will develop in the next few years. I imagine it keeps the senior leadership teams within the manufacturers awake at night, seeking to agree the strategy to implement these disruptors in a way that reflects their organisation and enables them to actively manage this transition without losing control. I can only wish them luck and hope that they come through these revolutionary changes in good shape for all our sakes.