Progression Of Automotive Industry Through Disruption

The development of emerging markets, the speedy rise of new technology, sustainability policies, and shifting consumer attitudes surrounding ownership are all contributing to tremendous changes in today’s economies. Just like other sectors that have been transformed by digitization, increased automation, and new business models, the automotive industry will be no different.

According to most industry leaders and experts, there are four disruptive technology-driven trends in the automotive industry that will reinforce and accelerate one another:

• Diverse Mobility
• Autonomous Driving
• Electrification
• Connection

Despite universal recognition that disruption in the automotive industry is inevitable, there is no comprehensive view of how the industry will look in 10 to 15 years because of these trends.

As per Mckinsey and Company’s report, there are eight key perspectives on Disruptive Innovation in the Automotive Industry. These are the potential changes that will occur which will affect the traditional vehicle manufacturers and suppliers, potential new players, regulators, consumers, markets, and the automotive value chain.

New business models will boost automobile income pools as a result of shared mobility, connection services, and feature upgrades.

The automotive income pool will grow dramatically and diversify, with on-demand mobility and data-driven services. The cars will increasingly become a platform for drivers and passengers to spend their time in transit to consume fresh types of media and services or devote the freed-up time to other personal pursuits because of connectivity and, later, autonomous technology. Due to the obvious rapid pace of innovation, especially in software-based systems, the enhancement of cars will be needed. Consumers will be aware of technical improvements as shared mobility options with shorter life cycles will become more widespread. This disruption in the automotive industry will drive demand for upgradability in privately used automobiles as well.

Vehicle unit sales will continue to expand, although at a slower rate, notwithstanding the transition toward shared mobility.

According to research, crowded neighbourhoods with a substantial, well-established car base will be the ideal locations for these new mobility services. New mobility services may reduce private-vehicle sales, but this is expected to be countered by increased sales of shared vehicles, which need to be replaced more frequently due to increased usage and wear and tear.

With the Consumer mobility behaviour shifting, a market fit-for-all purpose mobility solutions will emerge as a result.

Consumer preferences are shifting, regulations are tightening, and technological advancements are resulting in a fundamental shift in human mobility behaviour. Individuals are increasingly utilizing several modes of transportation to finish their journey; goods and services are delivered to consumers rather than being fetched by them. As a result, the traditional business model of automobile sales will be supplemented by a variety of different, on-demand mobility alternatives, particularly in densely populated urban areas where private-car use is actively discouraged.

Whether travelling alone to work or transporting the entire family to the beach, today’s consumers use their cars as all-purpose vehicles. They may desire the ability to choose the best solution for a certain purpose on-demand and through their mobiles in the future.

Growing segments of specialized vehicles created for highly particular demands will emerge as a result of consumers’ new habit of employing tailored solutions for each purpose.

This shift to diversified mobility solutions will cause another automotive industry disruption and will potentially reduce private-use vehicle sales.

The most crucial segmentation parameter that defines mobility behaviour and, thus, the speed and extent of the automotive revolution will be city type, not country or region.

Understanding future business potential necessitates a more detailed examination of mobility markets than ever before. It’s also important to divide these marketplaces into city types depending on population density, economic growth, and affluence. Consumer preferences, politics and legislation, and the availability and affordability of new business models will all differ significantly among different categories.

As a result, the type of city will become the most important indication of mobility behaviour, displacing the conventional regional view of the mobility market.

New automobiles sold might be fully driverless, assuming technology and regulatory obstacles are addressed in the near future.

Advanced driver-assistance systems (ADAS) will be critical in preparing regulators, customers, and businesses for the medium-term reality of automobiles taking control of the road from drivers.

The market introduction of ADAS has revealed that pricing, customer comprehension, and safety/security issues are the key roadblocks to rapid market penetration. In terms of technological readiness, technology companies and start-ups will almost certainly play a key part in the development of autonomous vehicles. Autonomous vehicles may face extra challenges in terms of regulation and market acceptance. Autonomous vehicles, on the other hand, will provide significant value to consumers once these obstacles are overcome.

In a progressive scenario, fully autonomous vehicles could account for up to 15% of passenger vehicles sold globally in a decade.

Electric vehicles are becoming more viable and competitive; but, the rate at which they are adopted will vary greatly from place to place.

In the coming years, the disruption in the automotive sector will be through new and substantial momentum for electrified vehicle penetration (hybrid, plug-in, battery-electric, and fuel cell). This will be created by stricter emission rules, lower battery costs, more widely available charging infrastructure, and greater consumer acceptability. The interaction of consumer pull (partially driven by the total cost of ownership) and regulatory push, which will vary greatly at the regional and local level, will decide the rate of adoption.

As the mobility business becomes more complicated and diverse, incumbent players will be obliged to compete on several fronts while also cooperating with challengers.

While other industries, such as telecommunications and mobile phones/handsets, have already been disrupted, the automotive industry has witnessed little change and consolidation.

Traditional automobile manufacturers will be forced to compete on several fronts as a result of a paradigm change to mobility as a service, as well as new entrants.

Another game-changing aspect is that software expertise is becoming one of the most critical differentiation criteria for the industry in a variety of domains, including ADAS/active safety, connectivity, and entertainment. Automakers will have no choice but to participate in the new mobility ecosystems that arise as a result of technical and consumer trends as cars become increasingly integrated into the connected world.

Newmarket entrants are expected to focus on only a few economically advantageous segments and activities along the value chain at first, before branching out into other areas.

Another disruption in the automotive sector will be through diverging markets that will create chances for new companies. They will initially concentrate on a few key steps along the value chain and target only a few economically viable market segments before expanding. Many more new participants, such as Tesla, Google, and Apple, are expected to enter the market, particularly cash-rich high-tech firms and start-ups. These newcomers from outside the sector have greater clout with consumers and authorities.

Automotive professionals are unable to anticipate the industry’s future with precision. They however believe that strategic decisions will influence the evolution of the industry.

Established players must employ a four-pronged strategy, to keep themselves ahead in the digital disruption in the automotive industry:

1) Be ready for the unexpected.

Automotive companies must transition to a continual process of anticipating new market trends, researching alternatives and complements to the conventional business model, and studying new mobility business models and their economic and customer viability by 2030 to be successful. This will necessitate a high level of scenario planning and agility to find and grow new appealing business models.

2) Make use of alliances.

The industry is evolving from peer competition to new competitive relationships, as well as partnerships and open, scalable ecosystems. Automotive manufacturers, suppliers, and service providers must build alliances or join ecosystems to prosper, such as those centred on infrastructure for autonomous and electrified vehicles.

3) Encourage and facilitate transformative change.

OEMs must align their capabilities and procedures to address new problems such as software-enabled consumer value definition, cybersecurity, data privacy, and continuous product updates since the software is increasingly defining innovation and product value.

4) Make the value offer more appealing.

Carmakers must differentiate their products/services even further and shift their value proposition away from traditional automobile sales and maintenance and toward integrated mobility services. This will put them in a better position to keep a piece of the globally rising automotive revenue and profit pool, which includes new business models like online sales and mobility services, as well as cross-fertilizing potential between the core automotive and new mobility business models.

The automobile industry’s future holds many obstacles as well as many new opportunities. These four criteria underline the necessity for existing businesses to make fundamental and strategically evaluated decisions today to become a driver of change and benefit from the disruption in the automotive sector that new players will bring. The automobile industry is far from being in decline; in fact, its most exciting times are still to come.

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