The Automotive Industry and Digitization: Processor Power Instead of PS Power
Digitization continues to inexorably advance, revolutionizing more and more industries and business models. After the music industry, the publishing sector, and TV broadcasters, automotive manufacturers must now focus more strongly on dealing with the changes that digitization brings. Will a car’s networking soon be more important than its mileage?
The networked car has long since stopped being a vision of the distant future. Whether Audi, BMW, Ford, Mercedes-Benz, Opel, Peugeot, Renault, or others – almost every automaker now offers comprehensive digital services to make life easier, safer, and more comfortable for their customers. The car reads e-mails, swaps information with other vehicles about traffic, calculates the ideal route in real time, and relays the current position automatically in case of an accident. And in cases when only a person can help, it establishes a direct connection to customer service. Spontaneously searching for and booking a hotel room while you’re on the road? No problem, the concierge service will take care of it and send the hotel address directly to your navigation device. In future, both short-term and limited-time options are conceivable – technology is making it possible. For example, a temporary chip tuning could provide more PS power for a camping trip in the mountains. A limited-time music streaming option provides the latest favorite hits on the car radio.
Most current supplier connected services are more expensive, but soon they’ll be part of a car’s basic equipment. This is because the generations of buyers who are growing up now expect more than a couple of USB ports in the dashboard.
Manufacturers benefit from digital services
But the increasing networking of the car isn’t just worth it for the buyers, but also for manufacturers, in more ways than one. First, it has major business potential. Last year, nearly 192 million dollars were spent worldwide on paid digital car services. By 2021, according to estimates, this revenue will have climbed to 1.9 billion dollars (source: Statista).
However, many services will be free. This is because – and this is the second benefit – they will reduce costs for auto manufacturers and improve product development. Even today, cars gather countless amounts of data important for regular inspections. However, they do still need to be read on site in a workshop. In future, the sensors in the car will point out potential problems. Long before the technical devices break, characteristic properties will change: They make different noises, vibrate, or run hot.
In future, reports from the sensors will avoid major damage, and with it costly repairs, in the warranty period. The manufacturers then automatically install software updates without having to bring vehicles into the workshop. This way, they receive comprehensive information on the use or non-use of new functions and on typical model complaints that can thus be rectified more quickly.
Third, digitization and new communication channels are changing the interaction between retailers, buyers, and manufacturers. Through the connected services, for the first time intensive interaction is taking place between manufacturers and end customers without diverting through retailers. With data from vehicles and the networked car as a direct communication channel to the driver, automotive manufacturers can improve customer service and management. If the car reports that the tires need to be replaced, offers for new tires will appear directly on the dashboard display. Or they can offer the driver a safety package tailored to exactly their personal vehicle use.
And fourth, the data from the networked car can help compile fitting car-sharing offers in a city or region for the driver. This is also an interesting field for manufacturers where demand continues to grow: In 2015 there were roughly seven million car-sharing customers worldwide, while according to the prognosis by consulting firm Frost & Sullivan, there will be approximately 36 million users sharing 427,000 vehicles by 2025.
Comprehensive data analyses are crucial
The challenge for automotive manufacturers in future will not just be gathering the data, but also preparing and analyzing it. If they can’t manage that, they can pass the wheel to outside competitors who don’t know anything about cars, but know a lot about data usage. As of recently, Toyota has been working with telecommunications supplier NTT Data and Microsoft. With NTT Data, the Japanese company aims to develop solutions to reduce traffic jams and accidents and support drivers through artificial intelligence. Microsoft licenses a majority of its vehicle technology to Toyota, from operating systems, to voice recognition and gesture control, all the way to IT security.
Beyond that, Toyota, Ford, Mazda, Groupe PSA, Suzuki, and Subaru have founded a consortium aimed at accelerating the development of standards for apps in cars. In this way they want to prevent Internet conglomerates like Apple and Google from pushing them into the passenger seat of the networked car. With iOS CarPlay and Android Auto, both IT giants already have fitting digital interfaces in their product range.
The car is becoming an assistant
Peugeot presented its concept of the car of the future at the Mobile World Congress in Barcelona in late February: The “Instinct” study uses artificial intelligence and is connected with both the driver’s cloud and the networked properties in the Internet of Things. This way, the car becomes a personal assistant. “Instinct” knows, among other things, your calendar, the weather, road conditions and traffic prognoses, as well as the driver’s physical status, transmitted by their fitness armband. Now, if a snow front makes for bad road conditions at night and traffic looms, from the garage, the car could set the driver’s alarm clock a half hour earlier so that they can arrive at work stress-free. Or, after a stressful day, it doesn’t let them drive on their own and instead takes the wheel, even turning up the heat at home on the ride.
The extent to which car owners are ready to disclose their data in the named scope remains to be seen. In any case, the development will continue. “The digital big bang has long since begun,” Porsche’s digital boss Thilo Koslowski recently said at the Automobilwoche conference in Munich. His motto: “Data is the new oil, algorithms are the new engines, and the new activity unit is intelligence.”
Author: Editorial team Future. Customer.
Image: Sergey Nivens – Fotolia/Adobe Stock