Digitization disrupts the automotive industry on a tremendous scale. It is no wonder the CEO of the world’s largest car manufacturer, Herbert Diess, declared (interview in Handelsblatt, 2018): “The [established] car manufacturers will only win the race for the new mobility with a probability of 50 percent.”. Let’s take a comprehensive look in this article at the digital transformation in the Automotiv Industry. Just to put things into perspective: The automotive industry in Germany is a key industry with about 2 million employees and a share of eleven (11) percent of the gross domestic product.
Overview of digitalization in the automotive industry
Key drivers of change in the automotive industry can be put in a nutshell: ACES – Automated, Connected, Electric, and Shared Vehicles. It refers to autonomous driving (or ADAS: Advanced Driver Assistant Systems), electric vehicles, vehicles that communicate with each other and car sharing. What all these trends have in common: They force the digitalization of the vehicle. To put it differently: The digital value-added share of the vehicle is growing rapidly. A modern vehicle today has about 130 million lines of code (LOC: Lines of Code), it is already a hundred times more complex than a smartphone. And it is foreseeable that the LOC will rise to 200 to 300 million.
A study by the strategy consultancy McKinsey (Automotive software and electronics 2030. Mapping the sector’s future landscape, June 2019) forcasts an annual growth rate of 10% in revenue of embedded software up to 2030. The car gets equipped with new devices and sensors that are managed by software. LIDAR, for example. Here is a nice interview with the founder Dr. Florian Petit of Blickfeld, a promising German high-tech start-up around the LIDAR technology (the interview is in German): LIDAR: Functionality and importance for the future of the automotive industry.
.Digitization in the automotive industry is not only about revolutionizing the product. It is also about a new approach to manufacture the vehicle, namely in the Factory 4.0. Daimler aims to build the most modern car manufacturing plant in the world. The factory in Sindelfingen (near Stuttgart) is dubbed Factory 56. Among factory workers, the production plant is nicknamed “fear factory”. All installed car parts are equipped with a radio chip, logistics in the plant will be fully automated, the machines communicate with each other – largely without human intervention.
Mobility of the Future: Intermodal transport, collective taxis, public transport, individual transport
Autonomous Driving SAE Level 5 has been postponed – at least on public streets. In niche areas, however, autonomous vehicles are already reality. On closed terrain, for example. Nevertheless, Patterns of use have changed already in the mobility area. And new providers of mobility services emerge. This forces car companies to realign their business models. We are currently in an explorative phase, new mobility services will emerge. Some will disappear, others may flourish. Car sharing, for example, has disillusioned many providers: Will providers of Car Sharing Services ever be able to make money? How will user acceptance grow for car sharing in future? As a matter of fact, in Germany the car fleet earmarked for Car Sharing is just 0.04 percent of the total vehicle population. Unsurprisingly, many companies have thus withdrawn from this market that offers no profits. Mazda pulled out, Citroen, Opel, and the joint venture between BMW and Daimler has cut back its activities considerably.
For sure, the future of mobility is about intermodal mobility. As we see more seamless switching between transport vehicles such as subway / bus / eScooter / eBike, the dependency on the own car will decrease. And the availability of big data on vehicle positions, target destinations, traffic congestions etc allows not only to manage traffic more efficiently. It also allows new mobility services such as so-called collective taxis (in Berlin it’s called BerlKönig). Click here for an exciting interview (in the Hy podcast, in German) with the founder of Door2Door, Maxim Nohroudi: Podcast, Outlook at future mobility.
Data strategy in the automotive industry
The revolution in the automotive industry is accompanied by a paradigm shift characteristic of the new Digital Economy: It’s about a new dimension of service and comfort. And it is achieved with a consistent data strategy by creating a digital twin for each car. This is consistently followed by Tesla, pioneer not only of electric vehicles, but also of a consistent data strategy for cars. A Tesla car is equipped with an unbelievable number of sensors as well as powerful computing power. The data generated by the sensors are permanently transferred to the Tesla cloud. The aim? – More comfortable, safer driving thanks to sophisticated data analysis. The aim is a vehicle that can make smart, data-driven decisions.
The Digital Twin, on the other hand, is the key technology to create sophisticated services around the car. The digital twin is the digital representation of a real-world object, the car. It makes all relevant information available via an interface. Digital twins can also contain algorithms that accurately describe their real-world counterparts. It could even comprise a simulation module that behaves like the real car. Another aspect of the digital twin can also be a visual representation of a car in operation. In the case of Tesla, the digital twin is located in the Tesla cloud. Now, how does this help the driver of the car? Let’s assume sensor indicate that something is wrong with the air suspension on the right rear. The digital twin of the car would then inform the nearest workshop about that issue, and make an appointment. It might also arrange with the workshop to pick up the vehicle, if a replacement vehicle is available. And the digital twin would share all available information about the vehicle with the workshop. Ideally, the workshop has a digital twin in the Tesla Cloud …
New players in the automotive industry
Industrial transformation does always bring about new players in industries. The automotive industry is no exception to this truism. I already mentioned Tesla. You may remember, that even the British manufacturer of vacuum cleaners, Dyson, pursued the development of an electric vehicle. Dyson, however, dropped out of the race again in 2019. Apple, though, is a much more serious player, who entered the automotive stage. Beginning of 2015 there were first rumours that Apple would develop its own vehicle. This rumor has now been dispelled. It does already provide Car Play or Infotainment. And market observers assume that Apple may also develop a hardware/software package for the car of the future.
Other Big Tech players have already entered the scene: Google already achieved to establish the operating system Android Automotive, which is designed to control infotainment or the entire cockpit (including heads-up display), including the management of the air conditioning system. The Polestar brand (electric vehicles), which belongs to the Volvo Group, is the first vehicle to be equipped with the Google operating system for automobiles. Other automotive players are interested or have already announced their use: General Motors, Fiat Chrylser, Renault-Nissan, Mitsubishi. The management consultancy A.T. Kearney estimates the sales potential for Google at around 100 billion euros by 2025 alone.
No surprise, Microsoft is also in the game; the Redmond-based group is a development partner for the development of the vehicle operating system for Volkswagen. And even Amazon could grow into a relevant player: In early 2019, Bezos invested in the US start-up Aurora, which has been developing autonomous cars since 2017. This was followed in June 2020 by the acquisition of the start-up Zoox (focus again: autonomous cars) for an estimated USD 1.2 billion. In addition, Amazon invested in the electric start-up Rivian.
Cyber Security or Connected Vehicles
Do you remember the spectacular hack of a car (from Fiat Chrysler) in 2015? A CyberSecurity company had remotely taken control of the vehicle for the magazine Wired: The hackers were able to control the music system, turn off the windshield wiper, even the engine. Under certain conditions the hackers could even take control of the steering wheel. The car company had to recall 1.4 million vehicles. The weak point was the infotainment system, which was not separated from the vehicle control system.
More and more vehicles receive an update over the air (Tesla, soon: BMW). These vehicles are permanently connected to the cloud. There’s not doubt: Cyber Security of cars will be a major issue for the car industry.