As four technology trends reshape the global automotive sector, customer preferences are moving away from its traditional strongholds, such as chassis and engine development.
This shift in customer preferences and the sheer size of the automotive sector have attracted new players: a potent mix of large high-tech companies and start-ups. Both differ from the automotive incumbents on virtually every level.
These new entrants and the disruptive trends they bring—electrification, autonomous driving, diverse mobility, and connectivity—will transform typically vertically integrated automotive value chains into a complex, horizontally structured ecosystem.
The newcomers are well positioned (and expected) to make moves in novel areas such as autonomous driving.Consequently, today’s OEMs and tier-one suppliers must abandon strategies aiming at total control of vehicles and instead pick and choose where and how to play by shedding assets, streamlining operations, and embracing digital acquisitions.
Four trends that favor software-driven innovation
The fortunes of players in the automotive sector have always depended on what customers see as valuable. Most of this value has resided in the hardware of vehicles and in the automakers’ brands. However, future innovations will probably focus on disruptive technology trends, so the customers’ perceptions of value will shift, increasingly putting incumbents in danger. The four trends that will favor the newcomers are these:
♦ Electrification. Drivetrains will shift toward hybrid-electric, electric, and fuel-cell technologies as they mature and become cheaper.
♦ Autonomous driving. The operation of automated cars will move from advanced driver-assistance systems to fully autonomous driving as the technology matures.
♦ Diverse mobility. As the sharing economy expands and consumer preferences change, the standard model will continue to evolve from outright purchase or lease to rentals and car sharing.
♦ Connectivity. The possibilities for “infotainment” innovations, novel traffic services, and new business models and services will increase as cars get connected to each other, to the wider infrastructure, and to people.
Attracted by the shift in customer preferences, the importance of the new trends, and the global automotive market’s massive size and value-creation potential, technology players are making their way into the sector. As they develop new software options, cars are evolving into computers on wheels, a change similar to events in the computer industry 20 years ago and the cellphone industry 10 years ago. As a result, we anticipate that a complex ecosystem will emerge in the automotive sector.
Read more of the original article at McKinsey & Company.
