The bedrock of the automotive industry for the past 100+ years has been shaken by the electrification and digitization of vehicles. Independently, these factors bring sweeping change. Together, they bring a complete industry reset. Add to this the speed at which this disruption is rippling through the industry due to regulatory pressure and consumer demand, and it is undeniable we are on the cusp of a new automotive era.
Automakers are setting aggressive goals for all-electric vehicle production: Honda by 2040, GM by 2035, and Mercedes by 2030. Many others have similar commitments to hybrid+EV fleets, and digitization is following in lock-step. The pace of this change is hard to believe when you consider these goals necessitate a reset of supply chains, production, and operations in around 1/20 of the time most of these companies have been in existence.
It is a truly admirable effort. However, simply because a business commits to a change doesn’t mean the business is ready for that change. Let’s analyze the implications and opportunities for automakers in a fully electric, digital, autonomized future.
Any powertrain, so long as it is electric
Historically, the Internal Combustion Engine (ICE) has been viewed as fairly simple: small combustions of either gasoline or diesel move power through the drivetrain to the wheels.
Today, simplicity has been redefined. The average powertrain of vehicles powered by an ICE uses more than 2,000 parts; that number is reduced to around 20 parts in an electric vehicle.
This seismic simplicity shift is creating widescale disruption of the manufacturing ecosystem. Automakers must completely reevaluate the extent of supply chain needed — not just in the number of suppliers, but also in the level of maturity required. The complexity of the parts and the engineering required to design, support and maintain those parts is now significantly reduced.
Alternatively, the competencies needed to design electric vehicles are shifting from mechatronics to battery chemistry, electrical engineering and motor engineering.
These two factors alone are a radical change from what the auto industry is good at today versus what it needs to be good at tomorrow. Now, automakers must overlay the computing revolution on top of this — ushering in the software era of the automotive industry.
The software battleground
Vehicles are now valued by digital, not just mechanical, capabilities. Computer chips are available in higher power at every turn. Sensors are becoming miniaturized. Connectivity is being accelerated with 4G and 5G.
This computing revolution is pushing smart vehicles beyond being vehicles, much as today’s smartphones are hardly representative of their namesake anymore when you take into account use per feature. While vehicles may never stray quite as far from their original use as smartphones, a threshold is being crossed from an operating system (OS) perspective.
The OS of a vehicle now drives key functionalities: engine control, body control, cockpit experience, infotainment systems and navigation. All these functions are looking more like best-in-class consumer electronics experiences, fueled greatly by the 5G revolution.
With this new digital standard comes new terrain for automakers to navigate:
- Rising software complexity. Keeping software components up to date and working together continually increases complexity.
- Supplier orchestration. OEMs are stitching together disparate vehicle software components to build proprietary platforms.
- Software defects, safety and security. Software in today’s vehicle comprises millions of lines of code to test, debug and secure against cyberattack.
- Development-productivity gap. Supporting and maintaining an increasing code base is outpacing the ability to develop it.
- Talent shortage and skills gap. The massive talent shortage faced by OEMs and Tier One suppliers will increase development costs greatly.
Delivering experiences in the car and beyond
Traditionally, automakers have been unplugged from the consumer experience throughout the ownership lifecycle of the vehicle. There are marketing, sales, finance, and service departments — all operating independently — to manage consumers, depending on their buying stage.
The emergence of direct-to-consumer vehicle sales is changing consumer expectations. Buyers expect the experience to be seamless from the time they start thinking about a car, through to the final sale, and throughout the vehicle ownership lifecycle.
As automakers shift revenue models from one-and-done sales to continuous subscription services, it’s critical to improve this journey. This is especially true because software-defined vehicles present the opportunity for digital upgrades.
The aftermath of the industry reset: opportunity
Software quality, ecosystem resilience, environmental impact and brand experience will determine the market valuation of automotive companies going forward. Automakers must embrace the opportunity to create a new relationship with vehicle production and management — one that goes beyond a driving experience and views the vehicle as a platform, the billboard for a new digital ecosystem.
How this digital ecosystem will ultimately take shape depends on the collective minds of the innovative, talented teams automakers are recruiting and building. The story of this era is just beginning, and we look forward to discussing the next chapter with you.
Read parts 2, 3, 4 and 5 in this series, The Race for CASE (connected, autonomous, shared, electric), in which we will continue to explore how automakers can navigate this new era with confidence.
This article was written by Aditya Pathak, VP and Automotive Lead in Cognizant’s Manufacturing, Logistics, Energy and Utilities practice.