Where is the automotive sector heading?
One could say technology is everywhere nowadays; after all, we live in a hyper connected society and we carry the whole world in our back pockets. With an estimated 5.4 devices per person in the UK, is it any wonder that separation anxiety is a term we now use in relation to our smartphone?
However, technology is not just at our fingertips - there’s more to it than just our smartphones and our laptops and our activity trackers. Often, it allows us to improve our lifestyle without us even realising it was technology that was behind it all. Functional innovations that we have come to take for granted are everywhere - from robotics and manufacturing automation and all the way to our car’s anti-lock braking system.
The automotive sector has always been a forerunner of technological innovation. In this market, it’s essential to be innovative and vital for organisations to stay ahead of the curve whilst investing in technology to create an impact in the marketplace. With worldwide spend on IT predicted to reach $3.8 trillion (£2.4 trillion) in 2015 according to Gartner, it is becoming increasingly clear that companies are putting IT at the core of their business. According to McKinsey, today’s economies are dramatically changing, triggered by development in emerging markets, the accelerated rise of new technologies, sustainability policies, and changing consumer preferences around ownership. These forces are giving rise to four disruptive technology-driven trends in the automotive sector: diverse mobility, autonomous driving, electrification, and connectivity.
Let’s imagine, for a minute, that we live in a world where these four disruptive trends are a day-to-day reality. What would that future look like?
Well, you’d start your day as you always do and quickly be on your way to work. You’d get into an electric self-driving car, which you may or may not own yourself. In 2014, the average commute time to work in the UK was 54 minutes (14 minutes more than the global average). In this scenario, self-driving cars would most likely cause fewer traffic jams and reduce your commute time. But even if you still spend the same amount of time commuting, that would add almost 2 hours of your time every day which you could use productively. Not having to drive, you could check emails, read or do research. Take into account that Sweden has already introduced the 6 hour work day - imagine two of those hours would be spent in an autonomous car; this would drastically improve your work-life balance, allowing you to spend more time with family or pursuing other interests.
Envisage you had four more hours available to you every day - how would you spend that time? We did the maths - we’re talking about an extra 20 hours per typical working week and approximately 908 hours in a year. How much progress would the human race be able to make with those few additional hours a day? The options are limitless.
But putting aside the extra time we’d have available to us, there are other potentially game-changing consequences in this scenario. Statistics say that 90% of all car accidents are caused by human error. Self-driving cars could eliminate the risks of accidents caused by tired, sleepy or distracted drivers. If this technology could reduce the number of road injuries in half, that would mean almost 100,000 UK residents would no longer need medical care as a result. This equates to almost 8% less A&E admissions per year which would almost certainly ease the pressure on the healthcare system and, therefore free up resources in other areas. Isn’t it amazing to think that just one innovation could end up helping to improve the quality of life for all of us?
Of course, connectivity would play a major role in autonomous driving - cars would have to be able to communicate with each other and with the roads. That would bring a host of benefits to us, as our car would inherently know which route to take to any destination to optimise time spent in the car. Conversely, in-car connectivity can award passengers the right context for consuming novel forms of media. If you take into consideration new emerging technologies, such as virtual reality and artificial intelligence, the future starts to sound more like a sci-fi utopia. It’s up to us to decide how we make use of all these technologies.
Who will own the car of the future?
Diverse mobility is another aspect that we need to take into account in this hypothetical future. What this means, essentially, is that you’d have more than just one option for your mobility - be it crowdsourced transportation, more effective carpooling or some other concept which hasn’t yet emerged. This could have a potentially huge impact on your finances - you would no longer need to own your means of transportation and, even if you did, maintenance and fuel costs could dramatically decrease. Additionally, not owning your car would give you freedom in terms of what car to use depending on the situation - you’d share one car for your commute, but perhaps a different car for your holidays.
But there is also another effect we should consider, which could disrupt the way we communicate. Sharing your commute to work with others would allow you to network in the best way possible - not via text, email or phone, but face to face. As 93% of communication is based on nonverbal body language, it’s fairly easy to infer that communicating via text, email, phone or social media is, at the very least creating a disconnect in interpersonal communication. Will diverse mobility determine us to go back to good old fashioned face to face communication, something today’s psychologists and communication experts alert society that is detrimental to move away from? Anything could happen, really.
What about the environment?
One of the major issues we are dealing with today globally is climate change. Scientists have presented overwhelming evidence that stresses this is one matter that can no longer be ignored. While we’ve seen a change in individual behaviour, what with household recycling, cars are still a major source of pollution which increases our carbon footprint.
Electrification is largely accepted as a possible solution to slow down climate change. This is not a pipe dream any more. Electric vehicles are a reality - today. Moreover, the UK Government hopes that, by 2050, almost every car and van in the UK will be an ultra-low emission vehicle. We still have to put infrastructure in place and educate the population where electrification is concerned, but just imagine - in 40 years’ time, petrol running cars might only be available in museums. In 2014, Elon Musk shared all Tesla patents, as he felt major auto manufacturers aren’t moving quickly enough to develop long-range electric cars. His opinion is that if we’re all on a sinking boat and someone has a great design for a bucket to get the water out of the boat faster, the design of the bucket should be shared to maximise our chances of not sinking. Aside from the impact electric cars would have globally, let’s consider how they would affect us on an individual level: already reasonable-priced electric cars are available and charging them is more affordable than fuelling a car with petrol. It is estimated that we could all save just over £1,100 every year simply by switching to electric vehicles.
How will the automotive sector be affected?
Of course, this may look like a dream come true to drivers of the future but what does it actually mean for the automotive sector?
Deloitte published a study in 2014, based on a global automotive consumer survey in which they suggested that more affordable, fuel efficient and flexible payment options could persuade more people to buy a car. McKinsey estimate that revenue from one-time vehicle sales might increase by 2% annually based on macroeconomic growth in emerging markets, which will lead to increased aftermarket sales, but also identify that there will be a whole new market created by connectivity and shared mobility - the likes of e-hailing, software upgrades or apps. All in all, they see the automotive revenue pool increase almost to the point of doubling.
One of the worrying aspects for the automotive sector seems to be a decrease in car sales because of shared mobility. However, whilst the shared mobility trend may slow the growth of unit sales, they are not actually expected to decline. Additionally, the slower growth rate in unit sales may be offset by servicing fees, software upgrades and connectivity products and services. We know these are still a way from reality and these predictions may prove to be very different to the reality of the year 2050. However, it is clear that these four disruptive trends have already started having an impact. Uber has been at the forefront of the news in 2015, whilst more and more automotive companies, as well as the likes of Apple and Google, are throwing their hat in the ring when it comes to self-driving cars. All cars are essentially run by a computer these days, so autonomous cars aren’t really a pipe dream any more. The question is - which automotive companies will turn these trends into a cash cow and which ones will not?