Mobility as a service Archives

The journey of automotive business transformation

by Julia Riemer | Aug 3, 2022 | Future Trends, Market development & Trends, strategy in change

Rapid and disruptive developments are repeatedly taking place in the mobility industry. One such change is the digital business transformation in the automotive industry. Increasing connectivity, the IoT, Mobility as a Service (MaaS) and Software as a Service (SaaS), the implementation of new features and services or apps, these are all elements of this business transformation. It evokes increased customer expectations, which manufacturers are responding to by focusing more on the consumer experience. And it requires new regulations for technical areas, which are joined by those for the environmental compatibility of corporate activities. Both together are drivers of investments in digitization.

Automotive experts predict that connected vehicles, smart factories (Industry 4.0) and a wealth of available customer data will drive this development. According to Frost & Sullivan’s Future of Mobility report, IT spending will rise from $38 billion in 2015 to more than $168 billion in 2025.

What can we expect from the digital business transformation in the automotive industry?

A look at history shows that some central aspects of the buying experience in the automotive industry have hardly changed over a long period of time. E-commerce has long been available to dealers and customers for the sale or purchase of new cars. Nevertheless, most customers preferred the traditional buying experience to the digital one. Even the introduction of digital tools such as iPads in showrooms has hardly changed customer behavior.

Now in 2022, customers of all provenance are increasingly willing to make their purchases, including car purchases, online. Automotive companies of all types, whether they operate offline, B2C, or B2B in eCommerce, will seek to further enhance the digital buying experience and further connect with customers digitally, whether through social media, an app, or a website.

The consumer experience is also the focus in the further development of the automobile itself. The car, which used to end with the body, is becoming a software-defined car, i.e., a software-centric electronic device on wheels that can communicate with the infrastructure and the back end, contains AI applications, can be updated over the air (OTA), and no longer has much to do with the way a traditional vehicle functions.

Challenges of digitalization in the automotive industry

Most initiatives to manage technological change in the automotive industry revolve around technology-driven trends and customer requirements and remaining competitive. Trends such as digital transformation in manufacturing, concern for the environment, increased requirements for software solutions, mobility-as-a-service and predictive analytics bring numerous benefits, but also present the industry with at least as many challenges. We have summarized some of them.

Investments

In the current difficult economic climate, maintaining liquidity and risk managing are of particular importance.

Companies investing in the digitization of the automotive industry need to focus on the most valuable use cases with the highest ROI. Predicting the ROI of new technologies and identifying optimal use cases in the automotive industry will remain one of the biggest challenges.

Just a few years ago, autonomous vehicles were heralded in the press as the biggest game changer. Since then, the outlook of seeing fully autonomous vehicles on the road has shifted significantly into the future. A 2020 Deloitte survey found that most consumers in Germany (67%) and Japan (61%) are not willing to pay more than $500 to equip their cars with autonomous vehicle technologies.

Similarly, innovative powertrain technologies. 58% of German and 54% of U.S. consumers said they would not pay more than $500 for alternative fuel engines. While there are advocates for these technological advancements, the uncertain investment climate and concurrent unclear customer demand for the technology remain among the biggest obstacles.

Resistance to change

The automotive industry could do more to drive critical transformative initiatives and business models. While the range of electric cars is increasing, range anxiety remains a real problem. More and better communication would be needed here. Also, broader initiatives by the automotive industry and its associations to promote a global or at least nationwide charging infrastructure could be envisioned. The ongoing debate about whether charging infrastructure should be the responsibility of OEMs or the government could be used for this purpose.

While the automotive aftermarket has benefited from B2C e-commerce for a long time, digital commerce has been sporadic in other areas of the automotive industry. Manufacturers face similar challenges.

Customer centricity

According to a Qualtrics study, the lack of customer centricity is an urgent challenge for the digital transformation of automotive retail.

Approaches to solving this problem should ensure that the personal experience at the dealership and the digital experience on any device produce similar customer experiences. The growing number of digital natives are sensitive to these experiences, and companies need to rethink how their relationships with prospects, customers, dealers, suppliers, and vendors can help to improve the overall experience of the car owner.

[infobox headline=”At a glance”]

Digital buying experiences in general, but especially in the context of Software-Defined Car, are shaping business transformation in the automotive industry
Technology transformation struggles with challenges in investment, resistance to changes and customer centricity
Five trends are significantly influencing digital transformation in the automotive industry: environment and sustainability, connectivity, autonomy, digital commerce and augmented reality
Although the journey of business transformation requires a lot, the benefits outweigh the risks, such as innovation and expansion

[/infobox]

Examples of digital business transformation in the automotive industry

The automotive sector already offers excellent examples of digital transformation: from product innovations to operational changes and customer-focused improvements. Here are some examples of digital transformation in the automotive industry:

Tesla has long been a pioneer in the use of artificial intelligence and Big Data. Since 2014, the company has been collecting data from drivers using onboard sensors and was able to roll out a wireless update that improved the accuracy of its Autopilot software.
Volvo’s Polestar brand was named the best positioned car brand for online sales. Like Tesla’s models, the Polestar 1 and Polestar 2 are only available online. However, Volvo also maintains dedicated “Spaces” at physical locations at partner plants.
BMW has introduced an IoT platform at its Regensburg plant with great success. It enabled the company to cut the time needed to roll out new applications by 80% and reduce quality control issues by 5%.
Volkswagen partnered with AR-based application developers to tag auto parts with the right tools. This system, known as MARTA, increases the efficiency of service technicians.
One example of overcoming the limitations of traditional offline business is TruPar, a wholesaler of forklift parts that has future-proofed its operations with unified eCommerce, CRM and ERP integration.
Mercedes-Benz recently invested 200 million euros in the Electric Software Hub in Sindelfingen, also known as the “software integration factory,” with the aim of accelerating its own transformation. Many functions relating to hardware, software, system integration and testing will be brought together there under one roof. 19 cross-functional units work there on 8 levels and 70,000 square meters of space on the electric/electronic integration process.

The 5 most influential trends for business transformation of the automotive industry

1 Environment & Sustainability Topics

The impact of human activity on the environment remains the number one global issue. Every industry must address sustainability issues and focus on sustainable technologies. Almost every major car brand already has a fully electric vehicle on offer. According to research by CNN, Volkswagen predicts it will sell 1.4 million electric cars by 2025, and it’s quite possible that electric cars will completely overtake gasoline-powered cars by 2040:

The rise of online shopping is driving sales of electric delivery trucks. In fall 2020, Amazon ordered 1,800 electric vans from Mercedes. Joining the trend of many brands to move sales to the Internet as well, automakers are offering customers a convenient experience without having to visit a dealership.

2 Connectivity

From phones to TVs to watches, most of our devices are already networked in some form, and automotive products are catching up fast. The development of infotainment systems, for example, is advancing rapidly. Cars are getting better at understanding voice commands, monitoring parts for wear based on driving behavior, and adapting to the driver’s personality.

As a digitally enhanced driving experience becomes more standard, automakers need to accelerate updates to vehicle systems. Tesla, for example, has long been a pioneer in wirelessly updating vehicle software. OEMs see significant value in remotely updatable vehicles, and their sales are expected to increase tremendously. The further development of Over the Air Updates (OTA) will continue to be a big topic we just recently reported on in an article about SUMS (Software Update Management Systems).

3 Autonomy

Machine learning and predictive driving technologies are already widely used in the automotive industry. As these technologies advance and autopilot-ranked systems are developed, the general public will warm to the idea of letting cars drive themselves.

The automotive industry is extremely data-driven, and the amount of data being transmitted by cameras, sensors and computers is increasing daily. Assisted driving is already becoming mainstream, and these technologies will soon find their way into automotive products at all price levels.

4 Digital commerce

Digital commerce technologies are transforming the automotive industry by enabling greater efficiency, cost savings and personalization. The proliferation of new tools and the wealth of available data can be better used for customer service. One example is feedback tabs or surveys on e-commerce and social media sites that can relay information directly to the dealer or manufacturer.

5 Augmented Reality

There are many applications for augmented and virtual reality functions in the automotive industry. Virtual showrooming, for example, allows customers to sit in a chair that mimics a car seat and experience in real time what it feels like to sit in the car of their dreams. Virtual prototyping and virtual configuration can help users to visualize the final product and to understand how all the parts connect.

Service departments, for example, can use augmented reality software provided by the manufacturer to make the job easier for automotive technicians. These technologies can be used not only by OEMs, but also by service departments in the insurance and used car industries.

What are the benefits of digital transformation in the automotive industry?

As digital technologies evolve all around us, manufacturers are increasingly at the crossroads: transform and evolve, or stick with the tried and true? In the long term, digital business transformation offers many benefits, including

Streamlining supply management in automotive production and facilitating a networked supply chain.
Innovation of vehicle performance and design
Expansion into new markets with the sale of automotive parts
Omnichannel sales and customer service experience
After-sales support and customer satisfaction monitoring

How can you get started with digital transformation?

Today, more than ever, companies need to stay ahead of the curve and get into the minds of their customers faster than their competitors. They need to identify their current and future needs and work with the right technology partner to meet them. They also need to streamline internal processes, maintain and grow relationships, and reduce costs. Magility helps your company to master the challenges in your industry and transform your brand using the digital revolution.

Enable digital transformation in your automotive business today

The pressure to go digital requires automotive companies to collaborate and partner with technology solution providers. Make digital transformation a core, inseparable part of your business, regardless of which area of the automotive industry you are operating in.

At magility, we’re here to help. Contact us now – we’ll be happy to answer your questions. Follow us for more news also on LinkedIn. We look forward to hearing from you!

The new IAA Mobility – a decentralized hybrid concept with growth opportunity

by Nada Welker | Sep 20, 2021 | Alternative Drives, Automotive Industry, New Mobility, Smart City, Startups

400,000 visitors from 95 countries, nearly 1000 speakers and 744 exhibitors gathered at the new IAA Mobility last week. Among them were car manufacturers, important players of the tech industry, numerous relevant companies of the supply industry and suppliers of micromobility products. As every time, we from magility were again active on site.

The new concept

This year, the IAA Mobility presented itself in Munich for the first time in a completely new way. Very ambitious, hybrid in presence and online version, as well as in a B2B and a B2C version. The B2B section was located on the exhibition grounds themselves, while the B2C area was placed in the center of the city. Many areas could be visited free of charge on Munich’s most popular squares, even without a ticket. Those who were not there in person were able to experience the show digitally via IAA Mobility’s new virtual platform.

The demonstrators

In particular, the squares in the city were protected by massive police presence. There has not been a larger police contingent in Germany since the 2017 G20 Summit in Hamburg. Numerous demonstrators gathered at different squares and demanded a turn away from the still car-dominated traffic policy. They stood up for pedestrian, bicycle and local traffic, abseiled from highway bridges, organized a bicycle star ride as well as pedestrian demonstrations or took part in a so-called protest camp on the Theresienwiese. Demonstrators accused the makers of the IAA Mobility of being nothing more than a platform for the image polish of politics and business.

Our impression – magility on site

During our walk around the fair, we could already clearly see the transition from a pure car show to a mobility exhibition. Different vehicle solutions and forms of mobility have found their way into the trade fair. The new IAA Mobility is no longer a pure car show where OEMs present their cars with powerful combustion engines. Only a few vehicles with combustion engines were to be found at the fair, but unfortunately also almost no exhibitors from abroad. The IAA Mobility is supposed to become a networking event and a platform for cooperation as well as for new business models, micro-mobility and urban policy. Under one roof, or one sky, many players came together to shape the mobility of the future.

In her opening speech at the IAA, Chancellor Merkel spoke of a real quantum leap compared to the last IAA. The networking of all forms of mobility was clearly the focus. In addition to the automakers, numerous suppliers, tech startups, bicycle brands and other micro-mobility providers with new offerings bustled around the exhibition areas. On different stages, there were discussions and lectures about the new forms of mobility, and everything related to them. It was also about the cities of the future, about cyber security, about traffic concepts and, of course, about the further advancement of networking.

A tangible vision of the city of the future, climate-neutral, without noise and congestion and with a multimodal and safe traffic concept, has not yet emerged for us at the fair. Due to the very ambitious, future-oriented and decentralized concept and due to the integration of the numerous forms of locomotion, one sometimes felt a bit lost in the large halls or on the streets. The path taken by the makers of the IAA Mobility is a first small step in the right direction and, from magility’s point of view, has great potential for the future. As is well known, transformation away from the tried-and-true to the experimental new never runs smoothly and requires support from experts who can combine the old and the new in a meaningful way.

The biggest weakness of the current concept is the inadequate implementation of the B2B concept. As in the old days, almost all exhibitors have sent pure sales teams to the trade show booths. However, there is a lack of qualified developers and buyers to bring the B2B concept to real life.

The car manufacturers

Electric vehicles clearly dominate the show floor at IAA Mobility. The industry has realized that it needs to rethink and the politically prescribed framework conditions seem to be taking effect. We were able to find only a few vehicles with classic combustion engines at the IAA. This effect is already reflected in the registration statistics of the German Federal Motor Transport Authority (KBA, 2020), which records a total of 25% of registrations for the e-vehicle and hybrid segments. This is almost on a par with diesel (28%), while gasoline still clearly leads with 47% of registrations. The OEMs are therefore perfectly capable of meeting current demand.

The principle of “more sustainable, smarter, shared economy” is increasingly replacing the old principle of “faster, stronger and wider”. At the IAA Mobility, this development has not yet taken hold in the OEM passenger cars on display. For potential buyers from the cross-section of the German population, the range of offers there is still inadequate. According to a study by Statista on the willingness of the German population to spend on the purchase of a passenger car in 2020, only about 6% of the population who planned to buy a new car in 2020 wanted to invest more than €25,000 in this purchase.

The only car at the show with a purchase price below €25,000 was VW’s ID.Life, although according to Volkswagen brand boss Ralf Brandstätter, it will not be available on the market until 2025. So we looked in vain for available electric vehicles for the mass market at the IAA Mobility, as well as hydrogen-powered vehicles.

Internationality was sorely missed at the IAA and should be restored at subsequent trade shows. In addition, the IAA Mobility does not cover the complete range of mobility, because motorcycles, air cabs, hyperloops, electric planes, supersonic aircrafts and spaceships are missing.

Our conclusion: IAA Mobility 2021 was, as always, exciting and at the same time already very different from the past. But for it to be sustainable, it needs to change a lot more. The direction is right, the design still needs significant corrective loops.

The suppliers

The suppliers moved much more into the center of attention at the IAA Mobility. The major suppliers (Tier1) met the automakers on an equal footing. This was quite different at the “old” IAA. Here, a clear shift is visible and the industry “behind” it is more visible. Among suppliers, too, the focus is clearly on electromobility and alternative drive technologies. Bosch, for example, announced at the IAA Mobility that electromobility would become the core business for the company in the future and presented the newly developed “eAxis“, which combines power electronics, electric motor and transmission into a single unit. Continental and Schaeffler also showed innovations around the topic of alternative drives at the trade show.

At the press conference, Wolf-Henning Scheider, Chief Executive Officer of the ZF Group, presented the ZF strategy “Next Generation Mobility. NOW“. He also presented the so-called “Modular eDrive Kit“, a modular construction kit consisting of coordinated components which, in addition to e-motors, also offers inverters, software, and various transmission options. According to Scheider, it bundles the entire expertise of the ZF e-mobility team in system solutions, components and software control in a flexible and modular platform. The consistent modular approach of the eDrive Kit is the optimal complement to the platform strategy of vehicle manufacturers. With the modular drive solution for purely electric passenger cars, ZF promises up to 50 percent shorter development times as well as high maturity levels. From compact cars to the premium segment, everything can be mapped.

The ZF example shows, as do Huawei, Schaeffler, Bosch, Tesla, and others, that the intelligence of future vehicles will be determined by a few, extremely powerful central computers such as the ZF ProAI. According to ZF, the ZF ProAI is the most flexible, scalable, and powerful automotive-grade supercomputer for the automotive industry, effectively becoming the source of vehicle intelligence.

The changeover process from conventional driveline technology to electromobility represents a massive qualification effort in the coming years, also for suppliers, who will have to adapt their services and products to the new requirements. From magility’s point of view, some suppliers are already well ahead of the vehicle manufacturers, while others will not survive this next evolutionary step.

The startups

Startups were much more in focus at the IAA Mobility compared to the last IAA. The startup booths were centrally located next to the big players in the industry and therefore very accessible to trade show visitors. They had the opportunity to network with investors, international partners and political representatives at the numerous networking events and to participate in master classes, discussion panels and lectures. The IAA Mobility Founders Day – a networking event – also reached progressive target groups of the IAA. Many of the most exciting developments came not from the established manufacturers, for example, but precisely from these new young companies and the startups. For example, Johann Jungwirth, Vice President of Mobility-as-a-Service (MaaS) at Mobileye, announced a small sensation from the field of autonomous driving. Starting in 2022, a robot cab service is to be offered in Munich together with the car rental company Sixt, which is to operate without a safety driver. Approval has already been applied for. Tech startups are ahead of established providers, primarily due to their faster development cycles. Many startups from the ADAS sector were also represented at the show. So was Cognata, an Israeli company that offers full product lifecycle simulation for developers of ADAS and autonomous vehicles. We will report on these and other interesting startups at the IAA and their high-tech developments in another article.

Micromobility at the IAA

Cars were not the only focus of attention at this year’s IAA. Micromobility providers also got involved in the trade show action for the first time. Bicycles are in vogue, and even classic car manufacturers such as Porsche are getting involved in the micromobility-market: In cooperation with German bicycle manufacturer Storck Bicycle, Porsche has launched a new brand called Cyklaer. This brand offers fast e-bikes at Porsche’s price level. BMW is active in the cargo bike sector with its “Dynamic Cargo” concept, and VW is also involved with its “e-Bike Cargo” cargo bike, which is even due to be launched this year. Young companies and startups are also getting involved in the micromobility sector at this year’s IAA Mobility. We will report on this in a separate article.

Our conclusion

The path to climate-neutral mobility that is affordable and available to all is visibly progressing, even if there are still some long-established views and behaviors to be rethought along the way! The IAA Mobility has picked up on this trend and given a starting signal with the new concept. The design can be further developed and can move in a promising direction. This year, IAA Mobility was clearly focused on e-drives. ADAS and e-mobility topics were definitely the focus of the show. Suppliers of micro-mobility-products also made their mark at the show. It was also clear to us that the convergence of industries will play an even more important role in the future. Platform providers are now playing a major role in the automotive industry. Huawei in particular stood out to us with its end-to-end solution from the cloud to the vehicle architecture. So telecommunications companies are no longer just appearing on the sidelines in the automotive market. They are right in the middle of the action, and car manufacturers will have to dress warmly. For the next IAA in 2023, we at magility expect the topic of autonomous driving to move further into the spotlight of the trade show.

magility on side

All in all, we look back on a very interesting trade fair and are already looking forward to the exciting development steps that will (have to) be taken through the mobility transformation by 2023. We are enthusiastically supporting the startups from our network in placing their high-tech developments in the right place at the right time here in Europe. For the industrial companies, we evaluate and review new innovative business models and accompany them during integration and market launch. With our experts in the field of electromobility and alternative drives, we also monitor this submarket. If you have any questions, please do not hesitate to contact us.