06.01.2022
Digitalization is the buzzword of the 21st century. What does it mean for the automotive industry?
Besides the usual effects of digitalization in the areas of corporate management and working environment, the car as a product is changing.
Today it gets increasingly common to plug in ones mobile phone into the car and to see the personalized home screen adapted to the car. This works mostly via Apple Car Play or Android Auto.
The above mentioned experience is only the second step (L2) in the today imaginable world of connectivity. The consulting firm McKinsey categorized the connectivity of cars into the following five different levels:
Regarding those 5 levels it becomes clear that a lot of new value creation is possible for the costumer/driver, the automotive manufacturers but also information networks in general.
Value Creation for the costumer
For the costumer software and connectivity is becoming a source for differentiation. According to a study 69% of Chinese costumers which are on average 20 years younger than the average European car buyer would switch manufacturer/car brand for a better connected experience. This results into a sinkage of brand loyalty. Cars transform from a mode of transport into a multimedia environment with connectivity at the heart of the digital user experience (UX). The time spent in a car is not solely seen as travel time but needs to be used productively. Today’s costumers want to be able to call people, send messages, listen to music and podcasts but also interact with their car.
One could for example imagine telling the car to eat at an Italian after the last meeting in the calendar. The car assistant would then look up for restaurants in the surroundings, compare your past preferences with the menus and then book a table - all happening in the background during your travel time.
The value creation possible through a connected costumer experience integrating the car as transportation device into the live of the drivers and passengers is immense.
Value Creation for the automotive manufacturers
For manufactures an enhanced connectivity of the fleet allows for totally new software improvements being influenced by data driven development. A costumer doesn’t want to have an old software in a two years old hardware. Through decoupling the software development cycles with the hardware development cycles manufacturers will be able to implement improvements constantly and therefore react faster to developments in digitalization. Over the air updates allow a continuous collaboration between hardware and software, contributing to an enhanced user experience opening totally new customer centric business models. Developing partnerships with tech companies will make a seamless integration into the costumers daily live possible and create new value of a car.
Value Creation for Information Networks
The usage of collected data while driving has a nearly eternal extent and can touch a lot of different industries.
For example the assurance industry could use the collected data of the driver to enable a totally usage based insurance lowering costs for the assurer and behaving correctly also for the driver. One could even imagine that such models could possibly lead to improved safety.
That the biggest potential lies in the usage for the automotive industry concerning AI and autonomous driving can be seen in our other articles.
Why is this relevant for the GenZ?
For the Generation Z the individualization switches from Exterior and Interior design more towards an individualization in the software. If one rents a car for the day or uses car sharing providers the expectation of an individual user interface is there and the need to use travel time effectively too. The Generation Z doesn’t want to go online anymore, they live online. Therefore it won’t be possible to not integrate daily life connectivity and futures into modern cars.
What does this mean for the automotive industry?
To sum up the above stated value creation this means that in the future the industry will be divided into two big blocks. The hardware side and the software side with a need of perfect collaboration. The software side will behave similar to today’s tech companies - collect data, form partnerships and always update the software. The hardware side will need to see the car as a constantly managed device.
Written by: Maxime Schönberg
Sources: McKinsey Study - The trends transforming mobility’s future; KPMG Mobility 2030 Study