Scott Williams is president of the Americas region of Orange Business, a virtual and network integrator.
We are in the era of hooked vehicles. By 2030, 95% of new cars will be connected, generating more knowledge and creating more opportunities for automakers. In addition, GlobalData predicts that by 2030, 80% of a vehicle’s price will depend on its software and content.
To take advantage of those opportunities, I think established auto giants want to think about how they can replace their operating and business models to take advantage of the merit of a software-based world. This is a mindset shift for generation leaders, as the old strategies of differentiating a car to acquire (power and fuel economy) no longer dominate customer thinking as they once did. Now it’s all about the experience.
For automakers, this means changing the way they buy and build technology. This is something that new local original electric vehicle (OEM) brands like Tesla are dominating. In doing so, they have redefined what consumers expect when they buy a vehicle.
Ford recently made headlines when its CEO talked about having no more than 100 vendors offering software to develop the most of it in-house. The more established auto giants are waking up to the demanding situations ahead. With extensive experience in automotive digitalization through leading a global network and a virtual integrator, here are a few tactics that I believe those demanding situations can be overcome.
Change is complex. It’s a transformation of every aspect of the organization. Why do they have to go through this? Because the wonderful opportunities in the automotive sector are in the software.
First, there’s the delight factor. As cars become more connected, whether they’re fully electric or not, differentiators focus less on old-fashioned functionality and more on the overall pleasure of being in the car. Drivers and passengers expect more from their trips, and local EV OEMs are rushing to make it happen. happen.
Infotainment goes far beyond integrated satellite navigation systems, DVD players, and radios built into folders. Now, Tesla’s entertainment demo includes apps like Theatre (for video streaming) and Arcade (for gaming), aimed especially at entertaining occupants while the vehicle is charging.
This connected experience extends to the way cars are purchased. OEMs such as NIO and Lynk showrooms
Club-style showrooms don’t want customers to have tons of templates for them to explore; Thankfully, they’ll scroll through devices while enjoying grocery shopping and revel in a comfortable environment with all the customizations and tweaks that can be made at the touch of a button. With 95% of virtual vehicle buyers as a data source and twice as many who start their online search as they do at a dealership, the shopping experience wants to be comparable to that of any other first-time online purchase.
What kind of company has gone to great lengths to redefine what the virtual experience looks like?Tech giants. It’s the Amazon, Apple, and now Tesla effect. Whatever they do, it becomes the expected norm and everyone wants to realign with what seems like a basic experience.
Another area supported by the software is the transition to electric cars. It continues to grow. The IEA forecasts 14 million sales through the end of 2023, a year-on-year increase of 35%. For North American OEMs, there are opportunities (EVs account for 8% of cars on the road, up from 55% in 2022). and globally.
But the transition to electric cars involves more than just changing the way cars are powered. This marks the end of the usual maintenance and upkeep systems that ensured brands maintained a connection with drivers through legal dealers and mechanics. More and more cars are adapting to software-defined systems. automobiles, and especially electric automobiles. Upgrades are made over Wi-Fi and Bluetooth connections, creating the risk of additional disconnection at appointments between the OEM and customers.
At the same time, this situation creates an opportunity. As cars become more connected, they produce more knowledge. In 2014, McKinsey estimated that a car processes up to 25GB of data per hour, a figure that has undoubtedly risen since then. It is data that, when processed and analysed well, is used to tell new services, offers and approaches.
This is where being a tech giant comes into being. Amazon, Apple, Google, and Tesla around the world are where they are thanks to their ability to access and respond to knowledge quickly. Whether it’s delivering reports or seizing the opportunity to OEMs want to transform into the transition to electric vehicles at home or in-house. To achieve this, some, like Ford, do everything in-house, even though they know this means industrializing software development.
However, few brands have Ford’s scale and resources. For most looking to work with partners for a true tech company, it’s vital to keep a few things in mind. First of all, it doesn’t necessarily mean proceeding with many suppliers. who don’t talk to each other like many do lately. It can simply be a hybrid solution, halfway between a completely in-house control and a completely outsourced control. For example, key elements of the software can be written in-house, with partners supporting other elements such as knowledge analysis and cybersecurity.
For this type of technique to be successful, brands need to define where they can work themselves and where they need support. A lot will depend on the resources they already have. For example, an OEM that has already developed some of its own software. It would possibly have to perform more complex technological functions than a manufacturer that has traditionally outsourced coding. What the right partners will bring to the table is insight into how broader trends in the automotive industry and learnings from other industries apply to OEMs’ express circumstances.
The auto industry has been slow to react to disruption. Historical players were surprised by the rise of Japanese brands in the 80s and then with the start of the transition to electric vehicles. Some are already lagging behind as EV-native corporations ramp up their growth, not only in terms of electrifying transportation, but also in terms of their ability to deliver differentiated experiences.
Established OEMs want to evolve to have both, whether they’re targeting local or overseas markets. It’s vital for OEMs to evolve their vision of themselves from being a classic automaker to a generation leader because they offer an expansive visitor experience.
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