How the car industry is being disrupted by digital

Arif Harbott
Arif Harbott

Close your ears Jeremy Clarkson but the future of cars is not about petrol, engines or safety it will be about digital connection and automation.

Why we buy a car is changing

For the last thirty years the car you bought was determined largely by its engine (speed and efficiency), space of the cabin (number of people) and to a lesser degree the level of safety. In some segments, such as performance cars, the buying decision was made almost exclusively on the size and power of the engine.

However many experts believe that in a world of hyper-connected, intelligent, autonomous vehicles it will be digital technology that determines your car selection.  Are the large car makers ready to move from manufacturing to software engineering?

Digital disruption of the auto industry

The car of the future will be hyper-connected – it will communicate with intelligent sensors on the roads, connect to nearby vehicles, and stream live data on traffic, weather and any special events that may affect traffic.  It will be able to monitor its own working parts, detects faults before they occur and reduce the level of road accidents. To do all of this it will need no human input other than a destination location. Welcome to the digital car.

Autonomous cars – freedom or soulless?

Google Car
The latest version of Google’s self-driving car — © Reuters

If you have not heard of autonomous or driverless cars before they are cars driven by a computer guided by an array of sensors and require no human intervention.   The Google self-driving car prototype has no steering wheel, brake or accelerator pedals. As a passenger you are free to read, talk or sleep while the intelligent car drives you to your destination. It sounds like science fiction but driverless cars can already navigate 1% of all roads and it is expected that by 2035 they will be ubiquitous. It is not only Google who are getting in on the act, Uber, Audi, BMW and the also Tesla, whose new car is fully equipped with auto drive capability.

Driverless cars will open up car travel for older people or those not currently able to drive, giving them freedom and mobility.  It will allow people productive commutes, ability to drink alcohol and get home safely, fewer traffic jams, shorter commute times, fewer road accidents and less need for road policing.  The whole car insurance model will need to change as well as the driving lesson industry both of which will need to adapt or be disrupted.

Some critics argue that this driverless car revolution will mean that a car loses it soul and will make driving dull. There are many challenges to overcome before driverless cars are common place. Sometimes, a driver must decide whether to swerve to avoid a single pedestrian or a car full of people, those types of ethical dilemmas will need to be programmed into the car. There are also the challenges of how driverless cars communicate and interact with the existing human driven cars, the need to accurately map the entire road network, complications posed by extreme weather conditions, and whether the car software is secure enough not to be easily hacked.

Car sharing and rethinking ownership

For many people the actual time spent using a car each day is low, the rest of the time it sits idle on the driveway.  Driverless cars will change the way we think about car ownership and will open up possibilities for car sharing.  When your car can take you to work, then drive back to your house and take your children to school and then drive back and take your partner to work, there is less need for multiple cars per family.

In fact it goes further than this, you could also share your car with friends, neighbours or your extended family if you can arrange your schedules accordingly.  The reality is this would be difficult but we could see a move to on demand car ownership, where you only pay for your journey and one car can then be used by multiple people.

Car connectivity will form a key part of your buying criteria

Even today, I rank a car’s connectivity very highly during my purchase decision.  If a car cannot connect to my smartphone or computer then I am much less likely to buy it.  The basics should be that I can connect my phone, play my music and make calls, all of which is usually standard. The next level of interaction is that I should be able to upload my maps from my computer to the car, allow the car to access my contacts and their locations and also query my calendar. A car must be able to integrate with your digital life.

In the very near future, your car will be able to query your calendar and know that you need to be at work for 9am. It will automatically work out the best route and send you a text message 5 minutes before you need to leave. If it is a cold day then it will also turn on the heater to warm the car up before you get in and as you approach the car open the door for you. Then all you need to do it confirm the location and the car will do the rest.

Cars that adapt to your driving style

As autonomous cars are not yet commonplace, humans still have to drive.  In the short-term, basic sensors which are already on many modern cars should be put to good use.  These monitors could assess your driving style and recommend if the car is suited to you or suggest  another model which better fits your needs.

Even more useful would be a car that could fine tune its performance based on your individual driving traits. To a lesser degree this is already available on some high end performance cars.

New challenges and opportunities for car manufacturers

All of these changes bring both new challenges and opportunities for car manufacturers if they are agile and forward thinking.  If they do not adapt then software giants such as Google, Apple or Uber, who do not have a traditional car manufacturing background will dominate the car industry of the future.

Challenge 1 – Data management

Digital cars will have embedded sensors and produce and receive huge amounts of data.  If this data is to be stored and analysed then large scale data management will become an important new competency for car manufacturers.  This new data should provide valuable insights for the manufacturers on the car’s performance and safety and this can be used to enhance the design and increase efficiency.

Challenge 2 – Manufacturing to software engineering

Cars of the future will be more like a computer on wheels, running large amounts of code, making many decisions and processing huge amounts of data. This means that auto manufacturers will either have to partner with software experts such as Google and take a lower percentage of profits, or build their own software engineering competencies.  Any radical competency change on this scale will not be easy.

Opportunity 1 – Connectivity services

When the demands of driving are lifted, the car interior could provide an opportunity to generate revenue from the occupants’ connectivity and car time. This could be charging for Internet services, advanced mapping services, multimedia packages (such as music or films), or enhanced diagnostics.

Opportunity 2 – Cars on demand

Those people with a lower requirement for car use could rent cars on demand.  The car manufacturer would own a connected fleet of cars and rent cars out to customers on a per trip, or per mile basis.  Cars could be ordered via a mobile, much like a taxi is ordered from Uber.  In fact this on demand fleet could replace the need for taxis entirely.

Final thoughts

If digital, driverless cars are the future, then the car industry needs to think beyond basic transportation needs.  They will still need to find a way to capture our imagination, satisfy our need for self-expression and give us the feeling of independence all of which have been the essence of car ownership for over 100 years.  Disruptive technologies will give new entrants a chance to overtake existing automotive leaders whose competence lies in established ones.

How the car industry is being disrupted by digital

2 thoughts on “How the car industry is being disrupted by digital

  1. I think the 2nd opportunity you mention and give an example of is actually boarder. It’s the shift that needs to happen from selling a product (a shiny car that moves) to selling a service (the ability to move around for the next 10 years, for example). The shift from product provider to service provider is something that digital pokes at but does not provide a solution for per se.

    One of the biggest challenges to making this shift is the automotive industry itself and the technical and brand legacy it is so bound to. Note how every car advert ever from the T Ford onwards consists of the object of desire (the vehicle) moving through space with some people smiling and having fun/being practical/looking rich/having sex etc etc. Thats it, thats the extent of the automotive sector’s vision.

    Having seen the inside of a car startup that didn’t push the envelope as much as it could i’m convinced that the only disruption will come from outside; cue Teslar etc.

    1. Thanks Tom. I tend to agree that a more service based approach will start to emerge. Can the large car companies shift 100 years of engrained thinking about the object as an object to more of service? I am not sure but as with many industries the disruption will start around the edges, first with a small service such as maps, then digital connection services, then platforms and the finally with technology companies moving back up the value chain to actual car manufacturing. Wow that sounds a lot like Google! Only time will tell.

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