The automotive industry faces the biggest opportunities and threats in 100 years

The acronym “CASE” means Connectivity / Connected vehicles, Autonomous Driving, Sharing / Services/ Subscription and Electrification. Those words are important concepts and technologies to disrupt the automotive industry. For instance, if more and more people use the ride-sharing services, the less cars are sold or produced. Unfortunately the pandemic changes this trend a lot since lots of people take care of their sanitary condition more than before and want to keep their own cars. Another example is that biggest economies such as the UK and Japan introduce new policies to prohibit the automobile companies to sell new gasoline engine cars in the next 10 to 20 years so that electrification is unavoidable. If electrification is accelerated faster than now, the employment in supply chain of the automobile industry will be affected drastically because electric vehicles need less components, and because components themselves of the final products should be changed. Therefore, the transformation of automotive companies are inevitable.

Realizing both software and hardware development is the key issue

To adapt “CASE” era, Original Equipment Manufacturers (OEMs) and automobile suppliers try to be not only hardware but also software companies. For instance, one of world largest automobile companies, Volkswagen, announced its investment plan and the Germany automotive giant wants to transform into a “digital mobility” company. Another example is that Japanese biggest automotive manufacturer, Toyota Motor Corporation, also announced the company wants to be a “mobility company”. There are several key words, mobility and digital.

Let us define mobility first. In this article, mobility is the optimization and better experiences for both people and goods that are moved from place A to place B. Thus, automotive companies should gather, understand and transform data of drivers and passengers into the improvement of their experiences so that key success factors in mobility are totally different in manufacturing.

The next important question is how to realize both software and hardware development. There are clear differences in terms of People, Culture and Organization between hardware companies and software. Hardware companies value predictability, stability, efficiency and control. On the other hand, software companies take care of search, speed, autonomy and flexibility.

Investments and collaboration are accelerated to compete with other players

If we had worked in big automotive companies such as Volkswagen, Toyota, Nissan, General Motors and Ford in 10 or 20 years ago, how could we have been to predict that we would compete with IT companies such as Google, Apple and even Tesla? Of course, it was difficult to forecast at that time, but the automotive giants have to compete with them now and it is really easier said than done. As we discussed before, both personal and organizational capabilities to succeed in hardware business or software are totally unalike. Therefore, the solutions are not easy to find. One way is to try to grow organically based on the investment. For instance, Volkswagen has already announced that the German automotive giant will invest EUR 73 billion in the next 5 years and the amount is almost same as the GDP of Luxemburg, which is 70th largest economy all over the world. When the companies do invest lots of money, they possibly keep their competence and create new one by themselves, but it takes time to be new revenue and profit sources and investments are sometime failed.

Another way is to collaborate with another player in different industry. The collaboration between BYD, which is one of biggest Chinese Electric Vehicle manufacturer, and Didi Chuxing, which is Chinese ride-hailing company is a good example. When the company cooperate with other company in the different industry, there are pros and cons of course. Pro is that collaborated companies make use of each capabilities without huge investments. On the contrary, it sometimes difficult to understand each company’s culture and ways of business, and this disparity sometimes leads to failure of the collaboration.