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 […]
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 people use the ride-sharing services, the less cars are sold or produced. Unfortunately, the pandemic changes this trend a lot. This is because lots of people take care of their sanitary condition more than before. As a result, they want to keep their own cars.
Another example is that biggest economies such as the UK and Japan introduce new policies. They will be to prohibit the automobile companies from selling new gasoline engine cars in the decades. Thus, electrification is unavoidable. If electrification is accelerating faster, it will affect the employment in supply chain of the automobile industry drastically. This is because electric vehicles need less components, and because many components of EVs are not the same as that of gasoline vehicles. Therefore, the transformation of automotive companies are inevitable.
To adapt “CASE” era, Original Equipment Manufacturers (OEMs) and automobile suppliers try to be not only hardware but software companies. For instance, one of world largest automobile companies, Volkswagen, announced its investment plan and 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 and understand data of drivers and passengers. Finally, they must transform those data into the improvement of their experiences. Thus, key success factors in mobility are totally different from those 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.
Let us imagine that we had worked in big automotive companies such as Volkswagen, Toyota, 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. However, the automotive giants must compete with them now. Of course, it is really easier said than done.
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 it would invest EUR 73 billion in the next 5 years. In fact, this 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. However, it takes time to create new revenue and profit sources, and investments are sometime in vain.
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.
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. As a result, this disparity sometimes leads to failure of the collaboration.
