What does the Future hold for the Automotive Industry?

Automakers are always innovating to best their competition. But, the auto industry is still facing a lot of challenges when it comes to autonomous and electric cars.

Fremont, CA: The auto industry is facing a wave of collaboration. Honda and General Motors have joined hands to develop autonomous vehicles. Ford and Volkswagen have spent billions of dollars on solo AV and EV design efforts. Moreover, giants such as BMW, Volkswagen, and Daimler are partnering for research and development for autonomous vehicles. Meanwhile, Fiat Chrysler is Waymo, a Google self-driving car affiliate for the AV program and reducing its investment in EVs as well. For the past decade, automakers have strategized their innovations based on the idea that the automobile industry is going to be revolutionized. Connected cars are already a reality, Electric cars are gaining popularity, and autonomous vehicles are still an uncertainty. Automakers have tried to get an early-mover advantage in these segments, but most automakers have been disappointed.

Nissan introduced the Leaf with a target of 1.5 million sales by 2016. Yet, only 400,000 cars were sold by the end of 2018. J.D Power and Associates predicted the sales of their global hybrid and EV annual sales would be more than 5 million units. However, the total sales reached four million in 2019. A few years ago, some analysts forecasted that autonomous cars would be available to everyone by 2035. But, Waymo’s CEO said that it would take decades for autonomous cars to be seen on the roads routinely. Waymo’s CEO also mentioned that AVs might never be able to drive without human assistance in conditions such as bad weather or crowded places. 

CASE mobility will reshape the auto industry. However, automakers need a clear-eyed look at their prospects and capabilities and a plan to navigate for the next few years. Automakers must not abandon their long-term strategies, but make changes in short-term realism. Thus, when an opportunity strikes, the automakers will be ready with new business models that will eventually be required. The CASE approach will represent a shift in the strategic assumptions for many automakers around the world. When CASE vehicles are ready for the market, the automakers that invested in them will reap the benefits.

The industry’s financials point out the difficulties in bringing CASE to life. Even though auto sales have increased by 5 percent annually, the profitability of automakers has lagged. The disappointing profitability levels are due to the expense of huge, complex, and risky technology investments that might take decades to recoup. Poor returns on new product investment are a big problem for the industry. Automotive companies are capital intensive, but they are far worse than most other sectors in terms of economic value creation. Even though the companies are performing poorly financially, the product introduction is expected to rise continuously by 59 percent, which is the fastest growth in EVs and AVs thus far.

Automotive OEMs and suppliers often argue that autonomous and electric vehicles represent a huge revenue opportunity. They believe that large R&D expenditures will pay off in the future. Autonomous cars and electric cars are the future of the automotive industry, and the automakers that do not ride on the bandwagon might get left out.

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