The most influential Megatrends set to shape the world through 2030, identified by Euromonitor International, help businesses better anticipate market developments and lead change for their industries.Learn More
The vehicle of the near future will be electric, lightweight and recyclable, connected and autonomous. The automotive industry is experiencing the biggest waves of innovation and what were until recently viewed as industry disruptors are now seen as opportunities for auto companies, as well as platform providers and app developers. Auto and tech companies as well as industry experts at the Connected Cars and Autonomous Vehicles Europe 2017 at the London Tech Week 2017 predict that mobility as a service will focus on user experience and that autonomous cars will reduce road fatalities and ensure access to mobility for an ageing population. There will be more collaboration between OEMs and tech companies and data will be the new oil.
Experts from Volkswagen, Daimler and Nissan identified four forces as the major trends shaping and changing the automotive industry of the future: autonomous driving, connectivity, ride sharing and electrical vehicles. These pressures are turning the car business into a software business where the traditional paradigms of the automotive industry are being transformed. The car itself is no longer the main attraction; the focus is shifting to services and user experience. This is the reason why tech players are increasing their relevance in the sector, while mobile players are expecting to play their part in the market very soon. The time spent in the car will be redefined and the discussion will centre on what people will want to do while they are not driving.
The transformation driven by technology and population factors such as ageing and urbanisation is shifting the focus to mobility as a service, where user experience is more important. Whilst currently most transactions are between OEMs and dealers, according to Daimler auto companies need to have a more direct relationship with their customers, which will be enhanced through connectivity, where the relationship between the OEMs and the driver will start long before they get into the car and continue long after, generating many opportunities for auto makers.
Many manufacturers and industry experts see reduction of road fatalities as the major benefit of autonomous vehicles, as currently human error is responsible for the majority of road accidents. Autonomous vehicles are also expected to allow better traffic flow, with the improved vehicle-to-vehicle (V2V) and vehicle-to-infrastructure (V2I) communication. This will also mean that while driving is no longer fun, we can let the car do the work. Parking or looking for a parking space generates 20-30% of all traffic, so autonomous cars should reduce this.
A major benefit of autonomous vehicles will be improved access to mobility for the ageing population. Falling interest in driving amongst the younger generation has been a major concern for car makers, but according to Nissan, connected cars and services provided to drivers inside autonomous vehicles can meet mobility requirements of the younger generations.
Despite high levels of innovation, the industry expects changes to be gradual. Nisan said that they will be at level 3 automation by 2020 and we will get to full autonomous drive by 2025, although full connectivity may not come with it. According to Strategy Analytics, autonomous vehicles will start being mass adopted from 2030. Investments in the sector are significant and start-ups are increasing with the aim to develop innovation. However, the market is still in the investment phase and therefore revenue from fully automated driving is, at present, zero.
The adoption of connected and autonomous vehicles is also being held back by a number of factors. 5G is expected to be an essential element for connected and autonomous vehicles, but wide industry adoption is not expected until the mid-2020s according to Intel, and Volkswagen sees a more incremental improvement of 4G.
There is also the question of public trust, especially among the elderly; we are therefore more likely to see the introduction of robotaxis first. Via its consumer focus groups, UK Auto Drive has found that the public is surprisingly open minded, and contrary to initial expectations, the early adopters were not the young but 60-65 year olds; affluent business people who are generally confident and are used to technology working.
However, the need for 5G availability, infrastructure and regulatory considerations will mean that from now to 2020 the market will not experience many changes, although in the long run it will be completely transformed.
Cars of the future may not be so different from today’s computers and smartphones. Traditional sources of revenue for manufacturers will be gradually replaced by new ones, such as software upgrades and car sharing. However, the key source of revenue will be data. The autonomous vehicle is a data machine able to generate and consume up to 4 TB of data per day, according to Intel. Moreover, McKinsey states that revenues generated from data will increase by USD450–USD750 billion by 2030. Data represents the biggest opportunity for the industry, but also the biggest challenge, as players have to find ways how to really monetise it. Issues such as data security, permission and ownership generated a lot of discussion at the conference.
The key use cases for 5G will be autonomous driving, smart cities, manufacturing, entertainment and healthcare. According to Intel, 5G will ensure ultra-reliability, low latency, massive machine2machine connectivity and enhanced mobile broadband. 5G will support a projected global economic output of US$12.3 trillion and generate 22 million jobs by 2020.
Traditional sources of revenue such as car sales, leasing, insurance, financial services and spare parts represent 81% of Volkswagen’s revenue, according to Ian Kendall from Volkswagen USA. He suggests data and services will change all this and the major new sources of revenue will include selling software, upgrades, media content, but also profit sharing from referrals to retail and foodservice, licensing, experiences, last mile transportation, health and wellbeing and personalisation.
Traditional car manufacturers place a lot of emphasis on heritage, design and style when making a car. With the advent of the new generation vehicles, this is changing, as the players are focusing on safety and reliability. Human factors such as the pleasure of driving and brand heritage risk being forgotten in favour of safety, whilst the aesthetics of vehicles is getting left behind. The right combination of human needs (provided by connected and autonomous cars) and human desires (the enjoyment of driving traditional cars) will determine the success of the category. The key is to let the vehicle drive, but the driver has to maintain control.
Institutions and governments will play an important role in securing mass adoption of connected and autonomous vehicles, in particular during the transition period. Governments have the power to accelerate or delay the expansion of the new technology, and what industry players need from them is to provide legal certainty, in particular at an international level. Institutions play a crucial part not only in terms of regulation but also in promoting the adoption of the new technology.
Three projects in particular were mentioned during the event. UK Auto Drive is a government-backed project started in November 2015 with the duration of three years, involving a consortium of Ford, JLR, Tata, academia and insurance industry and funds of GBP20 million. The goal is to test new connected and autonomous cars in order to support their introduction into the UK, as well as develop vehicle-to-vehicle and vehicle-to-infrastructure technologies. The Nordic Way is a project co-financed by the European Union which at the moment is in service in Finland, Sweden, Norway and Denmark, with the aim to be scaled up to Europe. Vehicles collect and share information with each other creating an automated cloud network of safety-related data between cars and the infrastructure. Data collected is crucial for the government to make the transport system more efficient and safe. The Galileo project is a European Union research and development project, a global satellite-based navigation system, which launched its first services in December 2016 and aims to connect all vehicles.
Whilst full connectivity and autonomy is a few years away, there are numerous driver assist technologies on the market already. Ford talked about its technologies ranging from electronic maps, cameras that detect a vehicle in the next lane to turn off main beam, distance alert if you are driving too close, speed detection in relation to the speed limits in the area and park assist. The new generation technologies due to come out in the next couple of years include traffic jam assist, cyclist detection, evasive steering, wrong way alert, cross-traffic alert, rear wide view camera, and remote park assist.
Connected and autonomous vehicles will be essential components of the cities of the future. Smart cities will rely on a frictionless connection between all of their parts. Prospective infrastructure will be set up with vehicles and the surrounding environment constituting its base. This will lead to a close partnership between companies and the city, where the latter will have an essential role in establishing an efficient platform and an interface between service providers. The key will be open collaboration and exchange of data between all players, rather than seeing it as proprietary data. This requires secure and open platforms.
One of the overarching themes discussed by car manufacturers and technology companies at the London Tech conference was the need for collaboration and open source platforms. There is recognition that it does not make sense for auto players to develop their own platforms: according to Alexander Klotz from Continental OEMs cannot have their own eco systems but they need to open the car. The opportunity for OEMs is to be a good integrator of services, to bring it into a smart system and to create a positive user experience.
According to Nicola Porciani from Lamborghini the challenge, particularly for niche brands such as Lamborghini, is the investment required. The services that customers are already using which are available on an iPhone, are a commodity – these should be accessible in a normal way. They want to invest more into services that are making a difference: providing unique luxury and driving experience. These are customised personalised services, but relying on the same platform.
Sharing technology and knowledge within the industry and collaboration between players must be taken to the next level. Only in this way can the adoption of autonomous and connected vehicles become a mass phenomenon.
Euromonitor is pleased to be gold media partner of Connected Cars & Autonomous Vehicles, the event where the automotive community comes together to be inspired and glimpse into the automotive future.