During 2 ½ days I attended in November one of the top automotive conferences in Germany about the future of mobility with presentations, workshops and speeches of the main European OEMs about the future of our industry. Presenters were among others the CEOs of Volkswagen, BMW, Daimler, Opel, the Director Business Development and Marketing Brembo, CEO of Pirelli, CEO of Scheffler AG, the CEO of Ford of Europe and the chief designers from Volkswagen, BMW, Renault and Volvo. Others were the CMOs of BMW, Mercedes and Kia plus futurist Matthias Horx and the Daimler futurist A. Mankowsky.
Unanimous message of all participants was that our industry currently is in its biggest change ever, that the next 10 years will present bigger change than the last 100. The presentations allowed a more or less deep insight into the different strategies of the companies – all of them are facing the challenges of digitization. This short report should give you some specific information about the state of play and some company individual insights.
The big topic of the conference was digitalization. The new players in the automotive sector who caused much of the digital influence on the industry like Google or Apple have not been present. The OEMs got a different view on these tech companies compared to the past. They have now become much partners more instead of enemies (somehow frenemies) and the majority of the Silicon Valley companies is somehow engaged in the mobility sphere and automotive, very different as 5 years ago.
Many presenters do not expect that a significant number of those tech-companies will also invest into car production – more and more of them even admit that the effort to construct and produce cars and to catch up with the experience of the classic OEMs is not the right priority. Nevertheless – this does not mean to be not alert. It means that OEMs need to speed up in learning the software business fast enough. Dieter Zetsche: “The question is who is learning faster?”
The main topics are the same for all: Autonomous driving, Connected Cars, Electric powertrains and Sharing models, often abbreviated as ACES.
Autonomous driving has already begun, but fully automated systems in all traffic situations issomewhat down a long road. The challenges are huge, the amount of data traffic also and the network coverage in all relevant countries is an issue. The 5G network will be crucial at minimum to support the technology of connected autonomous cars.
How people spend their time in autonomous driven cars is a big question mark for all. The answer will determine the layout and design of the interiors and the technical equipment for communications. Due to the futurologist Matthias Horx already 60% of all car drivers do not like driving that much due to various reasons. For them autonomous driving would be already a helpful solution. The psychological barriers to hand over the power to the computerized car seem to be lower than usually expected, according to Horx.
Connected Cars is the area where the OEMs have already gained experience. The differencebetween the OEMs is the level of car integration of the connected functions. To have those iOS or Android apps available in the car is not differentiating and therefore not enough.
Like many others, BMW´s target is to make the cars adaptive to their drivers and individualize as many functions as possible in a seamless manner.
The BMW Digital User Experience should drive customer and business value and is based on the following 4 pillars:
- Core business differentiation
- Engaging branded digital services
- Management of the digital channel
- Access to a premium customer base
BMW already has learned a lot. BMW´s open mobility cloud platform, developed in-house through an acquired former Microsoft-unit in Chicago, co-operates with Microsoft cloud systems, Amazon Echo for speech recognition, Mobileye for optical sensors and some others.
The team operates with a 6-week release cycle to improve their offer constantly. Most important KPI is how much time drivers spend with these apps. (see the BMW.com website for detailed information). The system was rolled out in the U.S., Europe and recently China with a steep curve of users.
Through the direct access to the drivers by a unique ID BMW gets feedback by 25% of their users for either NPS or qualitative questions using their mobile devices or the in-car communication system. Bad news for market-researchers?
The Electric car is the 3rd hot topic of our industry. A lot has been said about the market acceptance but it seems, as if the adaption curve will get steeper. Drivers of a faster development will be legislation, regulation, decreasing price and better charging infrastructure and not to forget better and cheaper products with longer ranges and shorter charging times. In California i.e. many companies drove the electric adaptation development by supporting the green driving through electric fleet cars. Something also Europe may see soon.
German OEMs just decided to invest into a better infrastructure at highways. In addition, the expected progress in battery technology and capacities will add another argument. VW will decide soon about an own battery production as Mercedes-Benz and Tesla already has.
Finally, the 4th topic is Sharing. The existing systems are well underway, like the Daimler Car2Go with 2 mio registered users or BMW Drive Now. More and more variations are coming up, like peer2peer sharing, which is more common in the U.S. already. Mercedes just launched the new Croove-App for that purpose.
The presenters did not have a unanimous view on the future of sharing. Some OEMs see that ownership still will be relevant in future, like for well-situated target groups or for long-distance rides. Depending on cultural aspects of driving or owning habits, markets may develop differently.
Many participants also stated that autonomous electric driven cars with a high level of connectivity are not simply boxes running around the street bringing people from A to B. Those cars still will have emotional aspects and they still will have unique differentiators. These will be the design, which needs to evolve and take the new technology and the different modules into account. In a best case, the volume of the technological package of cars will be smaller and both, more space for people and more liberties in design opportunities will be available.
The combination of the ACES-areas, and how they influence each other is also a critical aspect of the business. One is for sure, user experience, as a total in all those products, solutions and services will be one of the most critical factors for success.
The new ecosphere of ACES-cars will also leave its marks on production units. The total production capacity for cars world-wide is around 90 mio. cars/year. The impact of the change of the industry driven by the ACES on the total production of cars is quite difficult. Shared cars have a utilization 3-6 times higher than regular owned cars. But does this mean production goes down by the same amount? Some participants think production may be even down to 60 mio. in the peak, which would result in a big structural change. An even higher concentration of OEMs might be the consequence.
The four areas (ACES) are not only top of OEMs agendas but of suppliers too. Scheffler, Pirelli, Brembo, Harman and others already have adapted their strategies, re-think their part of the value chain and are transforming their business under the impact of digitalization. The suppliers count for 80% of the value added now and will also in future drive innovation in partnership with the OEMs.
Like for the majority of companies (Kantar included) the organizational impact of the digitalization is huge. All companies did analyse the current situation well and did both, understood the business models and their drivers and draw the right conclusions. However, will they be able to transform now and bring these conclusions fast enough into actions? This is a question raised more often during the conference, also by the big OEMs themselves. The OEMs are big ships with a long tradition and established culture. Big efforts are necessary to change this quickly.
The way to transform varies. Some install a CDO and try to make a top down approach of transforming. Others focus on small fast units, set apart from the regular organization to produce quick results and act as catalysts and role models for the transformation of the huge slow OEM ships. Many employees with new competence profiles are needed, some of them may be recruited internally through learning and development programs. The company culture needs a big change too. Mercedes-Benz tries to implement this change bottom-up while BMW goes the other way around. Because this will be a mind-set transformation too, the job will not be easy.
Another main learning the OEMs are facing is customer centricity. After more than 100 years in history, the customer now has been identified as the driving factor – funny enough. Before, there has been dealers taking over the customer interface. But from now on, the OEMs should better listen to the customer´s needs and they will certainly occupy the customer interface in an increasing manner.
In the end, it will be decisive who will learn the new skills fast enough and how fast the industry dinosaurs get agile enough to compete with the technology companies. The OEMs need to identify the areas of differentiation and then co-operate on the non-differentiating areas like what they do with the HERE acquisition of BMW, Audi and Mercedes-Benz for detailed maps and related technology or with the charging-infrastructure for e-mobility.
There were some other important remarks, which did not cover the four main topics of ACES. Combustion engines i.e. will remain quite important over the next two decades to achieve the emission targets of the OEMs. As we have seen Mercedes-Benz just presented a whole range of new engines with a huge investment of 3 bn. €.
The hydrogen fuel cell is another alternative drivetrain, which an increasing number of OEMs have research programs running.
And not to forget the sector of commercial cars. They are somehow not on the front line on stage but they are very busy in transforming their business with all the major aspects we see in passenger cars. There are tons of activities to find solutions for autonomous transportation of goods, long-haul autonomous trucks, last-mile delivery in cities with electric engines and special loading and unloading devices and especially capacity-optimizing connected logistic systems to maximize the utilization of fleets and shorten delivery times and cut cost.
So the race is on: The best co-operation with integration of customer centric software with highest customer benefits into the automotive hardware and seamless operation will make the race.