Finding a new balance in the automotive industry - Driving responsible innovation and transformation for the next decade - Capgemini
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Finding a new balance in the automotive industry Driving responsible innovation and transformation for the next decade
Executive
Summary
The automotive sector’s already
dizzying pace of change is accelerating.
This report gives Capgemini’s
perspective on the most important
changes that can be expected between
now and 2030, and the adaptations
that automotive companies will have to
make to ensure continued success.
2 Finding a new balance in the automotive industry
Following eras of industrialization these requirements: Subscriptions
(1920s to 1970s), globalization (late and agency sales will become more
1970s to 2015), and digitalization, a common, for example.
new era of change is emerging, driven • Intelligent Industry: The next
by three megatrends that automotive generation of digital engineering
companies are recognizing as critical to and manufacturing will build on
their future: technologies such as artificial
intelligence (AI), cloud, and the
• Sustainability: Societal and internet of things (IoT) to create a
regulatory pressure means that data- and software-driven industry.
companies need to adopt an end-to- Intelligent products and systems,
end approach to sustainability that operations, and services will improve
addresses not just the environmental uptime, reduce costs, and boost
impact of the vehicle, but that of efficiency, and hence increase value
every aspect of their operations and for companies, their customers,
those of their partners. To tackle this and their partners. Software will
issue adequately, Original Equipment play a crucial role in the automotive
Manufacturers (OEMs) will need industry and influence it radically.
to change their culture. They will
also have to rethink the way they Increasingly, too, automotive companies
collaborate with their suppliers and need to operate and establish a
partners to realize the concept of a clear position within a wider mobility
circular economy. ecosystem that includes providers of
• Customer centricity: Companies public transportation as well as enablers
need to cater to changing of mobility such as infrastructure and
customer preferences, such as utility providers, and local and national
younger individuals’ requirement governments.
for personalization and online
transactions. Connected services
will play an increasingly important
role as software proliferates inside
and around vehicles, not least to
support personalization. Sales
models will need to accommodate
3
Success within the mobility ecosystem culture that facilitates continuous Our research indicates that the
depends on three main factors: change, and aligning IT ever more automotive industry is moving towards
closely with the business. Companies a new “Responsibility Era” where
• Technology & software will also need to develop resilience, companies must shoulder responsibility
competency: To succeed within the reacting to disruptions in a controlled for a whole range of environmental
mobility ecosystem, companies will and efficient way. and social objectives. Even when new
have to focus at least as much on industry trends and preoccupations
software as on hardware. Automotive Building a position in the mobility come along, these responsibilities will
companies will increasingly resemble ecosystem will imply adoption of be here to stay, affecting every player in
technology companies such as new business models, for example the mobility ecosystem, every stage of
Google, Microsoft, or Amazon. Topics around mobility services and digital the automotive value chain, and every
that are likely to need high levels of mobility solutions. Any new model aspect of customer experience.
competency include cloud, data and must, however, be aligned with the
AI, and cybersecurity. requirements of each company’s Automotive companies must
• People & organization: This new customer base, and with the demonstrate that they understand
world will require new skills and company’s own core competencies and accept their new responsibilities
competencies, both hard and soft, and profitability objectives. Success in while balancing them against existing
new styles of leadership, and new, the mobility ecosystem also depends business priorities. By doing this, they
more collaborative ways of working on complementing vehicles with the can both build a credible position within
that increase agility. right range of services in the areas that the developing mobility ecosystem and
• Operational excellence: A customers value most: connectivity, safeguard their future profitability.
disciplined approach to the flexibility, and convenience.
management of costs and efficiency
will be vital and can be achieved by,
for example, using analytics and AI
to improve processes, developing a
TRANSFORMATION FRAMEWORK FOR THE NEXT AUTOMOTIVE ERA
Customer centricity
Success Factors
Technological & Software Competency
Mobility
People & Organization
Ecosystem
Operational Excellence
Sustainability Intelligent Industry
4 Finding a new balance in the automotive industry
Contents
06
INTRODUCTION
09
T H R E E M EG AT R E N D S T H AT A R E
SHAPING THE NE X T AUTOMOTIVE ER A
18
THE MOBILIT Y ECOSYSTEM OF THE
FUTURE AND IT S SUCCE SS FAC TOR S
28
PREPARING FOR THE RE SPONSIBILIT Y ER A
5
Introduction
In recent Capgemini studies, such as our
report on the Agency Sales Model1 and
our Connected Vehicle Trend Radar 2,2
we analyzed specific topics within the
automotive sector. But what does the
big picture look like?
1 https://www.capgemini.com/wp-content/uploads/2020/11/Automotive-Agency-Sales-Model_POV_Capgemini-Invent.pdf
2 https://www.capgemini.com/de-de/wp-content/uploads/sites/5/2020/09/ConnectedVehicleTrendRadar_2_Report.pdf
6 Finding a new balance in the automotive industry
How will the automotive industry as a The industry’s recent
whole evolve in the short and medium
term? Will automotive players offer
history and current status
similar products and services to today’s,
or something completely different? Will The automotive industry has been in
they operate their businesses in the a state of constant change since the
same way as they have done in the start of the “Industrialization Era” that
past decade? began in the 1920s and lasted until
the 1970s. Since then, manufacturing
This new study tackles these questions, and production processes have been
looking into the future of automotive enormously improved in terms of their
and analyzing the whole field of mobility efficiency and effectiveness through
– including not just vehicles but also automation of operations, reductions
mobility-related services – from the in the length of vehicle cycles, and
perspective of the automotive industry increased specialization. Within this
and from different angles of the value era, the industry had a clear product
chain. Based on this analysis, we share focus and specialized its operations
our industry predictions for the period with regard to the purchasing, logistics,
up to 2030. engineering, and manufacturing phases
of the product.
To provide context for these
predictions, we first discuss industry The “Globalization Era,” from
megatrends of both today and approximately the late 1970s until
tomorrow, describing their impact, 2015, saw the end of geographic
challenges, and meaning for industry boundaries that previously constrained
players. Focusing on the effect of sourcing, logistics, manufacturing, and
technology on key megatrends, we will sales. By opening up world markets
not only assess the big picture from and establishing international trade
the perspective of automotive players, alliances, products have been made
but also consider the implications available to customers all over the
for the most important component world and OEMs have benefited from
of the automotive ecosystem: the local advantages through access to new
customer. Customers’ dramatically talent, materials, and demand. This has
changed behavior is the ultimate driving given OEMs the chance to develop from
force for the transformation of the national or international producers
entire industry. focusing on specific markets into global
or multinational players.
7
The “Digitalization Era,” which began leading market is pulling the automotive technology company – and probably
around 2014 and continues today, is industry out of the crisis with a V-shaped rightly so, given the need for customer
characterized by disruptive innovations pattern of development. centricity and the increasing importance
in the automotive market. New of software within their business.
technologies have affected not only the All transformation stages, from the
internal operating model of suppliers Industrialization Era onwards, have As if these factors did not put enough
and OEMs, but also customers’ use brought significant new opportunities pressure on automotive players,
of products. A significant proportion with them, always putting efficiency they also need to deal with clients’
of the portfolio has changed as the and adaptability at the forefront. unprecedented expectations about
Digitalization Era has given birth to Nevertheless, each evolutionary stage is sustainability, convenience, affordability,
digital products and services. From this also associated with challenges. Digital and personal experience among others.
era onwards, OEMs and suppliers can no transformation is not an incremental Customers do not perceive vehicles and/
longer focus on engine-based vehicles innovation with minor changes, but or mobility as standalone products,
but have widened and shifted their a revolutionary one – at least when it but as an essential part of their own
portfolio to focus more on product- comes to the impact on people and ecosystem that needs to be seamlessly
related services. These services now on the working methods of traditional integrated and personalized. As people
represent an additional source of automotive players. experience different customer journeys
revenue for OEMs. Also in this era, the in other industries, they develop similar
concept of the mobility ecosystem has With regard to digital transformation, expectations about OEMs and mobility
emerged with new business models of certain companies are clearly leading players in general. Offering an appealing
its own such as car sharing, widening the the field. In every conference on digital and appropriate customer experience
scope of automotive players’ operations innovation or panel discussion on in the automotive world is currently
and enlarging their battleground. digital capabilities, the same leading one of the biggest preoccupations and
tech players are mentioned as state-of- challenges for OEMs.
From even a brief look at the past few the-art examples: for instance, Google,
decades, it is clear that the automotive Amazon, Uber, Alibaba, and Tencent. As always, the point of departure is
industry has been undergoing constant Alongside innovative and successful clear, but the destination and roadmap
change, culminating in today’s digital startups, these same players are now are less so. Drawing on Capgemini’s
transformation. Throughout its history, entering the automotive market and research and client experience, this
it has been a profitable industry challenging traditional OEMs and report looks into the future to predict
and major contributor to the global suppliers on their home ground. The what the automotive industry’s next
economy; outside times of crisis, it has boundaries between technology major era will look like. But let’s start
grown constantly in terms of volume, companies and other industries are by looking at the megatrends that will
revenue, and number of market players. fading away. New players are entering shape that era.
With the COVID-19 pandemic, the digital markets, both as competitors for
transformation of the industry has been established players and as their
further accelerated throughout the collaborators. In addition, virtually every
entire value chain. Even more than after automotive company nowadays seems
the 2008/2009 financial crisis, China as a to have the ambition of becoming a
1970 1980 1990 2000 2010 2020 2030
1970s 1979 2014
The end of the The beginning of the The beginning of the
Industrialization Era Globalization Era Digitalization Era
8 Finding a new balance in the automotive industryThree megatrends
that are shaping the
next automotive era
Alongside the challenges it has posed for the automotive
industry, the pandemic has made positive contributions to
its digitalization. Companies’ agility and digital maturity
have increased at unprecedented rates, as seen in the
rapid introduction of contactless sales and flexible offers.
By providing an impetus for more rapid transformation,
COVID-19 has accelerated the digital transformation that
was already under way. This transformation is enabled by
new and still developing technologies, such as artificial
intelligence (AI), analytics, and cloud platforms, and by the
increasing levels – and growing importance – of software
within the vehicle and in the underlying processes. This
period of rapid change is bringing different megatrends
to the fore.
9CASE
CONNECTED AUTONOMOUS SHARED ELECTRIC
Until now, the industry’s main To help companies tackle this As we have seen, the three megatrends
megatrends have been summarized transformation, we have developed identified by our framework define the
by the acronym CASE, representing a framework (see Figure 1) that broad themes that automotive players
“Connected, Autonomous, Shared, incorporates the three megatrends, need to understand and address. Only
Electric” vehicles. along with three success factors that by dealing with these three megatrends
will determine companies’ ability to sufficiently and equally can they remain
Although CASE topics are still very much succeed in the mobility ecosystem: competitive and secure their market
on the agendas of the board members Technological & Software Competency, position as mobility ecosystem players.
and shapers of the automotive industry, People & Organization, and Operational Let’s now look at each megatrend
companies’ focus has shifted. While Excellence. In this framework, the in turn.
connected and electric vehicles are megatrends broadly represent the
still on the priority list, autonomous “what” of the new era (what companies
driving vehicles and shared mobility are need to do) while the success factors
receiving less focus from traditional represent the “how” (how companies
OEMs. For the “autonomous” category, can realize the megatrends). The
the term automated driver assistance megatrends are discussed below, and
(ADAS) more accurately represents the the success factors in the next chapter.
current market direction.
Rather than emphasize CASE, our FIGURE 1
research shows that automotive
companies are increasingly recognizing TRANSFORMATION FRAMEWORK FOR THE NEXT AUTOMOTIVE ERA
three megatrends as critical to their
future: Sustainability, Customer Customer centricity
centricity, and Intelligent Industry.
Companies know that they need to
establish a position – and then remain
relevant – in a mobility ecosystem
Success Factors
that also includes providers of public Technological & Software Competency
transportation, together with mobility Mobility
enablers such as infrastructure and
utility providers, and local and national People & Organization
governments. Companies’ ability to
Ecosystem
address the three megatrends will
influence their ability to succeed in this Operational Excellence
mobility ecosystem.
Sustainability Intelligent Industry
10 Finding a new balance in the automotive industry1 MEGATREND
Sustainability
With environmental awareness on the variety of challenges remain regarding Against this background, other
rise, nearly 80% of customers are now the sustainability of battery technology, alternative power sources also look
making sustainability-based purchase ranging from the requirement for interesting. Apart from BEVs, advances
decisions, according to Capgemini rare earths as ingredients for battery in technology have paved the way for
Research Institute.3 Companies from production to a lack of recycling the development of electric vehicles
all industries are starting to react with solutions. All in all, BEVs will not powered by solar energy or hydrogen/
comprehensive programs aiming at become mainstream until customers fuel cells, as well as for vehicles whose
reducing their environmental footprint are offered the usability, convenience, engines can run on biofuel. These
and reaching a net-neutral impact in and affordability that conventional alternatives all have their attractions.
terms of CO2 and other greenhouse gases. vehicles offer.4 The use of hydrogen as an alternative
fuel is of interest because the energy
For the automotive industry, in addition It should be noted that increasing released from hydrogen only produces
to a general societal demand for adoption of BEVs will ultimately have water as a by-product. Solar roofs could
sustainable behavior, there is a major an impact on sales (different sales take electric vehicles to another level of
regulatory aspect. In Europe, the first models, probably with leasing options sustainability by leveraging the power
regulations regarding vehicle emissions for batteries) and aftersales (reduced of the sun, making them completely
were issued in the early 1990s and they service requirements due to decreased emission-free.
have been repeatedly tightened ever complexity of the whole powertrain),
since. In recent years, awareness has requiring adaption, at least, in these
focused on CO2, with increasingly strict areas as well.
requirements for fleet emissions.
We expect this trend to continue. A net-
zero CO2 impact for internal company
operations will be the standard by
2030. Similarly, by then we expect all
major OEMs to offer vehicles driven
by mechanisms other than internal
combustion engines across their
model ranges.
Already today, battery electric vehicles
(BEVs) are gaining customer acceptance,
with companies such as Tesla showing
the way. Rapidly improving battery
technology provides a more reliable
experience and instills confidence
in this new way of driving, partially
allaying concerns about charging
infrastructure and reach. However, a
3 https://www.capgemini.com/us-en/wp-content/uploads/sites/4/2020/07/Final-Web-Report-Sustainability-In-CPRD-2.pdf
4 https://www.iea.org/reports/global-ev-outlook-2020
11These alternatives would need further To realize these improvements,
investment – for example, to set up the transparency and culture change are
required fueling infrastructure in the required. Collecting and aggregating
case of hydrogen-powered vehicles. the right data about the sustainability
For hydrogen, there are also storage footprint of all steps along the value
challenges, which have delayed adoption chain provides a solid foundation for
so far. A recent Capgemini report5 improvement. A culture of sustainability
discusses some of these issues in detail. awareness can ensure that sustainability
is not just a concept within operations
Returning to the overarching topic of and production, but rather a mindset
sustainability, according to a Capgemini and responsibility to be followed and
Research Institute report, 62% of lived by each player within
automotive organizations claim to the ecosystem.
have developed a comprehensive
sustainability strategy with well-defined In taking steps towards a more
goals and targets.6 This is necessary, sustainable mobility ecosystem, the
as sustainability in automotive goes concept of a circular economy will
beyond e-mobility. An end-to-end become an increasingly important
approach to sustainability needs to part of the CxO agenda. Emerging
consider the entire impact of the technologies can help to realize the
value chain, ranging from product resulting comprehensive sustainability
development, sourcing and logistics, ambitions. Examples include the
manufacturing, and marketing and sales, attempts made by leading OEMs to use
to aftersales and recycling solutions. 3D printing to reduce manufacturing
Improvements in terms of climate, waste by eliminating scrap, AI to enable
environmental, and social impact are more efficient energy consumption, and
possible and required at each of data forecasting, analytics and green
these points. IT to help evaluate the environmental
impact of operations.
of automotive
organizations claim
to have sustainability
targets
5 https://www.capgemini.com/gb-en/wp-content/uploads/sites/3/2020/12/Commercial-vehicles-study-Capgemini-Invent.pdf
6 https://www.capgemini.com/wp-content/uploads/2020/03/The-Automotive-Industry-in-the-Era-of-Sustainability.pdf
12 Finding a new balance in the automotive industry2 MEGATREND
Customer centricity
Sustainability is not the only area where Furthermore, customers today A customer-centric approach to vehicle
customer expectations are changing. are showing an increased sense of sales has also led to the emergence of
With 59% of younger consumers (below independence and self-determination. subscription models, which provide
the age of 35) considering buying They want to decide for themselves customers with more flexibility. Various
a car, up from 35% in April 2020,7 a which products to buy, which decisions OEMs have been testing the benefits
generation change is happening among to take, and which data to share of a subscription model through small-
automotive customers and a reversal with whom. scale programs such as Access by BMW
of their historical preference to avoid or Porsche Passport. By 2030, vehicle
vehicle ownership. As a new customer This has important implications for subscription programs could account for
base emerges, customer preferences the development of future sales in nearly 10% of all new vehicle sales in the
are shifting from offline to online the automotive industry. Improved US and Europe.9
channels and from standard services to use of technology will help to cater
personalized customer journeys. to customer expectations both in With regard to operation of the sales
dealerships and at home. Especially process, an important transformation
As a result, customer centricity is key, during the pandemic, contactless sales, lies ahead, affecting both the customer
not only when talking directly to the deliveries, and aftersales represent experience and existing roles in
customer, but in all communication top priorities and objectives for automotive sales. The agency sales
channels, and also internally, during automotive players8 in order to satisfy model (see Figure 2) can be viewed
the development of new products and the newest customer expectations. To as an evolution of traditional three-
the setup of new processes. Customer realize distance commerce, immersive tiered sales towards an integrated
centricity needs to be the main driver in technologies such as augmented reality online/offline sales model. OEMs
the physical as well as the digital world, (AR) and virtual reality (VR) are key; interact directly with customers
seamlessly integrated into both internal they allow customers to explore vehicle and take responsibility for the sales
and external processes. features and even take test drives from transaction. The dealer remains the
the comfort of their homes. face that the customer sees, but acts
as an agent rather than a contractual
partner. Especially with activities that
require physical interaction, such as
coordinating and executing test drives
and handling service appointments, the
agent plays a decisive role by managing
the customer experience.10
13Transformations in automotive sales monetize the data gathered. The high Vehicle Trend Radar 212 indicates that
will also encompass aftersales service. potential of secure and trusted vehicle around 44% of customers do not yet
Using technology, the traditionally data is reflected in global revenue have any connected services in their
burdensome steps in the aftersales predictions for 2030 ranging between cars, and only about half of those that
customer journey can be seamlessly and $80bn and $800bn.11 do use them frequently. Simplifying
effortlessly integrated into customers’ interfaces and promoting the
lives. As an example, AI will help OEMs Many potential future use cases in capabilities of connected vehicles will
monitor connected vehicles in real aftersales rely on the connectivity not only help gain access to insightful
time to predict and prevent vehicle features of vehicles. Additionally, data but also increase the value of
malfunctions. Additionally, over-the- data generated by connected vehicles vehicles for customers.
air (OTA) updates will be a quick and is expected to increase, providing
effortless way to remotely update opportunities for OEMs to monetize With the right technologies,
vehicle software. digital insights. Technology adoption organizational changes and
by other industries will enable a partnerships, superior customer
In the past, the usage phase of the connectivity model that allows vehicles experience, personalized sales, and
vehicle was characterized by a limited to communicate with almost all the effortless aftersales, services will
relationship and communication physical assets in the surrounding become key differentiators that help
between the OEM and the customer. environment (V2X). OEMs maintain a competitive advantage
However, connected services and the in automotive sales.
entire in-car experience now represent Although connected services have great
a new battlefield for OEMs and a new potential, it is not yet being realized.
revenue source. To succeed in this OEMs need to adjust their portfolio
field, OEMs need to make sure they to take advantage of the fact that
offer valuable services to customers, customers are often willing to pay for
integrate third-party services, and these services. Capgemini’s Connected
FIGURE 2
TRADITIONAL SALES MODEL (THREE-TIERED, MAINLY OFFLINE) VS AGENCY SALES MODEL
Traditional sales model Agency sales model
OEM/Importer OEM/Importer
1 2 4
Online for
fulfilment
of 1
Dealer
Agent
3 4 5 1 3 2 1 3
Consumer Consumer
7 https://www.capgemini.com/wp-content/uploads/2020/04/COVID-19-Automotive.pdf
8 https://www.capgemini.com/wp-content/uploads/2020/05/Automotive-Sales-A-Bumpy-Road-to-Recovery-1.pdf
9 https://www.forbes.com/sites/sarwantsingh/2018/07/30/your-next-car-could-be-a-flexible-subscription-model/?sh=7ba8d7974ffa
10 https://www.capgemini.com/wp-content/uploads/2020/11/Automotive-Agency-Sales-Model_POV_Capgemini-Invent.pdf
11 https://www.capgemini.com/de-de/wp-content/uploads/sites/5/2020/09/CapgeminiInvent_VehicleDataMonetization_POV_Sep2020.pdf
12 https://www.capgemini.com/wp-content/uploads/2020/09/ConnectedVehicleTrendRadar_2_Report.pdf
14 Finding a new balance in the automotive industry3 MEGATREND
Intelligent Industry
Moving from the customer to the OEM With the help of key technologies such • Intelligent operations, reflected
perspective, new technologies have as AI, cloud, and IoT, automotive players in the digitalization and data-driven
constantly been disrupting product have the potential to address the topic optimization of automotive core
development and manufacturing. Lately, of Intelligent Industry in a targeted functions and processes, can reduce
an increased level of connectivity and manner. This can be realized via a complexity and add efficiency
automation was introduced under the threefold digital approach: through, for example, smart factories
heading of Industry 4.0. However, the or digital engineering approaches.
future will rely not only on automated • Intelligent products and systems, • Intelligent services, ranging from
factories but also on closer collaboration being smart and connected, can now connected services to monetization
between machines, workers, and be continuously improved thanks use cases based on data, can extend
customers to cope with the increased to real-time feedback. This means classic profit pools and provide value
level of product complexity. The next greater uptime, reduced costs, and to customers and partners alike.
generation of digital engineering and improved efficiency across product
manufacturing, Intelligent Industry,13 and system development. Intelligent Highly automated processes, platforms,
promises great shifts in industrial products and systems span everything and procedures result from the
processes and in business and from product engineering (e.g. of threefold approach. They enable OEMs
consumption models, and offers OEMs powertrains and vehicle architecture) to create new digital business models,
the opportunity to take the lead in the to software engineering (e.g. of products, and services, and more
race to a data- and software-driven embedded software or telematics) – efficient processes both internally and
automotive world. and more. in working with partners. Intelligent
13 https://www.capgemini.com/us-en/service/intelligent-industry/
15Industry brings potential business Digital twin/ digital shadow technology can add a further level
and efficiency benefits beyond those of speed and efficiency by bringing
of Industry 4.0 and can help OEMs to To enable end-to-end digital continuity, relevant computing operations
remain competitive in the long run. digital twins are now used across even closer to a vehicle or a
manufacturing and warehouse production facility.
We believe that Intelligent Industry operations to manage material flow,
will be the norm for automotive complete order-to-delivery processes, Automation & robotics
OEMs by 2030. We are already seeing and realize efficiency and quality
encouraging movements in this improvements in vehicle production. Intelligent Industry will make further
direction: For example, the percentage Digital twins help in use cases such as progress with automation and
of organizations with ongoing smart what-if planning or the prediction of robotization in the value chain. More and
factory initiatives increased from 43% in behavior under operational changes. more, advanced algorithms are used to
2017 to 68% in 2019.14 Through IoT sensors, the twin can also automate basic tasks and decisions. This
receive continuous, real-time data from increases efficiency and enables split-
This finding suggests that companies are the object. Digital twins will therefore second decisions that can, for example,
evolving towards Intelligent Industry, accelerate product development, reduce trigger actions to avoid interruptions in
for which data is the most important defects, troubleshoot equipment, production. Robots can now accomplish
input. Together with AI-based analytics, increase uptime, and decrease an ever-growing number of tasks in
readily available data creates the right manufacturing costs. The digital twin production, and sometimes also in
conditions for realizing Intelligent will be further extended into the repair and maintenance. These robots of
Industry’s primary benefit: flexibility in usage phase of vehicles and beyond. today usually have to be programmed to
manufacturing and across the whole Transparency of each component within perform specific tasks, but tomorrow’s
value chain. Intelligent Industry helps a vehicle throughout its entire life smarter, data-powered robots will
OEMs to adjust their business models in cycle will be key to staying relevant in be able to carry out a whole range of
real time in reaction to change while still the future. tasks, so that for example the same
acting in accordance with regulations, production facility can be used flexibly
such as safety or cybersecurity premises, 5G & edge for a variety of vehicle models and even
and sustainability paradigms (including for different types of powertrain.
CO2 emissions and reuse of materials). The right level of connectivity is
crucial for fully realizing the benefits The three megatrends described in this
As well as ensuring that they have the of flexibility in an Intelligent Industry chapter reflect the topics that are clearly
right data processing and analytics setup. The above-mentioned sensor already on the agendas of automotive
capabilities, automotive players data is ideally transmitted and players. But it is not enough to just
aiming for an Intelligent Industry analyzed in real time to enable fast consider these aspects and integrate
approach must not underestimate the and effective reactions to unforeseen them into the product and service
transformation processes required. changes. 5G technology promises to portfolio. Each player also needs to
Throughout their journey towards provide this benefit with a previously define its own business model around
Intelligent Industry, they will need to unheard-of transmission speed and these megatrends and in the context
address issues such as management bandwidth.15 The fact that 5G is a of the mobility ecosystem. The next
processes, employee enablement, and mobile communication standard brings chapter explains how this can be done.
appropriate organizational structures. additional benefits. Not only can a
factory be fully connected, but vehicles
While Intelligent Industry is facilitated by in use on the road can also constantly
various technology enablers, including feed live data about their status into
IoT, AI, and mobile communications, the predictive maintenance systems, for
following three enablers are particularly example. In use cases where very
important: fast reaction times are required (e.g.
autonomous driving), edge computing
14 https://www.forbes.com/sites/dereknewton/2018/12/28/the-myth-of-jobs-that-dont-exist-yet/?sh=7590220270ec
15 https://www.capgemini.com/de-de/wp-content/uploads/sites/5/2019/06/Digital-Report-%E2%80%93-5G.pdf
16 Finding a new balance in the automotive industryINTELLIGENT
INDUSTRY PROMISES
GREAT SHIFTS IN
THE INDUSTRIAL
PROCESS LEADING
TO A DATA-DRIVEN
AUTOMOTIVE WORLD.
17The mobility
ecosystem of the
future and its
success factors
In the previous chapter, we discussed three megatrends –
Sustainability, Customer centricity, and Intelligent Industry –
which together are driving the next major transformation for
the automotive industry. We outlined Capgemini’s framework
for helping automotive companies address the megatrends.
Companies, we believe, must define their desired position in the
evolving mobility ecosystem and then establish and strengthen
this position by addressing three essential success factors:
Technological & Software Competency, People & Organization,
and Operational Excellence
18 Finding a new balance in the automotive industryIn this chapter, we will start by So far, though, these novel business Customer demand
considering what might constitute models have seen varying degrees
a viable business model within the of success. The challenge is to find In an increasingly customer-centric
mobility ecosystem, then analyze the models that meet customer needs ecosystem, customers’ needs must be
three key success factors, and finally while at the same time offering a cost/ considered first. This means that the
consider likely future developments in revenue structure that allows profitable business model should define a position
the mobility ecosystem itself. operations. within the mobility ecosystem that is
driven by customer demand, and not by
Business models in the Car sharing services are a good technological possibilities.
mobility ecosystem illustration of this challenge. Although
customer demand clearly exists, Connection to core business
With the megatrends discussed in traditional OEMs seem to find the and core competencies
the previous chapter shaping future services difficult to run profitably.
mobility, automotive companies will However, traditional rental companies As the car sharing example discussed
need to establish and protect their such as SIXT are apparently more above shows, it is worth considering
position in a constantly changing successful, and continue to target this which already-established core
mobility ecosystem. This will necessitate market, along with Uber and other ride- competencies a company brings to the
new business models. Whereas a couple hailing companies. The explanation may table before deciding which business
of years ago automotive companies be that traditional rental companies, models to adopt. Being able to leverage
were mainly just selling vehicles, they are which are used to focusing on vehicle those existing core competencies has
now adopting business models around utilization rates, are better adapted to apparently helped the rental companies
mobility services and digital mobility this new business model than OEMs, to develop their new business model
solutions. These models are as relevant with their historic focus on engineering, faster and to operate it more profitably.
to the established market players as manufacturing, and selling vehicles.
they are to the innovative startups that Profitability
often initiate them. So, what does it take to define a
successful and profitable business Establishing a new business model can
model in the mobility ecosystem of the bring high upfront costs as well as a
future? Three criteria are key: persistently negative cashflow over
the first couple of years. If the financial
reality does not meet the upfront
expectations, the result can be the early
termination of the model. This is why it
is essential to establish clear profitability
requirements before starting out.
Fundamental questions are: Where is
the revenue coming from? How can we
balance costs with revenue? What is the
timeline for this? What are the investors’
or shareholders’ expectations?
19The three success factors
To successfully realize their chosen business model, mobility ecosystem players
need to be structured and organized internally in an appropriate way. The success
factors that we are about to discuss represent this internal perspective, including
the capability, talent, and operational dimensions. They all need to be tackled
simultaneously if a company is to deal successfully with the megatrends.
Success factor 1: Both internal and external perspectives improved ongoing operating
are important here. As well as providing expenditure. We expect the trend
Technological & the right services to customers, IT and towards cloud technology to continue
Software Competency technology functions also need to and accelerate over the coming years,
achieve scalability and cost optimization. with further increases in flexibility
Collaborative platforms can help by and the emergence of a growing
For vehicles to become smarter and
making it easy for central and regional range of cloud-based solutions for the
more autonomous, the underlying
stakeholders to work together; this can industry.
technologies need to become more drastically reduce time to market while
innovative. The shift from hardware to ensuring almost instant scaling and • Data & AI
software excellence is currently one of global coverage. With more and more data being
the key challenges for the automotive collected right along the automotive
industry. Over the past 100 years, Apart from the need for general value chain, companies are realizing
product engineering and production software excellence, a variety of they need capabilities to analyze this
achieved incredible progress with ever specific technologies are becoming data and use it to trigger intelligent
more sophisticated, well-designed, and increasingly relevant. In addition to actions. AI already plays an important
high-quality vehicles. In recent decades, those already mentioned in connection role in this context and will increase
however, software components are with Intelligent Industry, the following in relevance in the future. AI
increasing in relevance. Technological technologies are key: technologies will be crucial in every
competency nowadays implies product part of the value chain, from design
• Cloud
and software excellence in equal Cloudification (the migration of data to aftersales services. Additionally, AI
measure, since both are needed to and applications to the internet in can strengthen driver assistance and
fulfill increasing customer expectations. order to enable cloud computing) driver risk assessment systems, both
As discussed below, this shift also has is currently a hot topic in many of which can have an impact on the
talent and organizational implications. departments of OEMs and along the customer experience.
whole value chain. Success stories
Furthermore, the shift also has an
here include the use of cloud-based Though AI has been applied in
impact on ways of working. In line with
software in operations (e.g., for ERP many parts of the automotive value
agile methodologies from software
systems) and marketing and sales chain, there is a lack of integration,
development, both software and
(e.g., CRM systems or customer
hardware need to be developed at an with most AI projects implemented
interaction solutions). By taking
accelerated pace, frequently creating selectively and not at scale. In the
advantage of cloud’s configurability,
incremental value for the customers. supply chain area, just 4%16 of AI
adaptability, and scalability, and the
Examples include the release of new solutions get scaled up to be used by
pay-as-you-go commercial model,
hardware- and software-enabled more than one function. The most
the OEMs concerned have reduced
services via over-the-air (OTA) updates successful AI implementations have
upfront investment, improved
to a vehicle that has already been sold.
performance and resilience, and tended to take place in functions
20 Finding a new balance in the automotive industrywhere workflow and processes benefits with the risks of increased Technologies such
are more standardized, such as connectivity. But now other aspects
manufacturing/operations. of the operation are also at risk. as AI and machine
Overall, however, the potential in Looking first at the product, future learning will play
this area is huge. We expect that
AI will enable more and more use
vehicles will be highly digital, and their
in-vehicle and back-end systems will
a pivotal role in
cases, especially in areas such as the make them into data goldmines. With protecting vehicles
automation and standardization the adoption of 5G and IoT solutions,
of workflows in labor-intensive even more valuable vehicle and against cybercrime
operations along the entire value customer data will be generated;
chain. In parallel, “lighthouse” (i.e., see Figure 3 for the cyberthreats
high-profile) use cases for machine that will arise. It will be imperative value chain, including the finished
learning, blockchain, and quantum to implement strong cybersecurity product – the vehicle itself.
computing will become more measures to protect all this data.
common. OEMs need to secure their electronic Technologies such as AI and
systems, communication networks, machine learning will play a pivotal
• Cybersecurity algorithms, software, users, and role in protecting vehicles against
With the increasing prevalence underlying data from unauthorized cybercrime. In the future, vehicles
of software components and access and manipulation. will be equipped with operational
connectivity features, a variety of Over and above the cybersecurity profiling mechanisms featuring
risks need to be managed along the measures that OEMs themselves machine learning and deep learning
automotive value chain. Production decide to put in place, other technologies to detect security
and product development facilities safeguards will be dictated by future anomalies. This will help OEMs
have traditionally always been well cybersecurity regulations. These detect and diagnose cyberthreats in
protected, though they face the are likely to affect not only the real time.
challenge of balancing the potential manufacturing process but the entire
FIGURE 3
VEHICLE CYBERTHREATS
OBD-II Hacking
Personal Data
Spam and Advertising
Vehicle-to-Vehicle (V2V)
Malware and Exploits
Vehicle-to-
Infrastructure (V2I)
Third-Party Apps
Key Fob Hacking
Oversight
16 https://www.capgemini.com/de-de/wp-content/uploads/sites/5/2020/11/Fast-forward_Report.pdf
21Success factor 2: • Establishing new sets of values and to take advantage of the relevant
People & Organization shared beliefs across the organization, technologies. Training and upskilling
together with collaborative and agile are already an ongoing challenge for
So far, we have emphasized technology ways of working18 automotive companies, requiring
and automation, especially with regard • Introducing, and then living, a data- a structured and well-integrated
to the concept of Intelligent Industry. driven, change-friendly culture approach to continuous learning and
However, the automotive companies of • Implementing a structured, development. Gone are the days when
the future will still clearly be driven by comprehensive change management employees might spend their entire
human talent. Having the right people approach working lives in the same job using the
to steer the organization through the same tools. Automotive OEMs now
ongoing transformation remains a Most importantly, though, this is a need workers to be both continuously
crucial success factor. And attracting leadership topic. The automotive developing the hard skills required
the right talent is no longer just about company of the future needs a for their job and able to transition
hard skills. Every function will require leadership that embraces change and into other functional areas of the
people with the mindset and soft drives transformation. The leadership company, thereby enhancing a shared
skills to work unremittingly towards a team needs to embody the newly understanding and culture.
superior customer experience in an ever- established values and to champion
changing environment and as part of an both technological excellence and With automotive companies
interdisciplinary team. customer focus. These two perspectives becoming increasingly dependent
must be combined by driving on digital technologies, special attention
For traditional companies that are collaboration between the technology- needs to be paid to the IT function
oriented towards product engineering focused engineering and production and its integration with the wider
and organized in functional silos, this departments on the one hand and, on organization. It is crucial to ensure that
is an ongoing challenge that will have the other hand, the customer-driven the IT function is equipped to fulfill
to be addressed in the coming years, sales and marketing areas. This will be its purpose of providing software
both through recruitment and by a key task for OEM leadership in the excellence for the entire organization.
transforming the corporate culture. new era. Doing this needs not only the right
However, as reflected in the Capgemini skills and people, but also a seamless
Research Institute study on Digital Beyond cultural and leadership aspects, integration between IT and business
Mastery,17 automotive organizations the new wave of automation and functions.
have in fact already made significant digitalization makes it vital to train the
progress over the past two years workforce in the digital skills required
towards achieving the digital and Success factor 3:
leadership capabilities required. Almost Operational Excellence
69% of automotive players now believe
they have the required capabilities The third and final success factor
compared to only 32% in 2018. governing the transformation of the
automotive industry for the new era
Organizationally, automotive players relates to the discipline of operational
will find that they need to transform to excellence. This is primarily about doing
achieve the total customer centricity more with fewer resources, i.e. better
of a technology company while also of the jobs that resource utilization, but it should be
equipping themselves to cope with the
constantly accelerating transformation
Generation Z (born more than that: a holistic philosophy
that makes it possible to improve and
of their industry. These major challenges 1996 and after) will maintain an efficient and resilient
will mean: automotive organization.
work in have not yet
been invented19
17 https://www.capgemini.com/wp-content/uploads/2021/01/Digital-Mastery-Report-1.pdf
18 https://www.capgemini.com/de-de/wp-content/uploads/sites/5/2019/02/Capgemini-Invent_Agile-Organization-PoV.pdf
19 https://www.capgemini.com/wp-content/uploads/2019/03/Ai-in-automotive-research-report.pdf
22 Finding a new balance in the automotive industryFIGURE 4
KEY TECHNOLOGIES FOR AUTOMOTIVE DIGITAL TRANSFORMATION
88%
80%
78% 74%
70% 68% 67%
64% 63%
Cloud 5G Automation Non-cellular AI/Machine AR/VR Robotics Analytics Additive
Computing connectivity Learning Manufacturing
(Wired, WiFi, LPWAN)
Source: Capgemini Research Institute, How automotive organizations can maximize the smart factory potential, January 202017
Financials has recently diversified, with new come under scrutiny. Contrary to the
incumbents offering differentiating expectations of a few years ago, level 5
Even before the start of the COVID- products and a wide variety of autonomous driving is still not available
19 crisis, most OEMs faced increasing additional business propositions, in any regular vehicle – a fact that calls
challenges such as changing buying ranging from digital service features into question the rationale behind
behavior, and societal and political delivered OTA to provision of high- large investments in this technology
pressure towards greater sustainability. voltage charging infrastructure. Many (see Figure 4).
The past decade has also seen many of these initiatives quickly gained
missed opportunities to improve customer acceptance, and traditional Resilience
productivity or to supply missing links OEMs too are now adding these items
in the digital supply chain.20 to their agenda. Crucial though financials are,
they represent only one aspect of
To fulfill the growth and profitability Stabilizing or increasing profitability operational excellence. Another major
goals that they have set themselves, through operational excellence is aspect is resilience, particularly (but
OEMs now need to get the financials a challenge in many of these new not only) in the supply chain.
right. Faster, higher, stronger revenue business areas, however. For example,
ambitions have emerged as a business when offering shared mobility services Change and disruptions are standard
imperative over the past few decades. such as car sharing, it is still difficult in a world of volatility, uncertainty,
to achieve the utilization levels complexity, and ambiguity (VUCA).
Traditionally, automotive OEMs required to make a profit, even with Therefore, value streams such as the
mainly relied on new vehicle sales strong customer take-up. Similarly, supply chain and logistics processes
and aftersales business to generate investments in fully autonomous need to be constantly ready to react to
revenues. However, the portfolio driving technologies have recently new circumstances. Resilience must be
20 https://www.capgemini.com/wp-content/uploads/2018/12/Report-–-Digital-Supply-Chain’s-Missing-Link-Focus-Digital.pdf
23comprehensively embedded in all value • Focusing on process efficiency IT and business are of critical
streams, including R&D, product design, through continuous improvement importance. Building close and
and demand and supply planning. This and cost reduction efficient collaboration will help to
will lead to continuous improvement Systematic process management, drive efficiency and productivity
in each stream while also preparing and the use of tools such as advanced gains and avoid the disadvantages
organizations for whatever the future analytics and AI technologies, can of working in silos. Individual IT
may bring. help to continuously identify areas departments will largely disappear
for efficiency improvement, leading because most departments will
Steps to excellence to cost reduction in all parts of the contain a substantial level of IT
business. capability, seamlessly integrated to
We expect a disciplined approach to the • Accelerating future change improve execution excellence.
management of operational excellence To change established behavior, it • Driving innovation with disruptive
in all areas of the business to be a key is essential to build an organization business and IT models
success factor for the automotive where continuous improvement is A disruptive and innovative
industry in the coming years. Investing the norm; this will make it possible to organization requires the right
in operational excellence will build manage transformation faster and business and IT models if it is to
process efficiency and improve capacity more efficiently. Customer centricity achieve operational excellence. Future
utilization across an automotive will result in a stronger competitive work must emphasize continuous
business’s core value streams. advantage, and a change- and data- change and close internal and
Organizations need to take a number driven organizational culture is also of external collaboration while always
of steps to ensure that their investment great importance. retaining a clear focus on process and
pays off:21 • Aligning IT and business to create system efficiency. Companies must
real value put in place an open learning culture
Given that all parts of the business to facilitate the necessary behavioral
now have a strong technology shift towards more innovation and
component, alignments between idea creation.
21 https://www.capgemini.com/service/technology-operations/admnext/
24 Finding a new balance in the automotive industryFIGURE 5
AUTOMATION LEVELS
Level 0 Level 1 Level 2 Level 3 Level 4 Level 5
Driver Partial Conditional High Full
No Automation Assistance Automation Automation Automation Automation
Driver performs Driver performs Driver must remain The vehicle monitors Vehicle performs all Vehicle performs
all tasks related driving tasks with alert, engaged in the the environment and driving tasks and all driving functions
to driving. assistance from environment and in can perform driving monitors environment under all conditions.
built-in safety control. Vehicle can tasks. Driver is not under limited Driver is not
features. The perform one or more required to remain conditions. Driver may required.
driver maintains driving tasks constantly alert, but still be required
control of the simultaneously. must be ready to take to intervene.
vehicle. control as needed.
• Strengthening resilience22 Especially in urban areas of the a well-engineered hardware product.
Organizations must determine the world, mobility options have recently Connectivity, flexibility, and convenience
mix of resilience they want to build diversified strongly. Where individuals are just as vital and are mostly provided
into the supply chain and other key previously only had a choice between in the form of services.
areas, and make this into a strategic walking, taking the car, or using public
goal. Resilience targets need to transport, many new services have now What exactly does this mean for the
be clearly defined up front so that been added, ranging from ride hailing vehicles of the future? Most customer-
performance can be measured. and car sharing to bike and e-scooter focused use cases can be grouped under
Developing continuous improvement rental. While the pandemic has our three headings of connectivity,
and learning capabilities, and adversely affected new car sales, they flexibility, and convenience:
establishing a collaborative, problem- increased again after early lockdowns.
solving mindset, will make it easier China’s V-shaped sales development Connectivity
to anticipate, resist, and recover even led to better sales performance in
from disruptions. New technologies the fourth quarter of 2020 than in the A high level of general connectivity is a
such as AI should be used to create corresponding quarter of the previous prerequisite for many use cases. Some
transparency through data and year. During subsequent phases of the do not require the active involvement
further improve contingency pandemic, these patterns continued, of the user: For example, vehicles can
planning capabilities.23 with consumers continuing to favor communicate with one another and with
personal mobility over shared or relevant infrastructure to create a more
If all this is paired with execution public transport.24 convenient experience for the customer.
excellence, operational excellence will Other use cases do need the customer’s
result. Both profitability and resilience Customer expectations have evolved involvement: Examples that are already
will improve. accordingly. Accustomed to highly available include connectivity use cases
flexible, easy-to-use, and digitally such as remotely checking the vehicle’s
Shaping the mobility enhanced experiences in many areas status, starting certain functions such
ecosystem of their lives, customers expect the as heating or charging, and opening or
same in the area of mobility. This is closing the vehicle. Future use cases
Let’s turn our focus back to the heart of why the hardware component of a will build on these ideas, as well as
the future of automotive: the mobility vehicle is only part of the picture and on infotainment and safety features
ecosystem and its meaning for the why future mobility customers will enabled by connectivity services.
automotive industry. not accept a vehicle just because it is
22 https://www.capgemini.com/de-de/wp-content/uploads/sites/5/2020/11/Fast-forward_Report.pdf
23 https://www.capgemini.com/de-de/wp-content/uploads/sites/5/2020/11/Report_Supply_Chain_Resilience.pdf
24 https://www.capgemini.com/wp-content/uploads/2021/01/Shifting-Gears-Automotive-Research-Note.pdf
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