In January 2020, Tesla’s market value surpassed Ford’s and GM’s combined value, Google’s Android Auto hit 100m downloads in the Google Play Store and Sony entered the Automotive market with their Sony Vision-S concept car.
It’s clear that the big tech players are taking an ever increasing interest in this automotive and mobility market and that we’re standing in front of what can be seen as the new tech giant battleground.
Taking a step back, the automotive landscape has historically consisted of a number of well defined players, acting inside well defined domains, with clear value propositions. What we’re seeing now is a shift happening in the industry where electrification and the promise of full autonomy are rapidly disrupting the value chain. The previous core business of selling vehicles is being commoditized and instead value generation increasingly comes from products and services connected to the vehicle.
The GAFA group (Google, Apple, Facebook, Amazon) have all been active in this field and are acting on the new business opportunity. 2020 has seen additional new tech entrants state their claim with the likes of the new Vision-S from Sony and Microsoft’s launching its Connected Vehicle Platform. Both of these can be seen either as a component in the value chain, or as a jumping-off point for new software platforms intended to run on top of different vehicle platforms.
The increasing interest of the tech companies is no surprise as the amount of code within vehicles continues to rapidly increase. For example, modern vehicle braking systems are made up of a large set of sensors and over a million lines of code.
So in a world where vehicle differentiation and value is increasingly coming from software, how do incumbents respond? The first thing to get right is not to think of the big tech companies as just another supplier. With their deep pockets and search for new growth, they will not be content to become just a small piece in the value chain, but will continue to take on more value and challenge your business.
So what steps can traditional players take to respond?
Change in mindset to software first
Auto manufacturers need to stop thinking of the vehicle as the value, but instead see everything that the vehicle can enable or interact with as the value for drivers. See the vehicle as a channel or platform. That is selling a vehicle and then gaining value over time with new mobility services, content and experiences as well as the traditional automotive domains or vehicle servicing, spare parts and accessories. The more volume you have out there, the more value you’ll gain over time. The vehicle will be more similar to what we’re used to with our mobile phones or internet access where the hardware is provided for free and you pay for it via a subscription. Volkswagen’s 2019 announcement of it’s Car.Software organization will be interesting to watch. Will these arms length digital organizations have the power to influence the core business and will they get the acceptance needed to guide into the future?
Increase cycle times / Separate the SW and HW trains
We would like to stop hearing manufacturers announce the number of new vehicles they are going to launch in a year, but instead show a product roadmap of the new services and features that will be deployed over the air to all of their existing vehicles already out there. What we want to achieve for customers is an experience where you have access to a vehicle, whether bought, leased or rented, and that vehicle will continue to evolve and improve over time. Who wouldn’t wish for an owner experience that evolves instead of a scenario like today where our vehicles get older by the day?
Build unique partnerships
This is an area where we are seeing real innovation, whether it’s Hyundais partnership with Uber on flying taxis, Ford’s acquisition of electric scooter startup Spin, or Toyota autonomous vehicle concept in partnership with Amazon, Uber and Pizza Hut. These partnerships are being used to access new forms of mobility and deliver new services through the vehicle, transitioning automotive manufacturers to become mobility service providers.
Don’t be afraid to try new things
In a rapidly transforming industry like the one we’re discussing here it’s important to realize that we have to try new things and see things from non-traditional perspectives. As a fact, that is exactly what new entries into the automotive space are doing right now. We need to dare to try new things and we need to do so in an agile and fast-moving way where we quickly move from idea to something that we can test and evaluate before we make large scale investments in an area. We need to recognize that in today’s innovation climate we’ll not always know the results before we try, that is, we cannot be afraid to set out on a path where we don’t know the result before we start. The times of innovating under the umbrella of “yes we can be innovative as long as we can be sure about the ROI before we start” are gone.
In summary, there is a lot going on out there and we can’t remember a more exciting time in automotive innovation. The well-funded tech giants continue to shake up industries with automotive and mobility firmly in their sights. Automotive manufacturers can and are responding, but the transformation will be a long and hard one and require new brave thinking. At Star, we design and build the new software-driven products and experiences that automotive manufacturers are looking to embrace. To learn more connect with us below.