As vehicles become more connected and autonomous, the way drivers use them will shift, altering the whole economics of the car industry. By Bertrand Boisseau
No sector is embracing digital transformation more enthusiastically than the automotive industry. From self-driving vehicles to electrification, car manufacturers are investing heavily to modernise the sector, with US$100bn invested worldwide in 2022, according to ABI Research. That figure is projected to rise to US$238bn a year by the end of the decade.
The consumer-car relationship is evolving. As vehicles become more connected and more autonomous, the way drivers use them will shift, altering the whole economics of the car industry. This goes some way to explain the huge sums carmakers are investing in software and research in an effort to keep pace. The change is only going to continue accelerating as the car industry shifts closer to a software-defined model—where over-the-air updates to the vehicle’s systems such as the infotainment or the driving assistance define the value of a car, rather than the metal, plastic and leather of which it’s made up.
This is a time of enormous change for the automotive industry, and there are five key trends that will be crucial to the sector throughout 2023 and beyond.
The changing face of vehicle ownership
There are a number of reasons why people are changing the way they purchase and use cars, and it’s important for car manufacturers to consider how they are changing mobility. The number of young people holding a driving licence is continuing on a downward trajectory, both in the UK and further afield—and this was a trend even before the pandemic brought driving tests to a halt.
The rising costs of owning a car and the cost of living are playing a huge part in people choosing not to own a car at all, with it now estimated to cost £3,000 (US$3,700) per year to keep a car running. Car owners are also becoming more environmentally conscious, and this is sparking a growing trend in vehicle sharing and carpooling, as it’s around 40% cheaper than owning and driving a singular car. What’s more, with more people working from home, many believe there isn’t such a need to own a car, choosing instead to travel to the office a couple of days a week via public transport. Whatever the reason, car manufacturers need to consider how these socioeconomic trends are shaping the future of the industry.
Subscriptions will become commonplace
In the future, it’s likely cars will be something that people use only when they need to, driving a trend in vehicle sharing. This will cause a change in people’s attitudes, with an expectation that personalised features, such as the position setting of the steering wheel or a person’s favourite radio station, will automatically synchronise across the range of vehicles to which a consumer has access, regardless of brand, model or ride-hailing company. Such consumer demands of synchronised ecosystems will push car companies towards more subscription-based, app-driven operating models.
On top of this, apps and services will become far more important for the automotive industry. As a vehicle becomes an extension of the home and office, retail and business apps are expected to arrive in cars. This is already evident, with the consumers able to install standalone apps, such as Zoom, on the 2024 Mercedes-Benz E-Class. By 2030, McKinsey predicts 95% of vehicles will be connected, and entertainment apps such as console-quality gaming and video streaming will boom. For vehicle operators, apps will lead to new subscription-driven revenue models in the coming years.
Autonomous driving software
For car manufacturers to drive revenue from the various subscription services coming from apps in cars, they need to encourage in-vehicle usage. For that to be a reality, the vehicle needs to drive itself as often as possible while ensuring the complete safety of its occupants. This means that autonomous driving (AD) software needs to be operational in most if not all circumstances, which will probably require millions of cumulated hours of simulation and validation of AD algorithms.
The shift towards a more software-defined vehicle will force carmakers to reduce hardware and software dependencies, where software runs only on specific hardware
While road traffic laws may seem ‘simple’ to interpret for a human driver, it is much more complicated to ensure an appropriate level of understanding in AD software. Thanks to digital twins and the impressive progress in the artificial intelligence (AI) domain, engineers and developers are able to test their algorithms in simulated environments, without having to risk the safety of human drivers. Combined with virtual desktop infrastructures and high-performance computing, digital twins are revolutionising the conception of AD software.
New vehicle development
Cloud and AI are set to transform the way manufacturers develop cars. Dozens of tools are already involved—from CAD to thermal and electrical conception. These tools must leverage the computational power of the cloud and optimisation opportunities provided by AI and machine learning (ML). For example, in an intensive activity such as computational fluid dynamics simulations, which are essential to car design, engineers can arrive at AI-recommended results faster thanks to cloud computing. This approach is going to grow in importance in the coming decades, as vehicles become more connected, and consumers demand more features, moving towards smartphone-style upgradability.
Vehicle architecture needs to be able to deliver this. The shift towards a more software-defined vehicle will force carmakers to reduce hardware and software dependencies, where software runs only on specific hardware. Over the longer term, this will change the way carmakers work, with wider reuse of software components across vehicle models and brands. This will enable cooperation between the different parties involved in making a car and reduce development times. It will also help to boost cyber security, an area that far too often goes overlooked in the car industry.
Fleet management will become more important
With the numerous developments in the industry, the way cars and buses move around cities is also likely to radically shift. Fleet management services will be more important than ever to take charge of the many new autonomous, highly functional and interconnected vehicles roaming the streets, optimising the flow of goods and people.
Routing solutions will take into account everything from weather and road conditions to the amount of battery charge of an electric vehicle. This will help to find the best routes and ensure cars have optimal battery levels before being dispatched to customers, so they can reach their destination without delay. For shared vehicles, it will become even more essential to manage quick re-scheduling of rides based on optimised routing and dispatching the nearest available vehicle to reach customers the fastest.
Predictive maintenance, driven by sensor data processed by ML models will help carmakers anticipate when issues might occur and enable vehicles to last longer and be better maintained. Over time, this also means that future vehicles will be better designed, thanks to the huge amount of maintenance and performance data harvested from vehicles on the road.
Preparing for the future
The vast sums already being spent by carmakers on digital transformation and software show that the sector is eagerly embracing change. Over the coming decade, this will become even more rapid, with a shift towards subscription models and alterations in the way cars are designed welcoming a new era of automotive use. The world will move on from thinking of cars as the ultimate consumer object, and instead, as a high-tech service to use when needed. This will have a positive impact on the environment, society as a whole, and forward-thinking companies in the automotive sector.
About the author: Bertrand Boisseau is Automotive Sector Lead at Canonical