2017 was the year in which major automotive companies have actually moved to the stage of test and implementation from a state of observation and watching in the past. We have seen significant investments toward electrification strategies, digitization of entire automotive ecosystem, as well as partnerships with start-ups and technology providers for new business models such as data monetization, alternative, digital payment solutions and mobility as a service provider. Automotive companies no longer sell vehicle alone, but have already started to position themselves as complete mobility and technology providers with significant changes in corporate strategies. In addition, baby steps for new future have also been taken; research focus on the use of artificial intelligence in automotive industry, R&D investments for flying cars in addition to developments in autonomous vehicles topic, or the rise of cognitive cloud computing in automotive are a few examples of industry focusing on 2018 onwards.
Electrified vehicles, go digital and focus on alternative revenue streams were main motto of auto companies in 2017.
In 2017, major auto companies such as VW, BMW, Toyota, Volvo, Suzuki, GM and Tesla have continued to invest in building in-house capabilities to manufacture electric vehicles and turn their steering wheels to electrification strategies completely.
Toyota announced investing $13 billion in an electrification strategy looking for leadership in the EV arena. The Japanese giant is also exploring a partnership with Panasonic to manufacture batteries as well as develop next gen “solid state” batteries.
Tesla continues to be one of pioneers in EV area, has built a giga factory to produce batteries in Nevada. With investment is around $2 billion for the factory and the company started mass production in 2017.
EV investment by companies has paced up following the diesel-bans announcements coming from major European cities. BMW is setting up a Battery Cell Competence Centre in Munich estimated to be worth around $240 million and invested more than $120 million in electric drive technology in the Dingolfing plant in Germany. Besides the above mentioned investments by auto companies, another good example of strategic decisions also pushed by diesel related regulations was Volvo’s decision to stop producing vehicles solely powered by internal combustion engines and go hybrid or electric for all their future vehicle models by 2019.
Digitization throughout the entire automotive ecosystem was another main trend on which companies had their eye on in 2017. In the past, the focus was mainly on digitization of sales channels; however, now it is extending to the entire ecosystem: from pre-production phase to after sales. The main pillars of digitization are connected supply chain for pre-production phase, industry 4.0 and predictive maintenance for manufacturing phase, digital retail for sales and marketing phase, and mobility as a service solutions for after sales phase. Those pillars of digitization underpin the transformation of business activities, process improvements, and the development of new competencies and business models for auto companies. Total digitization investments of companies are estimated at around $16.4 billion, out of which $12.4 billion were used for industry 4.0 and connected supply chain. Digitization investments for pre- and manufacturing phases (connected supply chain, industry 4.0 and predictive maintenance) are expected to reduce the costs of production due to lower maintenance costs, improving at the same time the quality of the finished product due to effective managing of parts & resources and improved logistics. Manufacturing phase investment was followed by connected vehicles and services investments of around $3.2 billion; these particular investments are expected to make the future mobility safer and quicker, while cyber security is expected to play a major role in protecting vehicle and passenger data which is one of the major concerns.
Auto companies are also looking into alternative revenue streams and one of the key topics of 2017 was data monetization. Bartering, brokering, and business intelligence are the key data monetization business models widely used across industries. Business and pricing models are customized according to use case scenarios and data type. Ford’s investment in Pivotal and the partnerships of GM and Octo Telematics, BMW and IBM were examples of exciting news proving us change in the way companies look into the automotive industry and its future. According to recent study published by Frost & Sullivan, the overall opportunity in data monetization would amount to ~$33 billion by 2025.
First solid steps to have a Turkish national car
Keeping an eye on global trends and future of automotive, we can state that 2017 was also an important year for Turkey. In 2017, Turkey finally decided to take step on a strategy to produce a national car and established a consortium in Q4. In this changing yet challenging and highly competitive global automotive industry, where auto companies are investing and investigating new technologies, Turkish car should be positioned carefully. Looking at the global trends, decision only on powertrain technology being ICE or electric or any other technology will not be sufficient and the consortium should be closely following future mobility trends together with changing customer demands, developments in automated vehicles and alternative business models to reach global success.
Automotive industry is transforming extremely quickly and moving toward a completely new digital era with all the investments and partnerships, and 2018 is expected to bring stronger and more solid actions from entire automotive ecosystems. While automotive companies are looking to keep their existing business, we have seen lots of strategic decisions to create future roadmaps and build new dimensions of automotive industry. What is known is actually the fact that the success will not be measured by classical KPI’s like vehicle sales or revenues anymore and companies able to bring new dimensions will have a place in this competitive future. All trends to be followed throughout 2018 and following years based on 2017 industry outlook can be found in Frost & Sullivan’s Global Automotive Outlook Report which will be published in Q1 2018.