Vehicle manufacturers are beginning to see the light at the end of the tunnel, but the difficulties of the last two years have forced them to change their approach to digitization and the supply chain. Gartner experts have identified the five technological trends that will guide the transformation of the sector this year, in which software will play a fundamental role.
During these two years of pandemic, the automotive industry has suffered great problems due to the lack of supply of chips and large fluctuations in demand. This has given impetus to the change in focus that the sector was making on digital transformation, and this year will see important changes. According to Gartner , software is set to become the main driver of profit growth for automakers, driving a profound transformation in their production and business models.
Pedro Pacheco, senior research director at Gartner, comments that in the last 100 years, vehicle manufacturers have focused on improving mechanical processes and hardware, both in their factories and in their products, and have not worked on the related aspects. with the software, which they left in the hands of third parties. But he believes that “as digital becomes the automotive differentiator, software will become the primary driver of profitability growth for automakers.” Therefore, he believes that the goal of OEMs will be to become technology or software companies.
Looking ahead to this year, their research reveals what will be the five main technological trends that will be seen in the automotive sector:
Shift in focus on hardware sourcing
After the many difficulties that automakers have experienced in the last two years, they are now rethinking the traditional inventory strategy, which followed the Just in Time (JIT) principle. This led OEMs and tier one suppliers to cut their reserve inventory to a minimum, suffering from chip shortages .
Looking ahead to 2025, Gartner says that 50% of the top 10 automotive OEMs will design their own chips and establish long-term, strategic, direct working relationships with chip companies, while abandoning the practice of JIT inventory management. .
Integration of vehicles in a holistic technological ecosystem
Gartner analysts believe that in the coming years tech giants will enter the automotive industry, trying to integrate vehicles into their digital platforms. In 2022 it is expected that AWS, Google, Alibaba or Tencent will strive to expand their footprint to vehicle technology. Pacheco says that “these technology companies are bringing the car closer to their respective ecosystems, which, in turn, opens up new services connected to the vehicle.”
His estimates are that, by 2028, the percentage of vehicles that integrate Android Automotive will go from the current 1% to 70%. To achieve this great penetration, the technological giants will take advantage of the difficulties that car manufacturers have in developing technologies and software to sell them their platforms. And the main argument will be that it will allow them to turn the software into one of the main sources of income. And also that with its help they will not need to build the necessary digital infrastructure to provide these services to end customers.
Advancing open source and open data collaboration models
In the past year, several technology companies have developed open source vehicle architecture operating systems and an open electric vehicle platform, and Gartner expects that partnerships between these types of companies and vehicle manufacturers will expand starting this year.
On the other hand, automotive companies are beginning to treat data in a similar way to technology companies, in order to build and integrate digital ecosystems to access more information, and not to sell data. This will allow them to develop more attractive digital features or services, following in the footsteps of other technology sectors such as mobile applications or cloud services.
More digital revenue through OTA updates
Over the past year, various car manufacturers have launched over-the-air (OTA) update services for their products. This makes it possible to update the software of their vehicles through data networks, without the need to physically go to a specialized center, making it easier for users to access new services with the same hardware.
This marks the beginning of a new business model that will generate income based on services, and not only through the sale of assets or subscription models, which have already proven unviable . Gartner forecasts that by 2023 half of the top 10 car manufacturers will offer software-based unlocks and capability upgrades that can be purchased after vehicle purchase. And the main channel to deliver these improvements will be OTA updates.
Obstacles to the progress of autonomous vehicles
Autonomous driving technologies are maturing apace, but there are still many barriers to overcome before self-driving cars can hit the streets. Gartner experts point out that detection technologies are improving, perception algorithms are becoming more sophisticated and regulations and standards that will allow the use of autonomous cars are progressing. But developers of such cars are still having trouble scaling autonomous operations to new cities and regions.
Manufacturers are already announcing the first level 3 self-driving cars and are working on rolling out level 4 autonomous trucks and robotaxis. But to achieve this they need to do exhaustive simulations and tests in real environments, something expensive and slow, which is making it difficult to commercialize. In addition, issues relating to liability in the event of an accident and legal and social considerations are not yet well resolved. Adding to this is the difficulty of developing ways in which humans can easily and effectively interact with AI-powered vehicles.
Jonathan Davenport, research director at Gartner, comments that “the very high R&D costs involved in robotaxis or level 4 trucks hamper the speed of adoption in terms of coverage, but also in terms of return on investment.” He highlights the irony that one of the main advantages of autonomous driving is the reduction of the operating costs of transport, and in his report he foresees that by the year 2030 there will be four times more level 4 autonomous robotaxis operating globally than taxis. which will be operational in 2022.