I remember back in the mid-80s going to Epcot with my family and marveling at the car of the future with its streamlined aerodynamic slanted windshield and hood, a stark contrast from the boxy cars of the 80s. Sure enough, they were right. Today’s cars do feature that sleek design that had seemed so futuristic to me as a kid. I don't even recall exactly when cars became less boxy; they just sort of evolved over time. And so it goes with innovation. The small incremental improvements made year over year do not seem like much, but then you look back several years, and it can be mind boggling how far we’ve come. It sparks the imagination, envisioning what the future has in store for us.
This is true of all industries, but as stiff competition and new regulations drive innovation in the automotive industry, it is likely those changes will be accelerated, creating a very exciting time for automobiles. In a recent Aberdeen study we looked at the state of the automotive industry and asked 218 automotive companies what they think will be the biggest change over the next decade.
We found that automotive suppliers and OEMs have interesting, but slightly different perspectives (Figure 1).
The top 2 things OEMs predict are:
- Competition / opportunities in emerging markets
- Greater use of embedded software to control vehicles
OEMs anticipate changes in the global market. They are feeling more pressure from competition, especially those in emerging markets, and need to look for ways to differentiate. Embedded software offers opportunities to implement innovative new features that can reshape the entire driving experience. The self-driving car is just one example of the amazing new features enabled by embedded software. In addition, as emerging nations grow and prosper, they are finding they are in need of transportation. This growing need creates new opportunities to sell more cars for OEMs. However, changes are needed to make those cars affordable for these new markets. Embedded software can help here as well. Replacing formerly mechanical functions with software is a method for taking cost out as much of the cost of manufacturing those mechanical components is eliminated. Plus code developed for more expensive cars can be reused, lowering development costs too.
Suppliers on the other hand are anticipating the changes they will need to make in order to continue to be suppliers for the OEMs. To meet tighter regulations for fuel efficiency and emissions standards, OEMs will be leaning on their suppliers so they believe the biggest changes will be:
- Materials used in cars (24%)
- Drive train technologies (20%)
Using alternative, lighter weight materials will be one method to meet these regulations and suppliers will need to update their manufacturing facilities to work with them. For example, lighter weight materials such as carbon fiber composites which can offer strength equivalent to steel at a fraction of the weight, require completely different manufacturing processes. In addition, new, more efficient drivetrain technologies are needed, changing what OEMs will need from suppliers.
These thoughts are further reinforced when automotive companies were asked what they are doing to achieve fuel efficiency and emission standards. Both OEMs and suppliers are working toward the same strategies:
- Improve the efficiency of the drivetrain
- Light weight vehicles
With new fuel efficiency standards in the US requiring an average fuel economy of 54.5 miles per gallon for the 2025 model year and tighter European emission standards by 2020, we can expect the cars we are driving in a decade will be quite different from what we have now. OEMs and suppliers are working on it now.