Even prior to the pandemic, in 2018 and 2019, the automotive industry was reeling with multiple headwinds: A slowdown in BRIC economies, more stringent lending norms, increasing competition, reduced economic activity, and a dip in the demand for vehicles worldwide. The lockdowns and disruptions induced by the pandemic in 2020 were like a descent into the maelstrom for the automotive industry as it witnessed sales falling to historic falls. However, the inclination towards personal mobility over public transport by consumers was a silver lining. While the pandemic is still around, the automotive industry sees some semblance of hope in 2021 owing to a confluence of automotive trends.
Based on insights from Forbes, let’s delve deeper into what these trends are.
A focus on going digital
Like every other organization, automotive manufacturers would have to re-imagine themselves as a digital company. The use cases for the technology in the automotive sector are too numerous to ignore anymore. Automotive businesses will have to make difficult decisions about whether or not to bring software development in-house, and some will even start developing their own operating systems or partner with Silicon Valley firms to develop next-generation car operating systems. I believe that 2021 will be the year when automakers launch their own version of iOS and Android for mobility.
Automotive manufacturers that cannot build a robust and seamless digital ecosystem will find their business going south quickly. There is already a big gap between manufacturers who have a strong digital ecosystem and those who don’t. Acquiring consumer mindshare in the digital space is the need of the hour for automotive manufacturers today. According to McKinsey, by the end of the decade, the automotive software industry is expected to have grown by almost 250 percent.
Connected cars will expand horizons
Connected automotive Internet of Things (IoT) platforms are changing the perceptions towards automotives. Imagine travelling to your destination of choice with a mere touch, gesture, or voice command. Not only can you sit back and relax while your car takes over but also catch up on your favourite movie or show and gorge on some great snacks or beverages while you are at it. Alternatively, you can also choose to catch up on those zoom meetings with clients turning the confines of your vehicle into a personal mobility office space. Is your vehicle just a vehicle any more?
It is expected that the features-on-demand will increase vehicle convenience, comfort, entertainment, performance, and safety. Together, they will completely change the user experience and push the limits of personalisation, while also allowing automakers to experiment with new business models and recurring income sources. According to MarketsandMarkets, after COVID-19, the worldwide connected automobile industry is predicted to grow at a CAGR of 25.2 percent from 2020 to 2025, from USD 53.9 billion in 2020 to USD 166.0 billion in 2025.
Subscription services leading to a shared economy?
New car ownership models such as leasing and vehicle subscription might have a bright future. Consumers will benefit from very flexible contract terms, car commitments that might be as short as a Tinder date, and quick vehicle shifting, but hefty subscription costs will be a deterrent. To be successful with car subscriptions, automakers will need to develop a business strategy that addresses not just the luxury demands of the market, but also delivers cheap, price-sensitive variations that are easily accessible to the general public.
According to verified market research, the automotive subscription market is expected to reach USD 38.81 billion by 2027, increasing at a CAGR of 38.40 percent from 2020 to 2027.
The road ahead
Building sustainable, connected, and innovative automotive business models is the need of the hour. Consumers today are emphasizing on sustainability and automotive manufacturers that focus on a circular economy are expected to gain more traction. Today, the demand for personal mobility is expected to boom and automotive manufactures that have a thriving digital automotive ecosystem shall find their business booming.
