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Automotive Success Factors in 2021: Go Digital or Go Home?

Even before the COVID-19 crisis, the automotive industry was experiencing the effects of tectonic changes in the market landscape. Disruptive technologies and changing consumer preferences have been forcing carmakers to adapt. Those that react faster are more likely to succeed – but what are the success factors that analysts see for years ahead, and what’s the role of digitalization in the auto industry’s future?

Automotive Success Factors in 2021

Related reading:

Technology Trends Shaping the Mobility & Automotive Industry in 2021

The fact that new trends are disrupting the auto industry is yesterday’s news. The widely used acronym ‘ACES’ refers to the primary drivers of change in the sector: Autonomous Driving, Connectivity, Electrification, and Shared mobility. For years, all of these have been contributing to the restructuring of the automotive market landscape as we know it.

The COVID-19 pandemic has given this process a great push, forcing carmakers to adapt faster in order to emerge from the crisis as winners. Analysts from McKinseyDeloitte and other companies have identified some of the most important factors expected to make or break the success of mobility companies in 2021 and beyond. Let’s see what these are, and how they are all connected by a digital thread!

Digital consumer engagement

As pointed out in our automotive technology forecast for 2021, online channels are increasingly popular alternatives to the physical touchpoints that were traditionally necessary parts of a car purchasing process. This trend received a boost as the pandemic unfolded, but analysis suggests that digital channels will stay important even after the crisis.

A fully digital, multi-channel vehicle buying experience is expected to become the norm. Early adopters of this online sales strategy are already making headway in the digital race: one US manufacturer of electric vehicles with a comprehensive online sales strategy managed to increase its sales by 10% in February 2020 in China, despite an overall decline of 80% in automotive sales caused by the pandemic.

Analysts believe the expansion of digital automotive sales channels will continue to grow in importance and could represent a source of competitive advantage in coming years.

New ‘as-a-service’ revenue streams

A shift in consumer preferences towards subscription-based models has been identified years ago. The “as-a-service revolution” has transformed a number of industries, and the automotive sector is no exception. Today, there are more and more on-demand solutions and shared mobility services.

While representing a fundamental change for traditional carmakers, this also means an opportunity to build out alternative and recurring revenue streams. While different from the models automotive companies are familiar with, these new sources of revenue could become game changers due to their stability and the new profit-generating opportunities they open up.

The importance of digital capabilities in something like a carsharing service is relatively straightforward to understand. Today, we may find it harder to grasp new digital-enabled business models such as on-demand services in our cars (e.g. “subscribing” to the steering wheel heating service for winter months). Unfamiliar as they seem, analysts believe that similar models will likely contribute to a shifting business landscape in the mobility sector.

Strategic relationships for digital maturity

Traditional carmakers seem to have been struggling to build out their digital capabilities over recent years. Challenged by established tech companies just joining the automotive market, they are already up against heavy competition in the digital race. In order to stay ahead, some have chosen to form alliances with tech innovators.

Related reading:

New Alliances Shaping the Future of Self-driving Cars

The pandemic continues to have a grave impact on the bottom line of automotive companies worldwide, constricting budgets for R&D. In the meantime, tech innovators are seeing growing revenues as life becomes increasingly digital. Therefore, such strategic partnerships between OEMs and tech companies are expected to become more widespread, helping these players join forces to better leverage their comparative advantages.

Not only are these partnerships explicitly targeting tech innovation – they also require new ways of digital collaboration between organizations. New processes and shared digital platforms will be required to accommodate and facilitate innovation across company boundaries.

Increasing the robustness & resilience of automotive supply chains

As the outbreak of the COVID-19 pandemic in China disrupted supply chains across industries and throughout the globe, manufacturers were forced to confront a harsh reality that some experts believe will impede globalization. Among manufacturers operating in the EU and US, a shift is expected towards local sourcing in order to prepare for future events that would compromise the integrity of their supply chains.

Despite the (likely) increasing costs, this partial “reshoring” process could also hold benefits for carmakers. Tighter collaboration with suppliers and shorter physical distances result in flexibility, enabling auto manufacturers to be more responsive and to react and adapt faster to a changing market environment. By applying the appropriate digital infrastructure to manage supplier alignment, quality control may be simplified in an increasingly fast-moving sector that builds more and more on digital innovation.

Putting the digital pedal to the digital metal

What all the above success factors have in common is their reliance on digital maturity. In the post-pandemic world, automotive companies will have to increase their focus on digital strategy in order to emerge as winners in a difficult market environment.

In addition to investing in the right talent, mobility companies will need to consider updating their digital tool infrastructure. Smart and collaborative digital development platforms are increasingly becoming indispensable in the development of safety-critical automotive technology.

Prominent automotive companies such as BMW, Daimler, VW, Mercedes-Benz, Audi, Continental, and others are using codebeamer to drive their digital product engineering processes. To learn about the ALM journeys of digital mobility innovators, download our customer case studies with leading ADAS & autonomous systems developers below:

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