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Need for digital transformation in Automotive industry
Need for digital transformation in Automotive industry

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The automotive industry today is in a constant state of flux and is witnessing a significant transformation. There are constant changes on a multi-dimensional stage, which we have not witnessed in the past decades. The degree of change is such that the future of the industry is expected to be fundamentally different than what we know today.

What are the factors driving the business and technology decisions leading to a transformation in the industry?  

  1. Changing customer expectations – With a growing influx of information, conscious and evolved customers, especially in emerging economies, are demanding more personalized and unique products and services. There has also been an increasing preference on “experience over ownership” leading to structural changes across organizations.
  1. Rapidly transforming competitive landscape – The industry no longer consists of just traditional automotive OEMs. Entry of new age OEMs such as Tesla, Baidu, Neo Motors, etc focusing on technology, along with increasing involvement of tech firms such as Google, who are accelerating the pace of innovation in autonomous mobility, are changing the landscape of the industry.
  1. Driving innovation through newer partnership models – Newer partnership models are emerging in the industry between auto OEMs and partners from other industries to accelerate innovation. Some examples include BMW-Intel-Mobileye3 alliance which is focused on autonomous driving and the Microsoft and Renault-Nissan-Mitsubishi alliance, which is focused on connected car innovation. Other consortiums formed by OEMs and Tier 1 suppliers such as MOBI5 (mobility open blockchain initiative) and AVCC6 (autonomous vehicle computing consortium) are also involved in solving challenges around blockchain, autonomous driving, etc.
  1. Technological advancements – There is no doubt that rapid technological innovations are responsible for this shift in the auto industry. Increasing use of digital technologies such as AI/ML, robotics, edge computing, etc. across products & manufacturing processes, proliferation of open, interoperable technology standards, coupled with low cost of connectivity and commoditization of hardware are driving this change in the sector.
  1. Evolving regulatory landscape – Newer regulations specifically focused on clean energy, emission, electric mobility, autonomous driving, and cybersecurity etc., are also guiding the auto industry to make changes in the way it operates.  
  1. Shifting global economic and political climate – Due to the pandemic, supply chain ecosystems across the world were affected, due to which many countries started to think beyond China. There has also been an increasing demand for localization which has further affected the auto industry.

In addition to these changes and factors which are affecting the industry, OEMs and suppliers are also facing multitude of challenges, which also need to be considered while formulating business policies and making strategy decisions.

Challenges faced by OEMs and Tier 1 suppliers

 

  1. Business challenges including demand slowdown, budget reductions for newer products and services, shift from products towards service-based economy.
  2. Operational challenges including supply chain disruptions, margin pressures and lack of real time intelligence.
  3. Technological challenges including continuing reliance on monolithic technology architecture and inability to scale up new projects beyond POCs and prototypes.
  4. Talent challenges including upskilling of people and general resistance displayed towards new digital initiatives.

 

In addition, automotive enterprises also must constantly address the newer set of priorities that they are facing in these ever-changing times.

 

Imperatives for automotive enterprises

 

  1. Growth in business and revenues by creating newer revenue streams, exploring newer markets, adopting newer business models, and building newer partner ecosystems.
  2. Achieving Operational excellence by driving process efficiencies, reducing operational cost, and creating connected enterprise ecosystems.
  3. Meeting changing customer expectations by increasing delivering personalised services through value added services and improving customer engagement.
  4. Driving product innovation by increasing use of IoT, AI/ML and cloud etc and integrating continuous feedback in the product development process.
  5. Focusing on sustainability by reducing carbon footprint in the product, design, and production processes.
  6. Creating competitive differentiation by achieving product and service differentiation.

 

There is no doubt that the automotive sector has been undergoing a digital transformation in the past few years and this is expected to continue in the near future as well at lightning speed. Achieving success in the digital world will require newer ways of thinking, newer business models and partnerships, newer structural and strategic changes in the organizations. Though challenges remain, but Indian automotive ecosystem remains ready and agile for the changes. Continuous progress in leadership, engineering domain expertise, access to digital talent and an entrepreneurial culture is helping India become a preferred destination for many global companies, not only in the present, but the future as well.

 

To read the first blog of this series, click on https://community.nasscom.in/communities/gcc/how-are-gccs-driving-digital-transformation-india

To read more about how the automotive industry is undergoing its digital transformation and the role of GCCs thereof, download our report “Digital Transformation in AUTOMOTIVE and the role of GCCs” from the links below.

NASSCOM website - https://nasscom.in/knowledge-center/publications/digital-transformation-automotive-and-role-gccs

NASSCOM Community - https://community.nasscom.in/communities/digital-transformation/digital-transformation-in-automotive-and-the-role-of-gccs.html


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Vandhna Babu
Principal Analyst - Research

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