Digital Transformation of the Value Chain in Tomorrow’s Automotive Industry – Analysis and Recommendation on how Software can Tackle Present and Future Challenges

Abstract:

The automotive industry is undergoing fundamental change: driven by environmental and sustainability aspects, the concept of the combustion engine is on the verge of extinction, induced by political measures. It is being replaced by the electric drive - within a short period of time, automotive manufacturers, suppliers and other players are being forced to make fundamental adjustments to products and structures within the companies and to rethink the entire value chain. An important part of this is also the mobility needs of society, which play a formative role for the automotive industry of tomorrow. Manufacturers are therefore developing not just vehicles, but holistic mobility concepts. Trends such as autonomous driving and connected cars are also setting the pace: The automobile is increasingly evolving from a simple means of transportation into a "computer on wheels." In the course of this, the major vehicle manufacturers are developing their own digital ecosystems in response to customer requirements: Apps are connecting companies, customers and vehicles, providing real-time information and services. As part of the digital transformation, this change has already been actively taking place for some time. Software ultimately plays the key role here - not only in the vehicle itself, but also within companies, society, and along the entire value chain: from raw material to vehicle, from vehicle to service.

First, we define which framework conditions result from current and future challenges for the automotive industry. As a solution approach, we focus on software as a central resource in the overall value creation of vehicles and mobility: software has become one of the most important resources in the overall value creation of the automotive industry and will continue to play an increasingly important role in the future. Actors in the automotive industry - OEMs, suppliers, but also software companies and start-ups - are examined for their software activities and products. It will be analyzed which tasks are already implemented by software solutions and to what extent they meet the general goal of efficiency, optimization and automation and contribute to solving the challenges identified. Areas that are insufficiently covered are identified. For this approach we will use grey literature, technical literature, statistics and trend surveys. We will structure these, put them into context and finally interpret them in order to be able to derive recommendations for action for the future.

The example of the German automotive industry shows that the adaptation to the rapidly changing market and the associated needs was fundamentally overslept. The digital transformation and the shift towards e-mobility were implemented too late, allowing young brands such as Tesla and Polestar to establish themselves. Other new companies that offer optimal value creation in terms of electric drives and software right from the start are already waiting in the wings. Nevertheless, the local vehicle manufacturers have been able to catch up with the new competition and now offer a portfolio with electric drives in almost every vehicle class. For technical reasons, electric motors consist of significantly fewer components than internal combustion engines - across manufacturers, the actual difference between the various drives in terms of performance and other features is now smaller than before, and the advantages of individual electric motor models no longer carry as much weight as was previously the case with internal combustion engines. For this reason, vehicle manufacturers and their brands are differentiating themselves in the age of e-mobility primarily through the ecosystem they offer: The software is at the center and will determine competitiveness and success on the market in the future. A significant basis for securing market share within the automotive sector is therefore investment by the players involved in their software activity and infrastructure. Cooperation between the players will also take on a more significant role in order to save resources for certain developments and services and then to be able to implement these cost-effectively in their own respective ecosystems - as an example, the "HERE Maps" mapping service, which was jointly purchased by BMW, Daimler and Audi and integrated into the vehicles.

In sum, the key competitive advantage will come from a brand's ecosystem, while within companies, software-supported optimization along the value chain will be crucial to making the development of their own products effective and reducing costs. In the future, it will not only be necessary to manufacture and market one's own vehicles, but cooperation between vehicle manufacturers and suppliers as well as the exchange of information and networking of all players up to the point of bonding with the customer through the digital ecosystem will play the supporting role for future success.