Trends in the Automobile Industry

Strategic planning is made according to goal definition of the organization. Latest trends and developments along with industry analysis are taken into consideration for forming strategies that can easily be applied (Spaeder, 2007). Automobile industry within U.S. is highly competitive with large number of companies and varied types of automobile models. Innovation has been the key to growth of the industry within the country. Open economy in the US has further invited more market participants to enter and market their products in the country. The scope of this analysis deals with latest trends within the automobile industry in US that has been driving growth. Analysing these trends will allow forming of strategies that are suitable for the industry and market.    

Automobile industry within US has been highly innovative with a number of trends that has been driving such growth patterns. Technology trends is bound to revolutionize ways of industry towards changing of consumer behavioral patterns, driving transformational change and in developing partnership (Sturgeon T. V., 2008). As global economies are transforming dramatically with developments in emerging markets, there has been an accelerated rise in technology that is further changing consumer preferences for ownership. New business models have been forced to revolutionize as digitalization has been impacting automation. The trends have led to various disruptive trends emerging in the automobile industry as electrification of vehicle, fully automation and connectivity of vehicles.   

Product Related Trends-Electrical Vehicles: Most important type of trend that is driving the automobile industry is green battery operated cars. Tesla’s CEO Elon Musk  has been highly focused and developing automobiles that does make use of unsustainable form of resources as fossil fuel and runs on battery. This innovative disruption has led to high growth in environmental friendly automobiles. with electrified vehicles becoming more competitive and viable, having features of regular vehicles, there has been tremendous speed of adoption at  the global levels. With tightening of emission restrictions, lowering of battery costs, availability of charging infrastructures, increasing consumer acceptance has created a strong penetration for hybrid, battery electric, plug-in and fuel cell vehicles(techcrunch.com, Retrieved on 4th February 2018). Especially regulatory push at the local and regional level will drive sales in this segment. It has been estimated that by 2030, electrified vehicles would amount for 10 to 50% of total vehicle sales. Adopting electric vehicles will be high across denser cities that have stricter emission rules as there will be consumer incentives as well including driving privileges, tax breaks, discounted electricity prices and so on. Battery costs has also decreased from $150 to $200 per kilowatt-hour with electric vehicles taking over conventional vehicles.    

Product Related Trends-Electrical Vehicles

Product Related Trend-Automated Vehicles: A pertinent technological trend that is driving automobile industry is fully autonomous vehicles. It is estimated that by 2030 approximately 15% of total car sales could be fully autonomous vehicles(Shaheen, 2013). Currently there is availability of advanced driver-assistance systems (ADAS) which is playing an important role to impact regulators, corporations and consumers for                                             moving towards fully autonomous vehicle before 2020. There are a few challenges that are hindering growth of fully autonomous vehicles, but once those challenges are overcome successfully then there will remain tremendous value for consumers.

Figure 1: Prediction of Autonomous Cars by 2030

Source: (Company, Retrieved on 4th February 2018)

Service Related Trend-Connectivity: Shared mobility, feature upgrade, new business models and connectivity services will allow expansion of automotive revenues by 30% that could amount to $1.5 trillion. This revenue pool could allow diversification for on-demand mobility services along with data driven services. Traditional car sales that is currently figured at $5.2 trillion could expand with increasing aftermarket services and products from $3.5 trillion in 2015(Paul Gao, Retrieved on 4th February 2018). Connectivity amongst automobile vehicles along with autonomous technology will allow users of vehicles use transit times for personal activities. Software based systems have increased speed of innovation will impact cars to be more upgradable.

Figure 2: Revenues from New Services

Source: (Company, Retrieved on 4th February 2018)

Shared mobility solution will make consumers more aware regarding latest technological advancements taking place. This will led to upgrading used cars in private manner as well. Overall global car sales is expected to grow at but will drop significantly affected by macroeconomic factors along with rise of connectivity services (Sturgeon T. J., 2008). These advancements, growths or changes within the industry are needed to be aware of to form strategies that could significantly affect automobile manufacturers.

The automotive industry has become highly dynamic and open to new technological disruptions taking place. While these new changes and innovations are proving to be profitable, on the other hand it poses significant challenges. The most critical challenge facing some well-known traditional automobile manufacturers is regarding their capability to integrate these technological trends (Batten, 2011). While some manufacturers are innovation bent others are facing significant challenges in adapting to new situations which requires transforming their entire facilities and available infrastructure. This might require tremendous investments from the part of the manufacturer and also making some new value chain relationship. While transforming might be a valuable option, it might not always be a viable one. Requirement of high amount of investments to be made in research and development platform might not be feasible in cases of small traditional automobile manufacturers or their suppliers. With immense amount of technological up-gradation coming into being, vehicles in future might be subjected to higher levels of pricing. technological adaptation might not be viable at low cost vehicles that are currently manufactured. Moreover, there might be issues related to security and safety of passengers using electric and fully automated vehicles. In order to keep pricing affordable new technological vehicles might not be able to provide highly customized features with appropriate security and safety aids (strategyand.pwc.com, Retrieved on 4th February 2018). Therefore, most important issue remains with fully automated or electrical or connected vehicles safety features that might not come in the price that consumers desires. Automobile companies hence have to maintain a perfect balance of features in prices that can easily be marketed to consumers. Especially consumers in emerging economies are price sensitive consumers, which might be difficult to penetrate at higher price levels.      

Conclusion

Analysing pertinent trends from the automobile industry it can be seen that disruptive trends are governing the industry and its participants. Primarily three trends that will drive the automotive industry will  be game-changing, which allows predict the way, the industry will look in the future within next 10 to 15 years horizon. This trends will affect traditional vehicle manufacturers, suppliers, regulators, potential new entrants, markets, consumers and also automotive value chain. All trends are not deterministic in form but allows industry participants to prepare for potential future state. Strategies needs to be designed in a manner such that possible challenges can be overcome in an effective manner.   

Reference Lists

Batten, V. (2011). Future Developments. Thunderbird International Business Review.

Paul Gao, H.-W. K. (Retrieved on 4th February 2018). Disruptive trends that will transform the auto industry. https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/disruptive-trends-that-will-transform-the-auto-industry.

Shaheen, S. A. (2013). Carsharing and personal vehicle services: worldwide market developments and emerging trends. International Journal of Sustainable Transportation, 5-34.

Spaeder, K. E. (2007). 2007 SHAPE-UP-Want to get your business into perfect shape? Healthy choices benefit both your body and your bottom line. Entrepreneur, 43.

strategyand.pwc.com. (Retrieved on 4th February 2018). Automotive Trends. https://www.strategyand.pwc.com/trend/2017-automotive-industry-trends.

Sturgeon, T. J. (2008). Globalisation of the automotive industry: main features and trends . International Journal of Technological Learning, Innovation and Development, 2(1-2), 7-24.

Sturgeon, T. V. (2008). Value chains, networks and clusters: reframing the global automotive industry. Journal of economic geography, 297-321.

techcrunch.com. (Retrieved on 4th February 2018). The top 7 trends in the auto industry for 2017. https://techcrunch.com/gallery/the-top-7-trends-in-the-auto-industry-for-2017/