Today, digitisation is dramatically affecting all industries, businesses and areas of our lives. One sector reacting quickly to this progress is the automotive industry. According to BI Intelligence, by 2020 there will be around 220 million connected cars on roads across the globe, increasing from the 30 million connected cars in use today. One company leading the way is HARMAN.
Acquired by Samsung in 2017 for $8 billion in its quest to increase its presence in the critical automotive sector, HARMAN’s President of the Lifestyle Audio Division, Michael Mauser, discusses how digitisation is changing the automotive industry and how diversification and collaboration is crucial to stay ahead of the competition.
We live in a digitised world in which devices, homes, infrastructure and cars are becoming increasingly connected. Alongside this, the global automotive industry is about to enter a period of transformative change that will take us from owning and driving cars to shared mobility for passengers.
Digitisation is at the heart of this transformation. As with mobile phone and smart devices, digital apps and digital features with Over the Air (OTA) updates and personalisation will become key differentiators in a car. These factors will overtake the traditional horse power, acceleration and design that we currently base our preferences on. This is allowing new brands – the likes of Google and Apple – to enter the automotive space and become strong competitors to traditional car brands such as BMW, Audi and Mercedes.
This digital transformation is creating megatrends that are shaping the future of mobility and are unleashing significant business and growth opportunities. Daimler describes these megatrends as CASE. ‘C’ stands for connected Car, ‘A’ for autonomous driving, ‘S’ for shared mobility and ‘E’ for electrification.
It’s the scale of the opportunity that is driving interest: it’s anticipated that there will be 220 million connected cars by 2020. According to the World Economic Forum, there is $0.7 trillion at stake for automotive players and an additional $3.1 trillion of societal benefits to come from this, which includes reduction of air pollution, turning time spent driving into productive time and a significant reduction in road accidents and deaths. Society is set to benefit more than the industry alone.
Automotive companies that want long-term success within the industry need to quickly make key strategic decisions on how to address the CASE megatrends. Diversification will be crucial to this.
Computers on wheels
Software is one area where automotive businesses can seek growth as cars become ‘connected’. Software is continuously gaining share in the value proposition of cars as it steadily replaces hardware. The latest cars have over 100 million lines of software code; more than a Boeing 747. Bluetooth and WIFI streaming are replacing wires; voice and gesture controls are substituting dials, knobs and remote controls; music streaming is making CDs obsolete.
As our cars turn into computers on wheels, Ford Engineering has predicted that roughly 50% of the vehicle value will be in hardware, such as powertrain, suspension and body, and 50% will be in software. This is a transformation from the 90% hardware and 10% software of the past. Automotive companies must adapt, embrace this move to software-based systems, and become savvy in this technology and its customer offerings.
The Internet of Things is upgrading the car to a connected smart vehicle and ensuring it remains ‘future proof’ with Over the Air updates. It’s introducing innovative new functions such as cloud-based office tools for productivity, high resolution streaming of entertainment services, remote vehicle diagnostics and personalisation.
But connected cars come with challenges. As cars transform into computers, they inherit the problems of the IT industry. One of these issues is cyber security. Connected cars are a target for hackers who may want to manipulate networked systems and access data. Automotive companies must therefore become security experts, implementing systems that detect and prevent malicious attacks.
Feet off, hands off, eyes off, brain off
Moving onto the second CASE megatrend, ‘autonomous driving’. On average, we spend around two and a half years of our life in a car. But autonomous vehicles will revolutionise how we spend this time. There will be the opportunity to be productive, to work or have in-car video conferences, to be entertained with movies and audio, or to relax and sleep while on the road. This ‘feet off, hands off, eyes off and brain off’ transformation is driving demand for superior connected car and car entertainment solutions.
But as we move closer to autonomous vehicles, increasing Advanced Driver Assistance Systems (ADAS) will be needed. These safety-crucial systems are additional ribbons to add to the automotive bow.
Around the world, on average, cars are parked and not used 96 percent of the time. Owning a car isn’t efficient, particularly if you can share them easily and at low cost. McKinsey is forecasting that the car sharing market could reach $165 billion by 2024. ‘Share mobility’ is set to cause a seismic shift in our mobility behaviour, with consumers renting the best customised solution for a specific purpose via their smart devices. It will change the sales model for car manufacturers. It’s anticipated that up to one in ten new cars sold in 2030 may be a shared vehicle, and this could increase to one in three new cars as soon as 2050. At CES this year, HARMAN debuted the Rinspeed Snap, a prototype of what these vehicles could look like.
The final CASE megatrend is ‘electrification’, which spans hybrid and electric cars. More than two million electric vehicles have come onto our roads since their introduction seven years ago with China and the USA leading the way. Mass market adoption is anticipated with industry numbers reaching predictions as high as 70 million vehicles by 2025. VW alone is planning to produce one million electric vehicles annually by 2025.
Through all these changes, diversification will be key to success. At HARMAN, we went through significant transformation in the past, inventing technologies to be an industry leader and drive growth. In the past, HARMAN was a hardware component supplier, offering embedded features such as navigation and entertainment systems. Now we are a chameleon addressing changing digital mega trends and we have transformed as a business. Software has become far more important and is outpacing hardware. We now have 12,000 software engineers in the business whose work is helping us lead the industry. Those software engineers account for 40% of our total headcount of 30,000 employees.
This diversification is what attracted Samsung to acquire HARMAN. Together, both companies have a wealth of expertise allowing us to drive forward change in the automotive space.
And it’s led to another way of working – collaboration.
Combined, our diverse experience, collaborative approach and openness to work with the best technology minds is helping us to satisfy demand for automakers. For example, taking Samsung’s strength in 5G and HARMAN’s automotive credentials, we will be the first to market offering 5G-based car telematics solutions.
A collaborative strategy
It’s this strategic approach that’s led to the establishment of the Autonomous/ADAS Strategic Business Unit (SBU) and Samsung’s Automotive Innovation Fund, a $300-million fund focused on the automotive market to bring together partners to collaborate on technologies that will drive the industry forward in this new age of mobility. We are also developing audio and entertainment solutions never before imagined like Virtual Venues
and Individual Sound Zones
. This strategic approach will bring together connected car, autonomous technologies and enhanced entertainment for safer, smarter, more entertaining mobility.
This is the start of a new chapter in the automotive industry. To thrive in the future, our aim is to become the leading connected technologies company in the world. We want to continue to diversify, to expand our offering to data analytics and to drive major recurring revenue streams through software services and IP licensing.
As with all automotive companies, we need to continue to adapt, to diversify and work with collaborative partners, which I believe will be the key to success in this redefined automotive space