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Industry Trends

Digitalization In The Automotive Industry

April 6, 2022

Digitalization has the ability to reshape how we utilise transportation while also providing enormous value to businesses and society.

People have proudly owned and passionately cared for their automobiles since the days of the horse and cart. However, as digital widen the frontiers of possibilities, it is destroying that relationship. We have an endless supply of conveniences and services thanks to smartphones, the Internet, and wireless and cellular connection. We anticipate the same from the automobile industry as well & it’s happening right now.

The automobile sector is being transformed by demographic, market, and digital factors. The connected and empowered consumer, who is becoming more digitally savvy in all forms of electronic media, is at the start of the shift cycle. People, particularly the expanding numbers of digital natives, do not see transportation as a commodity to be purchased; rather, it is a mobility experience that may carry them everywhere in a single vehicle or across many modes of transportation.

Cars now have features that were unthinkable just a few years ago because of the dual roads of assisted driving and self-driving. They park themselves and drive on highways with their hands-free technology. When cars become completely self-driving, there may not be any need for “drivers.” As part of a seamless continuum, we will all be travellers, using different modes of transportation to get where we need to go. We may or may not be on congested roads when we get there.

What is the significance of digital transformation in the automobile industry?

Manufacturers and service providers face fierce competition in the business, and they must adapt to quickly changing client needs. The following are three reasons why the auto sector has to become digital:

1. Customer expectations are shifting

Consumers in the digital era are looking for speed, convenience, and innovation. A company’s business will be lost if it is unable to serve them with its goods and services.

The automobile industry is under a lot of pressure to match shifting needs and preferences while being profitable and operational, thanks to an exponential growth in customer demand for value-added cars, cutting-edge technology, speedy service, and loyalty-inducing marketing.

This is where digital transformation comes into play, as it helps these businesses to keep up with the changing demands of their consumers.

2. Unprecedented worldwide market reach

Automobile firms can now reach out to customers all around the world thanks to digital technology. Physical distance is no longer a significant obstacle.

This means that if an auto manufacturer is willing to change itself by using digital technology, it will be able to reach a lot of new markets all over the world.

The automobile business may use search engine marketing tactics to promote to individuals using the geolocation capabilities offered with sem. SEM may be employed as part of their marketing plan since it allows them to target individuals from all over the globe based on their location, nation, language, search history, and other factors.

3. Increasing profit margins

By 2020, about 70% of vehicle sales in the world will be impacted by digital technology. This demonstrates how critical it will be for the automobile sector to digitally modernise in order to maintain high profitability.

Digitalization is already having a significant impact on the automotive industry, transforming how producers create and how buyers interact.

This is changing the way the auto industry competes. It’s making incumbents have to be more flexible in order to stay ahead of the competition.

The digitization of the automobile industry will be centred on the connected traveller, autonomous driving, digitising the company and ecosystem, and digital marketing.

According to research, the automobile industry’s digital transformation will provide a $700 billion potential for value creation, mostly via efforts like channel migration to virtual purchasing, value-added subscriptions, and next-generation services.

Through cheaper insurance premiums, decreased collision costs, fewer road fatalities, and lower carbon emissions, the value provided for society is expected to be much greater – up to $3.1 trillion.

According to recent estimates, 80 per cent of organisations that underwent digital transformation initiatives reported higher profitability, compared to 53 per cent of those that did not. This demonstrates that a corporation that adjusts to evolving technology and chooses to become digital can reap significant rewards.

Now that you understand why the automobile sector needs digital transformation, let’s look at some of the issues it confronts.

Given that newcomers like Tesla have been valued at considerably higher values while having a less economic effect, this is particularly important for established manufacturing giants like Daimler, VW, Fiat, and others. Tesla is the most valued automobile manufacturer, with a market valuation of $882 billion in March 2022, as a consequence of the premium that the market puts on it.

What are some of the advantages of digital transformation in the automobile industry?

With recent breakthroughs in the AI, IoT, and data analytics domains, digital transformation has gained traction in the automobile sector during the previous 20 years. Businesses gain from digital transformation in the following ways:

·   developing new digitally-enabled companies or services

·   product design that is centred on the consumer

·   supply chain optimization

·   boosting productivity (i.e. decreasing operational costs)

·   an increase in quality management

There are countless good instances of digital transformation in the automobile sector, spanning from product innovation to operational adjustments to customer-facing changes.

So, with a few factors in mind, let’s have a look at how digital transformation has been done in the automobile industry:

• Connectivity:

Thanks to networking features such as Bluetooth and wifi, people can now stream movies, utilise Google Maps, listen to music through Bluetooth, and much more.

Customers have been wowed by these features, which have sparked their attention. Because of their enormous popularity, such features have now become standard equipment in all cars.

The Tesla Model S is a fantastic example of this. With fantastic features like a browser, streaming services, and a vehicle app that lets you operate the cooling system, switch the car on and off, and much more. Tesla has revolutionised the automobile industry.

• Internet of Things (IoT) Connectivity Tool

IoT A point of connection between all internet of all things ecosystems is characterised as connectivity (IoT). Sensors, platforms, gateways, and other IoT devices are examples.

In layman’s terms, the Internet of Things refers to the connectivity of internet-connected devices that can transmit and receive data without the need for human interaction.

This might aid in what’s known as “predictive maintenance.” This system takes data from the automobile and uploads it to the cloud using IoT tools installed in cars.

Some servers will examine the vehicle’s data and decide if any repairs, such as mechanical or software faults, are necessary ahead of time.

This would surely help to reduce the number of accidents, the amount of time wasted due to breakdowns, and the overall vehicle efficiency.

• Purchasing a Vehicle

The desire for digital transformation has never been higher, with Covid -19 having such a significant influence on businesses all around the globe.

Buying a vehicle used to be a tough job, with salespeople bombarding customers with confusing information. Customers were also misled, resulting in them buying a car without understanding all there was to know about it.

Buyers may now investigate their preferred automobile online before visiting a dealership, thanks to new digital technology.

As a consequence, many individuals have grown more self-aware and informed, enabling them to get a car with more information than before.

Let’s look at the issues of the automobile industry’s digital transformation now that digital technologies are more crucial than ever.

What does the future hold for automotive digital transformation?

In the future, the whole value chain of automobile firms may be digitalized. As a consequence:

• As the number of digital transformation applications grows, companies’ operations may become more reliant on software and technology.

• Technology suppliers and automobile businesses are forming more alliances.

• The automobile industry’s digital transformation will continue to be shaped by new customer value definitions and business models, data protection, feature updates, and cybersecurity.

What are the obstacles to digital transformation in the automobile industry?

·   Investment: Significant funding is required to engage in digital transformation. For certain ventures, the return on investment (ROI) of these digitalization efforts may be questionable.

·   Impact analysis: In a short period of time, it is difficult to assess the projected advantages of digital transformation on corporate performance and goals. New initiatives and investments in the automobile sector may be slowed as a result of this.

·   Data privacy: In order to develop car features and build new goods and mobility services, companies in the sector gather customer, driver, and vehicle data. Data security concerns emerge in the automobile business, as they do in other industries.

·   Difficulty: Digital transformation necessitates a shift in the business model and the concept of the consumer. It entails significant alterations, and it may be influenced by any surgery. As a result, the complexity of DX initiatives may be a barrier for businesses. The transformation process should be properly controlled, and organisational culture and talent change should be stressed.


To take advantage of new possibilities in areas like as linked cars and mobility services, automakers must embrace innovation in today’s digital era. These organisations must establish a new portfolio of capabilities for flexibility and responsiveness to fast-changing consumer demand in order to assist produce new customer value propositions or restructure their operating models.

Although the route to transformation may change depending on the industry, one thing remains constant: those that are able to execute new business models based on customer feedback will have the first pick of talent, partners, and resources. They are expected to remain well ahead of future and current competitors as industry leaders.