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TODAY’S BARRIERS TO VEHICLE WILL SHAPE THE AUTO OF TOMORROW

By Laura Marcero

Innovations from voice assistants to around $37,000 for sales overall), generating subscription models and widespread demand will prove difficult. Consumers have also yet to buy-in to the driverless concept, platforms each gained traction among with 68 percent saying they’d feel uncomfortable consumers before business and in a fully autonomous car. From a industry audiences embraced them. perspective, there are still advances to be made in For electric and autonomous vehicles, battery range (and resistance to extreme weather due to persistent economic, technology conditions), safety protocol and consumer privacy. and infrastructure challenges, the Most critically, the infrastructure to support these near-term use cases favor commercial vehicle is underdeveloped. U.S. gas buyers. As automotive leaders invest stations outnumbered electric charging stations in strategies around electric and seven to one as of late 2018, with funding for future growth fragmented across traditional automakers, autonomous vehicles, it’s evident that startups and utilities. Furthermore, accommodating mass consumer adoption will not be a critical mass of autonomous will require the first frontier. radical urban planning to transform , signals and parking structures.

What’s Holding Solving for any of these issues depends on Back Electric and extensive coordination across the public and Autonomous private sectors. In the interim, auto manufacturers need to ensure there is demand for the new Vehicle Adoption models they bring to market. Consumer transportation habits, from the vehicles they choose to whether they own a vehicle at all, are driven by a simple need: to get from point Commercial A to point B safely, quickly and cost effectively. Opportunities Electric and autonomous vehicles do not yet satisfy these criteria. for Electric and Autonomous Vehicles As oil prices remain low, mobility options such Even as certain factors inhibit mass consumer as ride-hailing expand and average electric adoption of electric and autonomous vehicles, vehicle prices stand over $60,000 (compared to opportunity exists in niche applications of new TODAY’S BARRIERS TO VEHICLE INNOVATION WILL HURON | 2 SHAPE THE AUTO INDUSTRY OF TOMORROW vehicle technology. Auto manufacturers may find estimated, but auto manufacturers that develop a willing early adopters – and partners – in specific path forward today will be equipped to compete industries, including: tomorrow. As leaders approach the planning process, it’s critical to think beyond the current • Ride-hailing: Lyft and Uber manage multiple boundaries of your organization. Removing the initiatives aimed at achieving carbon neutrality barriers that currently inhibit widespread electric and encouraging driver adoption of electric and autonomous vehicle adoption will depend on vehicles. Through Lyft’s Green Mode pilot, the collaboration within and outside the industry. company is partnering with Avis to expand its fleet of electric vehicles that drivers can rent. This will push auto organizations to consider: By working directly with auto manufacturers, ride-hailing vendors could develop more robust • Formal partnerships: With electric and incentives to spur electric adoption and support autonomous vehicles, the technology driver recruitment. embedded throughout matters more than what’s under the hood. And while companies • Logistics: Logistics have always been a capital such as Google or Microsoft have ample and labor-intensive business. Recent trends technical expertise and resources, they are including a severe driver shortage (particularly not yet set up to handle mass production. for long-haul shipping) and significant last-mile Manufacturers may increasingly turn to joint delivery costs shrink operators’ margins further. ventures with large and specialized technology For these organizations, autonomous vehicles players alike (including those focused on lidar, could bring efficiency gains and a material batteries or vehicle-to-everything platforms) to impact on the bottom line. Supplementing future-proof their supplier networks. Advances existing fleets with driverless vehicles can in driverless systems could also encourage alleviate scheduling constraints and more collaboration between manufacturers, as expenses, providing the flexibility to manage brands such as Volvo take steps to license their deliveries around the . IP to competitors. • With nearly four in 10 consumers : • Corporate spin-offs: Major auto manufacturers expecting brands to offer free, two-day and technology companies have already shipping, autonomous vehicles could help created standalone units to oversee vehicle retailers scale and expedite their delivery , including General capabilities. Chains including Walmart and Motor’s Cruise (valued at nearly Kroger have invested in autonomous vehicle $15 billion) and Google’s Waymo (valued at pilots to transform grocery delivery, but the over $100 million). These structures, along technology could lend itself equally to apparel with existing manufacturer alliances to fund brands, restaurants and drug stores. Beyond battery and autonomous vehicle innovation, accommodating consumers’ specific orders, allow organizations to shield other areas of retailers may eventually rely on driverless operation from risk. But auto leaders need vehicles to reimagine the entire shopping a vision for what these teams will look like experience – something Toyota, 7-Eleven and five and 10 years from now. As consumer Starbucks are experimenting with in Japan. preferences and manufacturer line-ups evolve, today’s innovation units could be spun out into How to Plan fully independent brands. for the Future • New dealership use cases: Dealerships play Consumer adoption of electric and autonomous a vital role in today’s auto supply chain, vehicles may be farther out than originally with almost half of their average gross TODAY’S BARRIERS TO VEHICLE INNOVATION WILL HURON | 3 SHAPE THE AUTO INDUSTRY OF TOMORROW

revenue driven by services, parts and body shop departments. Increased electric and Key Takeaways autonomous vehicle adoption, however, To maintain and grow revenue as auto will shift maintenance needs from manufacturers’ focus shifts on electric and and oil changes to battery repair and IT autonomous vehicles, organizations should: troubleshooting. Manufacturers will need to ensure their dealer networks evolve with Think differently. their products. As more -enabled Identify specific markets that stand to benefit vehicles come to market, dealerships may from electric and autonomous vehicles in the need to borrow from Apple’s Genius Bar near term, as the infrastructure and technology model – bringing in employees of whichever behind them continue to develop. vendor owns the underlying technology to manage customer service needs. With less Plan differently. space required for service and showrooming, Consider how collaboration with non-traditional dealerships could also repurpose existing space partners, including organizations in adjacent for charging and autonomous industries or current competitors, may help fleet parking. position your organization for the future.

Hype around electric and autonomous vehicles Act differently. continues to dominate conversations across Embrace the possibility that your organization’s the auto industry. With future profitability and role in the automotive value chain may shift, shareholder value at stake, leaders need a finding ways to repurpose existing assets – or detailed vision for connecting innovation nurture new ones – to open up new markets, investments to revenue. generate revenue and manage risk.

By confronting the reality that consumers will not be the first mainstream adopters of emerging vehicle technology – and why – the auto industry can truly begin to reinvent itself. huronconsultinggroup.com

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