Reinventing the wheel: digital transformation in the automotive industry
Digitalization has the potential to recast how we use transportation and generate significant value for industry and society.
The smartphone, internet, and wireless and cellular communication are giving us an unending supply of conveniences and services. We expect the car to bring us the same. Now it’s happening.
Connected and empowered consumers see the vehicle not as a product to buy; rather, transportation is a mobility experience that might take them to their destination in a single vehicle or via multiple forms of transport.
Assisted driving and self-driving technology means cars can park themselves and cruise hands-free on highways. We are approaching a time when there may no longer be ‘drivers’. We will all be travellers using various forms of transportation that will be part of a seamless connected continuum, coasting on roads that could be congestion-free.
Key segments, traditional peers and new entrants in the automotive industry
Note: Most of the new entrants do not have a significant scale of business and the level of available financial reporting to be quantitatively represented in the profit pools
Source: Accenture Analysis
We have identified three key digital themes driving this change in value throughout the industry:
Digitizing the enterprise / ecosystem
Calculating the value of digitalization in the automotive industry
Our value-at-stake analysis is a quantitative model that aims to assess the cumulative value impact over the next 10 years of digital transformation initiatives on the automotive industry, its customers, society and the environment.
Our analysis indicates that there is $0.67 trillion of value at stake for automotive players and a further $3.1 trillion of societal benefits as a result of digital transformation until 2025.
Automotive: value at stake for industry and society (2016-2025, by digital initiative)
Source: World Economic Forum / Accenture analysis
Key findings from our value-at-stake analysis include:
The customer journey
The customer journey happens across multiple channels, with consumers increasingly expecting a seamless omnichannel experience. We have identified four areas: the multichannel customer journey, next-generation servicing, transformed aftermarket and digital dealerships in which digital disruption will put $263 billion of value at stake for the industry.
Data-driven services, made up of infotainment, predictive maintenance and the data marketplace, offer a $117 billion upside to the industry through connectivity with the consumer and the vehicle. However, there will be losers in this equation as dealers and independents lose profits from disintermediation.
New business models
As nontraditional players such as Google and Uber attempt to drive market disruption, we estimate approximately $144 billion will be at stake for the industry over the next 10 years with the emergence of new business models linked to self-driving vehicles and multimodal integration. The magnitude of impact should be significantly higher beyond 2025 when technology development allows for mass adoption to occur.
The greatest impact to the auto industry will come from societal benefits such as reduced costs of vehicle ownership, lower premiums, reduced crash costs, reduced maintenance costs, fuel savings and lower carbon emissions. We estimate this to approximately add as much as $3.1 trillion of value and save 1.2 million lives over the next 10 years. There will be approximately 540 million metric tons in potential emission reductions over the next 10 years from all initiatives combined. This is against a global backdrop of nearly 37 billion tonnes of annual emissions. The societal impact is largely driven by three initiatives:
Automation and connectivity of driving
We predict greater than $1 trillion in economic benefits to consumers and society from reduced accidents and lower insurance premiums by making vehicles safer.
We estimate an aggregate benefit of $975 billion over the next 10 years to consumers. Consumers with low utilization of private vehicles will give up car ownership for cheaper multimodal solutions. We estimate that there will be up to 11% of annual potential vehicle sales impacted by 2025. Consumers will not just save on the cost of ownership but also realize time savings in situations where they do not drive themselves. In addition, $274 billion of societal impact is driven through time savings, reduced congestion, fewer crashes and lower emissions.
Case study: UbiGo – multimodal integration in Gothenburg
In Gothenburg, Sweden, 70 paying households have been using a service called UbiGo.¹ The single smartphone app provides access to public transit, car sharing, rental cars, taxis and bicycles. People get a single invoice and receive discounts when they use sustainable modes. Early results for this pilot programme are promising. The vast majority of participants want to remain UbiGo customers. To make this concept a reality, a variety of players had to come together to create the infrastructure and build the range of services provided. Key partners are AB Volvo, Ericsson and the Viktoria Institute.
Incentivizing better driving behaviour has the potential to generate $381 billion in economic benefits to consumers and society from reduced premiums and fewer crashes. Over the next 10 years, 158,000 lives could potentially be saved as one could expect up to 5% decline in potential road accidents by 2025 due to better driving practices.
Industry stakeholders should take notice and come together to prioritize digital transformation initiatives given the potential for four times more value to be created for society than for industry.
The road to digital transformation
Digital can break the mould of the automotive value chain as it creates greater efficiencies and cost savings. New platforms and data can accelerate and amplify the impact of digital technologies. Already, these shifts are disrupting business models for existing players, forcing them to fundamentally reconsider their businesses.
Digital can also bring societal benefits. A driver in Moscow, Istanbul, Mexico City or Rio de Janeiro wastes more than 100 hours a year in congested traffic.² Each year, road accidents cost $518 billion³ and claim 1.25 million lives around the world.⁴ Globally, air pollution from transportation causes more than 200,000 premature deaths a year⁵ and approximately 30% of the carbon dioxide (CO2) emissions behind climate change.⁶ Digitalization has the potential to reduce many of these costs.
To change at the pace of digital, players across the value chain must think about their structure, employee skills, hiring practices, how they collect and analyse data, and how they form partnerships inside and outside the ecosystem.
1 Ubigo, About
2 Tomtom, Measuring congestion worldwide [table and scatter chart]
3 Association for Safe International Road Travel, Annual global and US road crash statistics
4 World Health Organization, Global status report on road safety, 2015
5 World Bank, “Taking on the rising death toll from traffic and pollution”, 31 March 2014
6 UNECE, Climate change and sustainable transport