If the automotive industry is poised to see more change in the next five years than it has in the past 50, what sort of future are we looking at 20 years down the line? There’s no crystal ball, but the trends at work today suggest a clear direction towards a shared economy and smart technology.
Antonio Ferreira, Founder and Chief Executive of Lisbon, Portugal-headquartered automotive digital content start-up MiMotive, recently shared with Megatrends his view of a future transport industry. Cars will look different 20 years hence, as will the business models supporting them. The roster of successful companies and brands could be very different – and for existing players to give future consumers what they want, Ferreira believes there’s a need for drastic change.
The infotainment-powered car of the future
What the vehicle itself looks like in 20 years’ time depends entirely on consumer preferences, and they are demanding very specific things. “The car will definitely be different from what we have now, mainly driven by what younger consumers want,” he predicted. “Consumers are demanding more based on their lifestyles, and that will change the way the vehicle is going to look.” Notably, vehicles will have to incorporate considerably more technological content, connectivity and advanced driver assistance systems (ADAS) than they currently do.
The car will definitely be different from what we have now, mainly driven by what younger consumers want. Consumers are demanding more based on their lifestyles, and that will change the way the vehicle is going to look
At the heart of the development is a change in value proposition, away from the car as an object and towards transport as a service. Just a decade ago, obtaining a driving licence and that first car meant freedom. Now, pointed out Ferreira, “younger consumers are happy to swap the driving experience and the driving freedom for infotainment addiction. They would rather have infotainment within the vehicle and absorb that entertainment, than the driving pleasure, or just the freedom of moving from A to B. That will drive the development of the vehicle itself.”
What will propel the vehicle will also change, with a move not just away from gasoline and diesel but also electricity. Ferreira expects to see a broader lifecycle outlook with better informed consumers and greater transparency. “Everything will be very transparent. Consumers will base their decisions on information, not just on marketing. When consumers start taking into account the complete lifecycle, opinions are going to change very dramatically,” he predicted. For example, he believes that this lifecycle outlook will turn opinion on electric vehicles (EVs), currently presented as an eco-friendly solution. “The consumer has to be informed where the energy comes from. On that data, I’m not sure if EVs have the same bright future that they have now. Much depends on battery technology and that will develop, but long term there has to be a better solution.” Power cells or hydrogen could fit the bill, he suggested, though he admitted that these also have their drawbacks. “It all depends on the energy and product lifecycle and what energy has the best benefits,” he emphasised.
Who’s at the wheel?
Technological developments are steadily leading towards a future where the car handles much of the driving functions – but how much? “From a hardware perspective, we are not that far away from full autonomy,” said Ferreira. “From a software perspective, there will be many developments, especially from a fusion perspective, but we are not really far away.” However, legislation and regulations could prove trickier. “They are going to delay it, especially in Europe,” he said.”From that perspective, we’re going to suffer significant delays that are not going to match with the technology we have at the moment.”
As for consumer acceptance, this is likely to vary by generation. “For the older generation, it’s going to be much harder to give away that control to something that is autonomous. For the younger generation, it will be easier because it allows them to be more efficient and they see mobility as a service rather than a pleasure,” he commented. Overall, though, he sees automation as a slow but inevitable process: “It’s going to be much more autonomous. It will happen step by step, not overnight.”
Safe and secure?
With technology improving every day, some industry players are aiming for a target of zero road deaths. But is Vision Zero possible in 20 years? “I think it can be achieved, but it’s not going to be easy.” Autonomous vehicles ask almost as many new questions as they answer, and nobody knows how the moral dilemmas will be resolved. If a computer is making all the decisions in a car, how does it decide what to do in a situation where it either protects the driver or protects the pedestrian? “It’s not an easy answer, and who is going to programme that software to make that decision? At the end of the day, it’s more a right and wrong perspective, and how are we going to reach that?”
At the same time, hacking poses many new safety concerns. “Cyber security is one of the major automotive weaknesses we have at the moment,” said Ferreira. “That’s why we’re seeing so many start-up companies showing up in our area. We’re talking hundreds and hundreds of start-ups, some of which are attracting investment from the bigger players because simply no-one knows how to deal with it. There’s no real solution to this issue.”
Even 20 years down the line, Ferreira doesn’t see a complete solution to the risk of hacking. “Look at banking, at telecommunications – hacking is happening every day,” he said. “Cars are not going to be any different. There will be more niches within the automotive industry and cyber security is going to be a major niche.”
From cars to transport
With legislation likely to delay the arrival of self-driving vehicles, the greatest change in the next 20 years could come in the form of the ownership model. “The future of the vehicle is all about transportation rather than car ownership, as we have it these days. There is no future for personal vehicles, especially in cities,” predicted Ferreira. “Modern cities simply cannot afford that.”
20 years ago branding depended on the hardware, the type of engine, how the car sounded and felt. These days, branding is more of a design thing, a feeling that can be easily adjusted by software
The industry of the future will be all about transportation as a cycle, starting with a pick-up point and ending with a drop-off location. Today, he estimates that about 90% of the journey works well, using trains, buses, etc. “The difficult part is the first mile and the last mile, the first 5% of the trip and the last 5% of the trip,” he warned. “In the long term, there is not going to be one perfect solution for the complete transportation cycle. That’s why we have niche services like Uber that have been successful because they focus on that last mile.”
While rural areas may prove an exception, the overall trend is moving decidedly away from personal ownership. “There might be very small niches where cars can be applied, like ride sharing, but the premise of car ownership – of me personally driving or owning my car – is going to disappear very quickly in city driving.”
What does that mean for the automotive industry? “It means reduced sales and reduced production. 20 years down the line, there’s no way there can be as much production because one vehicle can be shared among three or four consumers,” cautioned Ferreira.
Brand loyalty – what’s that?
With the ownership model turned on its head, OEMs will need to scramble to retain some sense of brand loyalty. But then again, brand loyalty is already in the midst of an evolution. “Brand is very much a different thing to what it was a few years ago for cars,” suggested Ferreira. “20 years ago branding depended on the hardware, the type of engine, how the car sounded and felt. These days, branding is more of a design thing, a feeling that can be easily adjusted by software.” He points to the trend of platform sharing across brands by larger OEM Groups, such as VW Group, where small adjustments are made within the interior or software. “It’s going to be a lot more related to the software, to what the consumer uses every day rather than the hardware itself,” he emphasised.
In the future, we will see vehicle manufacturers move away from manufacturing, focus more on the brand and introduce themselves as a service
The vehicle brands that will survive these changes are the ones that will develop a different perspective of brand loyalty. “There are going to be more and more owners of code and owners of software rather than owners of hardware. We’ve seen that already, and manufacturers are giving more and more responsibility to system suppliers. They’re moving into branding rather than building cars themselves,” Ferreira said. “In the future, we will see vehicle manufacturers move away from manufacturing, focus more on the brand and introduce themselves as a service.”
It’s time for drastic change
And the big money makers in this scenario? “Not the hardware, not the manufacturing. It is coming from the service providers – either the owners of the brand or whoever provides that service of transportation.”
It’s reached the point where there has to be drastic change, because it’s what consumers are demanding
Along the way, some brands will disappear. “There’s simply no room for so many brands, especially when external players outside of the automotive market come into play; they are going to gain some market share as well,” he warned.
At the moment, the rate of change is faster than it has ever been. “The automotive industry has never worked in revolutions; over the last 110 years, it’s always been a case of evolution,” Ferreira observed. “Now it’s reached the point where there has to be drastic change, because it’s what consumers are demanding.”
This article appeared in the Q2 2016 issue of Automotive Megatrends Magazine. Follow this link to download the full issue.