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Manufacturing

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Exploring future automotive trends

Fiat Group’s Fiat 500 model contains new features built on the Microsoft Auto platform

Norbert Braendli, managing director of Microsoft’s worldwide automotive and industrial equipment group, outlines six powerful business trends driving the transformation of the automotive manufacturing industry.

The combined impacts of rising energy and commodity prices, environmental issues, unprecedented worldwide demand and technology convergence are requiring automakers, suppliers and marketers to leverage technology as never before, adopting new production techniques, new classes of powertrain, new business models and new driver and passenger capabilities.

Six powerful business trends are driving the transformation of the automotive manufacturing industry. By addressing these trends successfully, manufacturers can better respond to global challenges such as today’s market uncertainty.

Trend 1: Sustainability
High oil and gas prices, urban air pollution, traffic jams and extensive media coverage of the global warming debate increase the environmental issues awareness of automotive customers.

Drastic emission regulation for vehicles will get traction in most markets within four years but automakers’ product portfolios are insufficient to meet aggregate demand for engines with low CO2/emissions rates. Zero emission vehicles are mature for volume markets but R&D partnerships are critical to the successful development of power and fuel cell technologies.

Ultimately, city cars will be shared in metro areas and integrated with urban transportation systems. They will be picked up/dropped off at any corner, much the way Zipcars are today.

Telematics will also be a critical factor in the sustainability equation for routings to reduce traffic congestion and control driver behaviour.

Trend 2: Emerging economies
The US continues to be the world’s largest and most important automotive market by far, but the Japanese auto giants and others are looking to Brazil, Russia, India and China (BRIC) as the most important emerging economies to propel growth.

Automotive original equipment manufacturers and suppliers are becoming more specialised and fragmented, requiring more nimble collaboration and coordination. Adding to the complexity, high-tech manufacturers, software suppliers and service providers are entering the automakers’ partner networks worldwide. Automakers must provide processes and architectures that allow them to be in sync with the short product lifecycles of the high-tech industry.

To compete and take advantage of this changing landscape, automotive manufacturers need global scale, but also need to execute locally. Driving profitability and decisions closer to the end consumers becomes even more important – what Microsoft terms ‘profitable proximity’.

Trend 3: Digital convergence
Automakers must support the emerging ‘digital lifestyle’ of automotive customers by connecting vehicle systems to cloud services supporting these new user lifestyles.

Dealers can get an edge by providing remote vehicle management and online consumer services. They will become global players with local partners for servicing. Location-based service will become increasingly important, as people are connected with their car to download and upload data. Remote diagnostics and over-the-air updates will maximise vehicle uptime and minimise inconvenience. As a result, warranty actions are reduced in scope or avoided and new capabilities can be bought and delivered online.

Finally, in the aftermarket, software based flexible bus architectures enable an expanded aftermarket role and more dealer-fitted options/upgrades.

Trend 4: New business models
Consumer communities that drive and influence perceptions and demands are ever more significant. Automakers can leverage these communities as well as create their own as a means to reach out to consumers directly. Automakers must use digital marketing to influence consumers and to actively observe and serve consumer demands.

Automakers must also drive recurring revenue streams and deliver more complete consumer experiences. An excellent example of this is Microsoft’s Ford Sync initiative to connect automobiles with a variety of mobile and media devices.

Additionally, there will be increased business opportunities for leisure motorsport, such as weekend track use, as leisure motoring on public roads becomes more difficult.

Trend 5: Complex regulations
Increased regulation for road vehicles – to combat congestion, to reduce environmental impact and to reduce the cost of policing through technology – will change the face of road car driving, augmenting the existing trend towards ‘green’ and the growing ‘lifestyle’ focus.

Environmental regulations also have a substantial impact on global automotive supply chain/logistics networks. The environmental impact on supply chain/logistics will enforce globalisation of warehouse networks.

Trend 6: Changing demographics
The GenY mindset is radically different from that of prior generations, and this fact will force vehicle platform change. GenY consumers have a strong interest in personalisation and preference for lifestyle support capabilities over more traditional automotive differentiators such as performance or styling.

The workforce is ageing. More than 30 per cent of the population in most markets will be elderly by 2050. It will consequently be critical for manufacturers to capture knowledge and manage that knowledge efficiently within the enterprise.

Automotive manufacturers must also embrace business transformation to attract and retain the new demographic to the workforce, from Gen-Xers to Millennials, who grew up in the new digital world. Role-based productivity capabilities that are familiar and easy to use will be critical in attracting, retaining and driving the productivity of this next-generation and increasingly global workforce.

Commitment to technology
As a leading technology vendor and trusted advisor to the automotive industry, Microsoft remains committed to helping customers meet the unprecedented challenges of these turbulent times.

The automotive industry is intrinsically capital intensive – it is wired into the DNA that you must spend money to save money. This still applies even during the current crisis. There may be a temporary cessation of spending in some areas, but the primary impact is that the threshold for ROI goes up, and the payback period down.

Times of decaying new car sales are typically a good time for automakers to consider creative ways in which they can stimulate sales, or extract more value through greater participation in other parts of the automotive value chain. Declining sales drives a greater need for vehicle servicing to extend operating life, for example.

And car IT continues to be an area of focus for most automotive customers as it offers relatively low cost ways to add innovation, capability, and differentiation to vehicle platforms and is viewed as almost essential for some new variants, for example pure electric cars.

Microsoft has a strong portfolio of solutions that can be rapidly deployed to help automakers innovate to address the challenges of today’s uncertain markets.

Additionally, although readjustments in infrastructure might be required, automotive companies need to continue to invest in their IT infrastructure to maintain efficient operations. This will cause them to focus on getting more value for money and on flexibility.

Microsoft’s Software+Services initiative is emerging at the right time to offer automakers more flexibility in terms of how they deploy and manage IT.

While technology is not a cure-all for the current crisis, Microsoft and its partners continue to help automotive companies with the IT solutions they need to realise the benefits of velocity, flexibility, interoperability and productivity at a lower total cost of ownership.


This article first appeared in the Spring 2009 issue of Prime magazine.

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