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back to index backAMERItalk September,  2016


The Auto Industry’s Real Challenge

While automakers pour millions into winning the autonomous vehicle race, they run the risk of ignoring the more imminent threats that could sink them before the technology becomes pervasive.

The past five years have been good to the auto industry. Following a cyclical downturn and a series of bankruptcies and harsh restructurings in the wake of the 2008–09 financial crisis, U.S. vehicle sales have been strong, especially for highly profitable trucks and SUVs. Globally, automobiles have grown more attractive than ever, with all kinds of exciting new technologies — impressive powertrain systems, mobile connectivity, advanced driver-assistance systems, maintenance monitoring, and the like — further exciting car buyers.

In the eyes of many in the industry, the future looks equally bright. Oil and gas prices appear likely to remain reasonably low for some time, encouraging big-margin SUV sales. The technology inside autos will continue to grow more sophisticated and affordable.

Automakers feel confident investing large sums of money in developing new features for their cars, particularly advanced safety and navigation options. Many suspect that they can make fully autonomous vehicles (AVs), machines that can drive themselves anywhere, under any traffic and weather conditions, without a human ever having to take the wheel, a reality within a relatively short time, as little as five or 10 years. That, in turn, would open huge new markets, it is hoped, as buyers — large fleets as well as individuals — flock to driverless vehicles and associated services.

There is much truth in the vision of fully autonomous vehicles. Certainly, there will come a time when commuters can relax, eat breakfast, and write emails on the way to work as their robotic taxis transport them on algorithmically chosen routes in perfect safety. But as the recent fatal crash of a Tesla in semi-autonomous mode sadly made clear, it will probably take decades, not years, for this vision to become a common reality.

In the meantime, the industry will have to navigate through a number of difficult challenges, and figure out how to take advantage of a few surprising opportunities. But few industry players are adequately prepared for — or even willing to fully acknowledge — the hurdles they must clear before AVs are able to produce real revenue.

Before prolific AVs become a reality, industry players must make huge investments in meeting tightened mpg and emissions requirements, developing new powertrains, continuing to expand in markets around the world, and developing new vehicles to feed changing transportation needs. It is not clear that all the current competitors will survive. Indeed, there’s a strong possibility that the structure of the industry could change, with automakers dis-integrating more of the vehicle’s component manufacturing or specializing in particular vehicle categories.

Clearly, in the auto industry, there is a major disconnect between expectations and reality, especially with regard to the next five to seven years. AVs will likely take considerably longer to become pervasive than is anticipated, and by that time, the industry will probably look quite different.

To read entire article, please click here.

Source: strategy+business - GAI





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