Industry on verge of digital revolution

Technology expected to reshape mobility trends

With its emerging "Industry 4.0" and "Internet+" concepts, China's manufacturing industry is on the threshold of industrial revolution.

"Automotive 4.0" is more than just a buzzword as it has many implications along the value chain beyond manufacturing, including electrification, car sharing, connectivity, digitalization of the sales process and autonomous driving.

In China this is further driven by growing concern about air pollution, high demand for connectivity (as can be seen from tremendous iPhone 6 demand) and faster execution of the "Internet of Things", together with e-commerce and logistics.

New players, including tech giants, tech start-ups and even start-up original equipment manufacturers, such as Alibaba, Baidu, LeTV and Didi, have been rushing into the automotive value chain with innovative business models and game-changing technologies. The entry of these players is enabled by the introduction of new technologies including connected cars, automated cars, new propulsion systems and new materials.

A complete online to offline auto e-commerce ecosystem has gradually begun to take shape and companies such as Autohome and Cheyian have tapped into the automotive O2O market. Furthermore, Didi, after transforming the taxi service industry, is also paying attention to the car pooling/sharing market, and to the Car2Go service launched by Daimler.

Newcomers, especially from the IT industry, are more flexible to lead changes in the industry. OEMs, such as BMW, recently started to set up separate teams for IT in both R&D and production departments to manage software release decoupled from the longer cycle R&D process.

In China, we already see automotive OEMs investing heavily in new technologies and business model transformation. SAIC Motor joined forces with e-commerce giant Alibaba Group to invest 1 billion yuan ($160 million) in a fund to develop Internet-connected cars. Other OEMs, such as BAIC, Geely and Cheery, are also initiating "connected car" and other innovation projects.

To realize the future blueprint of Automotive 4.0, there are more than a dozen major trends currently developing and helping shape the industry. While some might change just a small portion of the automotive value chain, others (alone or together) could have a much broader impact.

We identified 14 of the most prominent trends surrounding the global automotive industry. Most of the major trends, even though they would impact the industry, are not disruptive.

The automotive retail process is being transformed significantly. One example is solutions offered by salesforce.com providing a cloud based CRM sales tool. The Audi City showroom is a good example of the digitalization of the sales process. Especially in China, we can expect major changes, combined with an already challenging retail profit situation at most dealerships.

Shared mobility, automated driving and connectivity are the key trends that will change both technology and the value chain dramatically. Whereas China may follow overseas technology to introduce automated driving, shared mobility and connectivity may be employed faster.

Shared auto world

Considering China's status quo, shared mobility is most promising in the foreseeable future and has the power to reshape the entire automotive industry and the concepts of automotive ownership and mobility as we know them .

Companies such as Didi, Uber and PP allow consumers to use shared vehicles and to share rides.

This trend will be greatly accelerated through automated driving as it removes the driver, thereby dramatically reducing the cost of using shared mobility. However, great uncertainty remains around the rate of adoption and usage of mobility-on-demand services, and the regulation environment.