The global automotive industry is facing a number of challenges today. Starting with the impact of COVID-19 on the industry, to the challenges arising from the gradual shift towards electric mobility, there is pressure on automakers to adapt.
In this blog, we investigate these challenges and understand how technology can help tackle them. We touch upon how artificial intelligence, machine learning, and big data analytics can aid in improving efficiency, reducing costs, and bridging the gap between the consumer, the environment, and the automotive industry.
4 Key Challenges Plaguing the Global Automotive Sector
The foremost challenge is the COVID-19 pandemic, which has had a significant impact on the global automotive industry. The pandemic disrupted supply chains and production schedules, leading to a shortage of parts and components. This has resulted in a decline in vehicle production and sales. According to a report by McKinsey, global auto sales are expected to decline by 20 to 25 percent from pre-pandemic forecasts in a virus-contained scenario. The pandemic has also led to a decrease in consumer purchasing power, which has further impacted the industry.
The second challenge is the shift towards electric mobility. Governments around the world are pushing for a transition to electric vehicles to reduce carbon emissions and improve air quality. This has put pressure on traditional automakers to adapt and invest in electric vehicle technology. According to the International Energy Agency, global electric car sales defied the COVID-19 pandemic in 2020, reaching a record 3 million units sold. In 2023, these numbers (for fully electric and hybrid vehicles) rose 31%.
A Merit expert adds, “While there is demand from the Government and consumers, the transition to electric mobility is not without its challenges. The lack of charging infrastructure and high battery costs are some issues that need to be addressed for this segment to scale further.”
Reducing carbon emissions and increasing fuel efficiency is a third challenge faced by the global automotive industry. Governments around the world are implementing stricter emission regulations to reduce the environmental impact of vehicles. This has put pressure on automakers to develop more fuel-efficient vehicles. In the UK, for instance, the Government has implemented a zero emission vehicle mandate to promote the transition to electric vehicles. The mandate requires 80% of new cars and 70% of new vans sold in Great Britain to be zero emission by 2030, increasing to 100% by 2035. This is the most ambitious regulatory framework for the switch to electric vehicles of any country in the world. The mandate is backed by over £2 billion already invested by the government to expand charging infrastructure and incentivize zero-emission vehicles. It also provides certainty to support the economy, industry, and families and is the largest carbon-saving measure in the government’s net-zero strategy.
Finally, new entrants like Tesla are disrupting the industry with innovative technologies and business models. Tesla’s electric vehicles have gained popularity due to their performance, range, and sustainability. The company’s business model of selling directly to consumers has also disrupted the traditional dealership model. Other companies like Waymo and Uber are also investing in autonomous driving technology, which could further disrupt the industry.
3 Ways Tech Can Play A Crucial Role In Boosting Auto Industry
The auto industry has always been at the forefront of technological innovation. So, it is possible for automakers to address these current challenges by leveraging technologies like AI, machine learning, digital twins, and blockchain. Here’s how.
Technology can help the auto industry adapt to the COVID-19 pandemic by enabling remote work and virtual collaboration. Automakers can use virtual reality (VR) and augmented reality (AR) to conduct virtual design reviews and remote training sessions. When it comes to optimising supply chain and improving production processes, AI & ML can play a crucial role in this space. For instance, Peak, an AI company, has been helping automakers optimise their supply chain by leveraging AI in numerous areas, from assisting with vehicle assembly to handling automation of repetitive tasks during and post production. AI can also be useful in identifying defects and potential issues beforehand.
To address the Government’s push for electric vehicles and reduced carbon emissions, automakers can use AI and ML to develop more fuel-efficient vehicles and optimise battery performance. Additionally, they can use digital twin technology to simulate and test new vehicle designs, which can help reduce the time and cost of developing new vehicles. For instance, Google’s new feature for electric vehicles leverages AI to identify the most suitable EV station and optimal route to reach there, thus providing enhanced convenience and efficiency to drivers. AI and ML are also being used to improve performance and longevity of EV batteries. For example, simulation-based design optimisation of the battery pack, and Battery Management System (BMS) is evolving to include AI & ML in improving design, manufacturing and operations.
Lastly, technology can help automakers compete with new entrants like Tesla by enabling them to develop new business models and revenue streams. For instance, automakers can use AI and ML to develop new mobility services, such as ride-sharing and car-sharing, which can help diversify their revenue stream. Additionally, automakers can use blockchain technology to create secure and transparent supply chains, which can help build trust with consumers.
Merit’s Expertise in Data Aggregation & Harvesting for the Global Automotive Sector
Merit Data and Technology excels in aggregating and harvesting automotive data using AI, ML, and human expertise. Our capabilities include:
- Crafting end-to-end data pipelines and scalable data warehouses
- Designing compliant governance solutions for seamless integration
- Utilising high-volume, high-velocity data tools for nuanced insights
- Extracting retail product attributes and audience data
- Aggregating industry-specific data points for informed decision-making
Trusted by leading automotive brands, Merit drives innovation and efficiency by delivering refined, actionable insights.
- Adapting to the New Normal with Technology: The COVID-19 pandemic has disrupted the automotive industry, affecting supply chains and consumer purchasing power. Leveraging technologies like virtual reality (VR) and augmented reality (AR) for remote work, along with AI and ML for supply chain optimization, can help automakers navigate the challenges posed by the pandemic.
- Electric Mobility Transition Supported by Technology: The global shift towards electric mobility demands innovation from traditional automakers. AI and ML play a crucial role in developing fuel-efficient vehicles, optimizing battery performance, and expediting the design process through digital twin technology. Smart applications, such as AI-powered route planning for electric vehicles, contribute to the seamless adoption of electric mobility.
- Addressing Environmental Regulations with Advanced Technologies: Stricter emission regulations worldwide necessitate advancements in fuel efficiency. The UK’s zero-emission vehicle mandate is an example of government initiatives driving the transition to electric vehicles. Technologies like AI, ML, and digital twin can assist automakers in meeting these regulations, ensuring compliance and sustainability.
- Competition and Innovation in the Industry: New entrants like Tesla challenge traditional automotive models with innovative technologies and direct-to-consumer sales. To stay competitive, automakers can utilize AI and ML to develop new business models, including mobility services like ride-sharing and car-sharing. Blockchain technology can enhance supply chain transparency, building trust with consumers and adapting to the evolving landscape of the automotive industry.
Related Case Studies
Automotive Data Aggregation Using Cutting Edge Tech Tools
An award-winning automotive client whose product allows the valuation of vehicles anywhere in the world and tracks millions of price points and specification details across a large range of vehicles.
A Hybrid Solution for Automotive Data Processing at Scale
Automotive products needed millions of price points and specification details to be tracked for a large range of vehicles.