How Automakers are Navigating Digital Transformation

Automotive digital transformation refers to the significant changes and adaptations that have taken place in the global automotive industry owing to greater adoption of digital technologies like Artificial Intelligence, Internet of Things (IoT). Blockchain, 5G Networks, and High Performance Computing (HPC).  

These technologies have impacted various aspects of the industry, like supply chain, manufacturing, sales and customer experience. For example, digital supply chain tools like RFID connected devices and sensors enable suppliers, manufacturers and distributors to track automobile components in real-time. If a component goes missing, the sensors immediately alert suppliers and manufacturers, thus preventing production delays.  

Similarly, digital technologies boost sales through virtual showrooms, through user-friendly sites that make booking a test drive, or purchasing a vehicle as easy as ordering a pizza online. 

Pre-Covid Trends in Automotive Digital Transformation

While digital adoption took a significant jump post Covid, the adoption kicked in much earlier. Among the foremost trends we saw was the shift towards electric vehicles (EVs). Driven by technological advancements, a global shift in mindset towards environmental sustainability, and changing consumer preferences led automakers to invest in EV technology, charging infrastructure, and battery advancements.  

Surge in EV sales 

For instance, by end of 2019, the global electric car fleet exceeded 7.2 million units, marking an increase of 40% from the previous year. The pandemic only further heightened the environmental concerns, and except for a brief, one-third drop in sales, the industry saw stronger activity in the second half of the year (2020). 

Autonomous vehicles 

A second trend we saw was an acceleration in research and development efforts for autonomous vehicles. Automakers invested heavily in safety measures by establishing rigorous testing protocols that combine simulations and real-world scenarios, they collaborated with regulators to align AV development with evolving rules, and made efforts to get public buy-in, by focusing on robust safety features, and attempting to bring more clarity in legal and ethical aspects like who will be responsible in the event of an accident involving an autonomous vehicle. 

Personalisation in consumer vehicles 

A third we could see was consumers wanting more personalisation in terms of vehicle design. In turn, automotives offered these personalisations in the form of letting buyers choose colors, trims and accessories, tech features like heated steering wheels and panoramic sunroof, and services like concierge assistance and remote diagnostics. 

Increased cooperation between OEMs 

Lastly, pre-Covid there was a growth in online traffic and increased cooperation among original equipment manufacturers (OEMs) and partners. On the first front, consumers started increasingly turning to digital channels for car-related activities, and virtual showrooms, online configurators, and test drive bookings became popular. On the other hand, automakers realised the power of collaboration, and joined hands with suppliers, tech companies and mobility providers to tackle challenges like EV development, autonomous driving, and shared mobility solutions. 

Digital Adoption Trends Post-Covid 

Post Covid, the industry witnessed a seismic shift in digital transformation. Automakers embraced agility to navigate uncertainty. They rethought strategies, focusing on people, processes, and technology. For example, OEMs shifted from one-time sales to recurring revenue models like subscriptions. The pandemic further accelerated the move towards online channels. Automakers placed customer experience at the heart of their strategies. Lastly, there was a notable focus on using data analytics for scalability, agility, and deriving actionable insights. Automakers used data to tighten supply chains and implement cost control measures. 

Let’s go into more detail and look at specific transitions that took place post-Covid in the industry. 

CASE technologies 

The automotive industry started going through a big change because of Connected, Autonomous, Shared, and Electrified (CASE) technologies. For example, automakers started investing in vehicle connectivity technologies like telematics and vehicle infotainment systems. They also invested in sensor technology, machine learning, mapping infrastructure and the like. Today, these technologies are changing how cars connect, drive autonomously, and use electricity. Tesla’s vehicles, for instance, are equipped with suite of sensors, including cameras, radar, ultrasonic sensors, and GPS. These sensors continuously collect data about the vehicle’s surroundings, road conditions, and traffic, and arrive at informed decisions. 

Semiconductor and chip shortages 

Secondly, the pandemic has showed that global supply chains can have problems. Two of the major challenges we’ve seen (and written about in our earlier blogs), are component and semiconductor chip shortages). This made automotive companies rethink where they get their parts from. They now use digital tools like supply chain analytics and real-time tracking to be more resilient and agile. They’re also working with more suppliers, using digital platforms to buy components, and making sure they can see everything that happens in their supply chain in real-time. 

Remote and Hybrid work cultures 

During Covid, automotives had to start letting their employees work from home, so they quickly started using tools for virtual collaboration and secured remote access to work systems. Today, this helps them work better and collaborate more even when their teams are in different places. 

What we also saw was that fewer consumers went to car dealerships. So, automotives started focusing on selling cars online. They made virtual showrooms and delivered cars without contact. Additionally, they started using digital tools to offer customers enhanced experiences. They developed personalised marketing strategies tailored to individual preferences, making the car-buying process more engaging.  

Virtual test drives allowed customers to experience the feel of a vehicle from their homes, providing a convenient and safe alternative to traditional test drives. These innovations not only addressed the challenges posed by the pandemic but also reflected a broader shift towards digitalisation in the automotive industry.

A Merit expert says, “The automotive industry today requires a customer-centric approach more than ever. With consumer behaviors and preferences evolving rapidly, companies must prioritise delivering exceptional experiences that meet the needs and expectations of their customers.” 

Adoption of data analytics and machine learning 

There was a obvious and significant increase in adoption of data analytics, machine learning and AI tools to make smarter and quicker decisions. Automotives started using data to predict when cars need maintenance, to forecast production numbers, and create personalised marketing campaigns. They invested in good data systems and hired people who know how to use data well. 

Electric vehicles 

While there was already a good demand for electric vehicles, sales peaked during and post-pandemic as consumers and Governments stressed more on the importance of environmental sustainability. Like we said earlier, in 2019, global electric car fleet touched 7.2 million. Post pandemic, in 2022 and 2023, the numbers shot up to 26 million.  

As cars get more connected to the internet, there are more risks of cyberattacks. Companies are working hard to make cars safe from hackers. They’re also making sure cars can get updates over the internet without being hacked. Keeping cars safe while still being connected is a big challenge. 

Automotive Digital Transformation today 

In the current scenario, sustainability, e-commerce, and connected ecosystems continue to dominate the automotive landscape. Automakers are intensifying their efforts in developing connected vehicle features, advancing electrification, and pushing the boundaries of autonomous driving technologies. This strategic focus reflects a need to meet evolving consumer demands for environmentally friendly options and seamless digital experiences. 

Geopolitical supply chain disruptions 

However, the industry is not without its challenges. Geopolitical tensions, supply chain disruptions, and shifting consumer expectations present significant hurdles. Navigating this complex landscape demands agility and resilience from automotive companies as they strive to adapt to unpredictable global conditions while maintaining operational efficiency. 

Customer-centric approach 

The automotive industry today requires a customer-centric approach more than ever. With consumer behaviors and preferences evolving rapidly, companies must prioritise delivering exceptional experiences that meet the needs and expectations of their customers. Embracing flexibility, innovation, and a relentless dedication to customer satisfaction will be essential in shaping the future success of automotive businesses in this dynamic environment. 

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.

Key Takeaways 

1. Digital Transformation Focus: Automotive companies are doubling down on digital technologies like connected vehicle features, electrification, and autonomous driving to meet consumer demands and enhance competitiveness. 

2. Challenges Ahead: Despite strides in technology, the industry grapples with geopolitical tensions, supply chain disruptions, and evolving consumer expectations, necessitating agility and resilience in operations. 

3. Customer-Centric Approach: Amidst rapidly changing consumer preferences, automotive firms must prioritise exceptional customer experiences to sustain relevance and drive success. 

4. Embracing Flexibility and Innovation: Navigating the complex automotive landscape requires a commitment to flexibility and innovation, enabling adaptation to dynamic market conditions and fostering growth opportunities. 

5. Sustainability and Digital Integration: Sustainability, e-commerce, and connected ecosystems emerge as pivotal drivers, highlighting the imperative for environmental responsibility and seamless digital integration to shape the industry’s future.