Addressing the Shifts in the Industry

Many in our industry think we are exploring uncharted territories as we venture into the next decade.

This is a decade surely to include greater levels of electrification due to emissions compliance, autonomous driving/active safety and light-weighting to enhance vehicle efficiency. Uncharted?

Possibly, but at least expected. The OPEC oil crisis of 1973 and the financial meltdown of 2008-2009 were unexpected events which many were not prepared for. At least our industry has visibility to the looming structural shifts with the ability to integrate strategies into their business plans without the surprises that other changes have come with. 

Are we unjustly ringing the alarm bell? Likely not. Let’s go stronger and answer that: “No.” One German OEM recently drove home the urgency of the future by noting that profits will continue to be under pressure due to a bevy of investments in alternative propulsion, connectivity, light-weighting and shared mobility—the new Big 4. This underscores what we’ve been noting for some time. Our industry will have to grapple with capping vehicle costs in an era of advanced driver assistance systems (ADAS), light-weighting and alternative propulsion expansion to maintain affordability. This will be our industry’s most significant challenge.

As a backdrop, those who understand and grasp this challenge will succeed. Those still reveling in the “this will not impact my business” mantra will be sadly mistaken. Virtually every vehicle system is impacted by the shifts of the next decade. Case in point: Vehicle bodies will integrate new materials and joining methods to reduce mass and lower the center of gravity–driving new investments in body shops, presses, employee training and upstream supply chains. 

Other systems such as chassis/suspension will be faced with the need to be lighter and more integrated within the vehicle to optimize ride quality and efficiency. Other systems such as braking and steering will need to continue to journey to a by-wire environment as vehicle autonomy and the changing complexion of propulsion systems engineer out older structures. That same shift will greatly impact fuel systems as electrification accelerates and changes its role in the vehicle. The reduced role of the internal combustion engine also drives changes in HVAC systems–toward a heat pump structure that will not only have to maintain a comfortable climate in the cabin but also regulate the temperature of new systems such as LIDAR and other sensors. The impact on interiors is already apparent. The valued real estate in the instrument panel and center console is being reallocated toward an “information portal,” increased storage convenience and integration into the “driving experience.” Banks of buttons and switches will give way to new interfaces as vehicle autonomy takes over.

Last but not least are the electrical backbone and electronics. The integration of 48-volt systems, increased levels of ADAS and the goal of increased optimization/communication within the vehicle will usher tremendous shifts. On its own, 48-volt opens several new avenues for components to shift to a more efficient environment. Additionally, the past few years we have witnessed several new innovations which were essentially “tacked on” the vehicle. This includes forward collision mitigation, lane departure, vehicle-to-vehicle communication (V2V), and other ADAS and convenience content.

Each of these systems cannot have its own control structure, so those companies that are able to optimize across these systems will benefit.

Suppliers of all tiers and capabilities will need to react to the onslaught of changes already underway. A proactive view of how your area may change, the shifting profit pools and decision structures, as well as adapting to the new economics of our industry, will be critical. Assuming the status quo will remain is possibly the worst strategy. In an era of risk mitigation, thinking outside the box toward increased vertical integration, an enhanced systems posture to increase value-add, and the possibility of joint ventures and alliances to fill holes in a given company’s portfolio will be the preferred route.