Digitization of Automobile Sector

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TOPIC: General Studies 3

• Industry

In News: The coronavirus pandemic and the subsequent lockdown put the brakes on the growth of the Indian automobile industry. 

• India’s automobile industry, the fourth largest in the world by volume, seems headed for another year of significant declines. Sales of passenger vehicles have been particularly hard hit, and recorded zero growth in April this year while a month earlier in March it was down 52 percent. 
• Counterpoint Research expects the nation’s auto industry to decline by at least 25 percent in all categories in 2020. A report by Fitch Solutions states that vehicle production in India is likely to contract by 8.3 percent in 2020, following an estimated 13.2 per cent decline in 2019.
• The industry, which moves in sync with the country’s economy, has been fraught by idle capacity, low demand, and high cost of production. And, the coronavirus pandemic has pushed it further.

The pandemic has brought to the forefront an opportunity for rapid adoption of digitisation in the passenger vehicle segment, putting the focus on a contactless environment.

Automobile and component manufacturers will have to finalise a well-thought-out strategy and a roadmap that leverages Industry 4.0 interventions to regain stability, remain competitive in the medium- to long-term, and become the auto factory of the future. Automotive shopfloors are expected to evolve and adopt digital technologies post Covid-19, said an EY India report.

Digitization of automobiles is gradually becoming the ‘new normal’

Digitization is set to enhance efficiency, reduce costs and spark innovation throughout the automotive industry.

Digitalisation of the retail channel is emerging as a key channel; this is how vehicles will sold or bought in the near future. This envisions a scenario where the buyer of a car could go through a process with minimal human interaction and maximum digital tasks. 

Coronavirus is expected to create a physical contactless environment with an increased thrust on online assessment and buying of vehicles. This is a huge shift as the purchase of vehicle is a strong-involvement, high-investment decision with deep-rooted human behaviour regarding touch and feel.

The new-normal initiatives to be adopted might include virtual tour, contactless home test drive, car and employee hygiene, and a customer safety kit. Home test drives is a concept where the vehicle comes to the consumer location rather than the individual going to the dealer’s place.

An omnichannel approach: The increased thrust towards digitisation does not mean that the entire realm of buying and selling cars will go digital. The shift will be towards a phygital world where online and offline co-exist. Auto giant Toyota has joined forces with some digital transformation companies to create an augmented reality system that requires no mobile application at all and enables consumers to get to know the car models without even requiring setting foot in the brand showroom. Using VR capabilities, auto companies can allow consumers to see inside and outside of their potential new model, as well as hear authentic sound effects with 360 degrees.

Heightened Digitalization of Vehicles: From high-quality infotainment systems for passengers to assisted driving and parking with payment from the dashboard. This level of digitalization has the potential to recast how people use transportation and how businesses generate value for industry and society.

Predictive Maintenance: Predictive maintenance has strong results which include improvements of more than 30 percent in uptime and predicting failure 30 days in advance with an accuracy rate of 90 percent.

Advanced Security: Using data-driven decisions for driving vehicles safely is making significant uptick in the automotive market growth. It is being done with the collection of data about drivers, their destinations, routes, traffic patterns and more by smart vehicles. This data collected then is used to communicate with and engage drivers in order to alert drivers regarding safety issues. On the other hand, concern over data theft is also a major challenge in the automotive industry. Hence, to ensure the security of drivers’ data, manufacturers need to make data security a major priority. And the latest models of the vehicle manufactured boast innovative technology that can meet that security needs.

The future looks like…

The current stress on liquidity and factory operations due to the disruption caused by COVID-19 will most certainly accelerate the digitization of shop floors and enable auto manufacturers to become proactive, agile, flexible and adaptive. Each auto manufacturer would need to immediately undertake a stage wise approach to achieve digital maturity at a faster pace.

The emergence of ride-hailing apps, a rising preference for not owning cars but getting them on an on-demand basis, advances in autonomous vehicles, and the advent of a contactless environment is likely to give a further fillip to adoption of a digital platform.

Take cue from data: The huge amount of data they possess can be ued as a central asset. Insights from this data will help in improving operational performance. The key to achieve this is by doing all the right things to increase the pace of digitisation.

• Digitisation is likely to help OEMs and auto component manufacturers extract data to help them study the past events and improve their productivity. 
• The data can also be used for gathering insights that can be leveraged to make smarter decisions and predict future events. It would also help the shop-floors to remain functional in such crisis situations, where dependency on manpower has been a challenge. 
• Digitisation may also address the strategic imperatives like, preparing for volatility and variables, reinventing manufacturing and supply chain, and evolving the workplace models to attract talent.

Set-up a Crisis Response team: The industry also need to set-up a Crisis Response team and perform the complete assessment of the impact on critical plant functions. 

• Mitigation strategies need to be activated for immediate response in the next two to three years. 
• A Digital Response Center (DRC) may be set-up to collaborate with this team to facilitate the execution of the interventions required for immediate response through technology. 
• The DRC will embark on a sustained digital journey to achieve stability, resilience and growth in the next one to two years

Connecting the Dots:

1. India’s automobile industry has embarked upon the road of digitization. Comment.