With gas prices low and car sales still relatively strong, automotive industry manufacturers should be feeling pretty good about themselves. But that doesn’t mean they’re not still also feeling the pressure to stay competitive. And they should stay on their toes—because the market’s expectations are changing.
Consumers may be rethinking their love affair with the automobile. Instead, they are viewing cars simply as a means of transportation—a way to get from point A to point B. Specific automotive brands are no longer the status symbol they once were. And although these shifts probably won’t make a big difference in terms of sales volume, they are affecting how much people are willing to pay.
At the same time, people now expect their cars to be smarter, more environmentally friendly, easier to use, and customizable to their personal preferences. They are demanding more sophisticated infotainment systems at a lower price, and higher-end features to come standard. Throw in the move toward driverless cars, and those who choose Uber and Lyft over car ownership, and it’s fair to say that a massive industry change might be coming.
Staying competitive in today’s automotive market now requires much more than manufacturing expertise. And that means automotive companies face the challenge of whether they have the expertise and tools in place to respond.
That’s why software is becoming more and more important to the automotive industry—to keep track of the various product variables required to meet the demands of the market. A Tesla car now has more lines of code than macOS or the Windows Vista operating system.
And frankly, software is becoming a critical part of nearly every industry. In his 2013 message to GE shareholders, CEO Jeffrey R. Immelt wrote: “We believe that every industrial company will become a software company.”
In 2016, Immelt followed up his prediction with action, moving GE’s corporate headquarters from Fairfield, Connecticut, to Boston, in large part to lure world-class software engineers in the area. Immelt’s point is that software development is the game-changing shift in what drives sustainable innovation. And though software often still isn’t getting the senior-level corporate attention that it deserves, some industries like automotive manufacturing are slowly starting to come to the table.
But with the changing role of software in automotive manufacturing comes challenges. So let’s take a look at four of the most-pressing ones…
1. Increasingly Tough Standards
Regulatory requirements are getting stricter in terms of fuel efficiency, software, product safety, and reliability. Safety features that were once expensive optional add-ons—like backup cameras—are now included as standard equipment on new models. Reliable software plays an important part in many of these new standards, but implementing them requires additional research and development. This adds to manufacturing costs and reduces potential profit margins. Therefore, the cost and efficiency of automotive software safety is becoming a key concern for developers.
2. More Focus on Electronics
Because software is being used to expand automotive capabilities in everything from infotainment systems to autonomous parking and driving, it makes sense that an increasing percentage of the cost to manufacture a car is being attributed to software content. A decade ago, electronics and software content represented less than 20 percent of the total cost to manufacture a car; today, it’s as much as 35 percent. Likewise, electronics systems are linked to more than 90 percent of innovations and new feature.
Yet, according to PwC’s “2015 Auto Industry Trends,” infotainment equipment was the most troublesome feature in 2014 vehicles. That means companies that can devise superior systems will have a competitive advantage—but they’ll have to act fast. Software breakthroughs have accelerated the pace of change in automotive products and features. Whereas the time frame for new vehicle launches is typically three to four years, the cycle for new software versions is measured in months.
3. Greater Demand for Customization
Variations allow companies to reach multiple customer groups within a fragmented market with different versions of the same base product. But managing the development of such variations can be a logistical challenge. Some versions may have components and features in common, so to avoid redundant work, those commonalities need to be defined and documented. Therefore, it’s important that automotive manufacturing software be able to keep track of multiple product variants and manage the development of each product variant efficiently.
4. Lack of Respect for the Role of Software
Though software is becoming more significant in the manufacturing process, many companies still fail to recognize its importance or allocate the resources necessary to develop quality software. For example, software executives are rarely considered top management, and decisions about software strategy are usually determined several layers down the hierarchy.
Yet, dismissing the importance of software comes at a price, such as lost business from technological advancements, poor user experiences, lower efficiency, and higher-than-necessary costs. Executives don’t need to know how to code, but they should understand best software development practices to guide their companies in the right direction.
If you’d like to find out more about software solutions for the automotive industry, I suggest you check out this post based on a survey we conducted at the 2017 South Carolina Auto Summit. It shares six key things we learned about the state of business application software in this particular industry.
And for information specific to Enterprise Resource Planning (ERP) software, this post discusses seven prominent frustrations in in automotive manufacturing and what they can show us about how automotive ERP software can and should work. Meanwhile, this post shares eight must-have features of automotive ERP software.
From these four common software challenges for automotive companies and Tier 1 suppliers, to ERP problems that span beyond the industry, it’s crucial for companies in the automotive industry to navigate these challenges to be successful with customers now and in the future.