Recent years have seen significant disruptions in the automotive industry, impacting all stakeholders across the value chain. Digital transformation in this industry has prompted businesses to innovate and advance future mobility, focusing on sustainability, connectivity, safety, and passenger and driver comfort.
In a report titled, ‘Digital Transformation in the Automotive Industry’, technology analyst firm, Transforma Insights has identified such nine key domains of change within the industry, enabled by digital disruptive technologies, like the Artificial Intelligence (AI), Data Sharing (DS), Internet of Things (IoT), Hyperconnectivity, and Edge Computing (EC) emerge as the key drivers of change in AutoTech.
The identified domains are as follows:
This domain refers to the use of digital technologies to elevate customer experience at customer touchpoints. A 2023 Cox Automotive survey revealed that 79% of dealers find digital tools improve efficiency, and 86% buyers believe they save time in showrooms. OEMs and dealerships are adopting digital retailing, reaping operational benefits. Automotive News reports a 20% higher conversion rate for dealerships using VR showrooms and AR test drives, while Spincar notes consumers spend 33% more time on web pages with 3D images.
This includes the use of sophisticated solutions to support the service, maintenance, and repair of vehicles at service centres and other locations.
Service teams collaborate with technology companies to implement AI-enabled solutions that address vehicle maintenance challenges, such as undetected defects. For example, Ship.Cars has introduced an AI vehicle inspection tool, reducing inspection time by 60%.
Connected roadside assistance offers near-real-time diagnostics, allowing technicians to arrive prepared with necessary tools. Automakers and service centres now use AR/VR to remotely address breakdowns, reducing vehicle and technicians’ travel and servicing time. For instance, in 2021, MHS Truck & Bus in Romania adopted RealWear's HMT-1 wearables, reducing diagnosis and travel time by 75% and 50% respectively.
It includes using public and private EV charging, battery swapping, and electrification of roads to run and operate electric vehicles. EVs reduce fossil fuel dependence, lower GHG emissions, and associated health risks and diseases. The US Department of Energy (DOE) states that electric freight vehicles cut GHG emissions by 48%. Its three key aspects are:
The rising EV demand requires robust charging infrastructure. AI-managed systems optimise load across stations, track usage, and adjust schedules to cut electricity expenses. For example, Revel's collaboration with Ampcontrol, for supporting real-time monitoring of electricity usage, cost projections, and flexible charging schedules. As a result, the company witnessed cost savings of up to 30% and above.
Battery swapping can solve the issues of affordability and time-consuming charging process, apart from reducing battery costs (about 33% of total EV costs). However, it also faces challenges including high capital investment and a lack of universal battery standards.
Electric road systems allow EVs to operate without fixed charging infrastructure, offering environmental and economic benefits. They enable EVs to use smaller batteries, reducing demand for natural resources like nickel and cobalt, and lower overall EV costs.
Includes using vehicle head units to provide commercial and private vehicles with wide area connectivity and services. Its four key aspects include:
Vehicle breakdowns disrupt traffic, waste time, and cause economic losses, totalling USD41 billion annually in the US. Embedded remote diagnostics and monitoring solutions allow manufacturers to identify faults, facilitate proactive repairs, and reduce vehicle downtime, ultimately enhancing the customer experience.
It allows vehicle owners to instantly notify the service teams to proactively address emergencies. One of the significant advantages of IoT in roadside assistance is its capability to deliver diagnostic information (such as engine status, error codes, tyre pressure, fuel level, and others) in near-real time, enabling technicians to arrive at the vehicle breakdown location. Moreover, this allows OEMs enhance customer experience and generate revenue through subscription fees. For example, BMW charges USD150 yearly for four roadside assistance events and USD350 for three years for six events.
The National Insurance Crime Bureau reported over 1 million vehicle thefts in the US in 2022, marking a 7% increase from 2021. Vehicle theft leads to significant economic losses, primarily borne by insurance companies, resulting in higher premiums for consumers to offset recovery costs.
An October 2023 McKinsey survey showed comfort and infotainment as the key factors in vehicle purchases in the US and Germany. OEMs are enhancing connectivity with better software, networks, and AI-driven features like voice assistants. Volkswagen, for example, integrated ChatGPT through its partnership with Cerence.
It includes fleet management and aftermarket devices that are later purchased and integrated into vehicles for connectivity features. Its six key applications are:
These devices connect to diagnostic ports, offering breakdown insights for on-the-spot repairs and remote troubleshooting, reducing unnecessary trips.
Some vehicle owners use these tools to monitor and diagnose vehicles’ health. Mostly, these devices use Short Range technologies.
These external devices are installed in vehicles to track their location in case of vehicle theft. Many devices use cellular connectivity for location tracking.
Dashcams record evidence, combat crime, reduce idling, and improve efficiency. AI-enabled dashcams analyse driver behaviour and reduce distracted driving with real-time alerts. In a 2023 survey by Motive, after installing dashcams, 54% fleet owner respondents reported fewer unsafe driving behaviours, 43% reported fewer accidents, and 45% reported insurance savings.
These solutions save fuel, lower GHG emissions, reduce idle time, and support sustainability. Vehicle telematics cut costs and boost driver safety - Telus used GeoTab to improve fuel economy and reduce costs per kilometre by 10%. Additionally, Tyre Pressure Monitoring Systems enhance fuel efficiency and safety, as under-inflated tires emit over 26 billion kg of CO annually in the US, according to the Department of Transportation.
Third-party vendors offer these solutions, ensuring superior design, sound, quality, and power efficiency. However, this market is declining as OEMs now provide embedded infotainment compatible with CarPlay and Android Auto.
The solution group includes autonomous passenger and freight vehicles, which ease driving demands while reducing traffic, collisions, fuel use, and emissions. A University of Maryland study found AVs can cut fuel consumption by 20%. Autonomous trucks also lower fuel use, driver hours, and improve safety, with a University of California and TuSimple study showing a 10% fuel reduction.
Autonomous driving can also address the truck driver shortage, projected to reach from 78,000 in 2022 to 160,000 by 2030. Besides, autonomous trucks can reduce accidents (which resulted in 5788 deaths in 2021 in the US) by navigating highways.
V2X refers to communication between vehicles and any entity that can impact them. V2V, a subset of V2X, focuses on communication between vehicles, allowing them to share sensor observations. These technologies enhance road safety, reduce congestion, and decrease pollution. A United States Department of Transportation (USDOT) study published in 2024 found that V2V communication can cut energy consumption by 6%.
According to the Federal Highway Administration, 50% of traffic injuries and 25% of fatalities in the US occur at intersections, which V2X can help prevent. Additionally, V2X reduces fuel waste and CO2 emissions, with the USDOT estimating over 10% fuel savings and 16% lesser CO2 emissions. V2V also improves road safety, with a 2016 NHTSA report estimating 13% fewer traffic accidents.
This solution area focuses on vehicle data sharing across the automotive supply chain, benefiting multiple stakeholders. OEM data sharing boosts revenue by monetising vehicle data while enhancing customer experience, safety, and service management.
Automakers are increasingly sharing vehicle and driver data with insurance companies through data brokers, enabling usage-based insurance based on driving behaviour. For example, Ford shares data from Ford 2020 and onwards models and Lincoln vehicles with insurers via LexisNexis.
Transparent access to automotive data supports sustainable solutions, operational efficiency, and material reuse. Initiatives like Catena-X enable tailored solutions through data sharing, while BMW’s 2019 PartChain pilot improved supply chain efficiency by ensuring spare parts traceability.
The solution group includes the use of digital technologies in vehicle recycling for maximum utilisation of reusable materials and reduce waste generation to a minimum.
In the US, 12 million vehicles are recycled annually, supplying materials like aluminium and copper for new cars. Digital tech enhances material recovery from ELVs. BMW, for example, is using AI and robotics to boost secondary material use from 30% to 50%. EV battery recycling is vital due to rising mineral demand and energy savings, with steel recycling using 74% less energy than new production (according to the EPA).
AI is revolutionising battery recycling by improving component analysis and reuse. For example, Circu Li-ion uses AI to automate EV battery dismantling and diagnosis, where 25% of new vehicle parts come from recycled components.
Digital transformation in the automotive industry is reshaping sustainability, safety, connectivity, and better user experience. Innovations range from enhanced customer interactions and predictive vehicle maintenance to expanding EV infrastructure and supporting autonomous driving. These developments address industry challenges such as inefficiency, high emissions, and safety concerns. Solutions like remote diagnostics, real-time roadside assistance, and battery recycling also improve operational efficiency, reduce environmental impact, and enhance the driver experience, paving the way for a smarter and more sustainable automotive ecosystem.
Learn more in the report ‘Digital Transformation in the Automotive Industry’.
