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Is the auto industry losing the autonomous driving race?

UAE. A new study released today by global strategy and management consulting firm A.T. Kearney concludes that autonomous driving will trigger the 21st century’s first major wave of growth.

Key findings from the report, ‘How Automakers Can Survive the Self-Driving Era’, are based on interviews with more than 150 automotive decision-makers around the world. A.T. Kearney consultants sought to identify the products, services and partner strategies with which OEMs and suppliers can win the autonomous driving race.

“Recent innovations and disruptive technology will make autonomous driving a reality in the foreseeable future with fascinating new mobility features and potential efficiency and safety benefits,” said Salvador Zarate, Partner, A.T. Kearney.

“We are seeing some Middle East countries making moves to embrace smart cities, with autonomous cars a major part of that evolution. As the market segment of autonomous cars grows both globally and in the region, we expect a significant change in the value chain as we know it with traditional automakers only one of the many players fighting for a piece of the 2 trillion dirham cake.”

The report stated that the newly emerging autonomous driving chain includes a variety of players, from component suppliers and software integrators to infrastructure and data providers. Many of these firms currently operate in different business fields, but the report outlined that all of these players would be competing for the same market once the autonomous car revolution evolves.

The report forecasts a break-up in the auto industry as it is today. Alongside OEMs, service providers will also create their own fast-growing and independent industry. As early as 2025, their consumption-dependent revenues and revenues from entertainment, multimedia and information offerings could already exceed what traditional OEMs earn with optional extras. Forecasts indicate that the vehicle market itself will split into three segments: premium, low-cost and drones.

“The business models of mid-range providers like Toyota, VW, SEAT and Citroën are being called into question,” said Michael Römer, head of Digital Business Europe, Middle East and Africa at A.T. Kearney and co-founder of A.T. Kearney Digital Labs. “Following the example set by technology pioneers such as GM, BMW and Ford, automakers need to forge strategic alliances with partners outside the industry if they want to deliver attractive telematics solutions, for example.”

Even premium names of the caliber of Audi, Porsche, Mercedes-Benz and BMW depend on external expertise.

Up to now, much of their success has been attributable to collaboration with technology-leading suppliers. In the new ‘hub-and-spoke’ architecture, where mobility services can only be provided if various players work together, they need to find the right partners for content, applications, connectivity and device.

Initial examples substantiate this development: Only a few days ago, BMW announced plans to cooperate with Intel and Mobileye. The Munich-based group says it wants to launch the first self-steering vehicle on the market in 2021. For its part, Daimler is already cooperating with a raft of providers in camera technology and sensor systems.

The study suggests that the autonomous driving era opens up an array of lucrative options for suppliers such as Bosch, ZF/TRW, Continental and Schaeffler. These companies are working their way up the existing supplier pyramid and could either replace OEMs as hardware vendors or position themselves as independent suppliers of software or software components.

At the same time, new players – digital groups such as Google, Apple, Facebook, Cisco and Microsoft, but also companies such as Samsung, Siemens and Deutsche Telekom – are also forcing their way onto the market.

More generally, the study also emphasised the social benefits of autonomous mobility – an aspect that has so far attracted too little attention. It claims the number of traffic accidents could be slashed by 70 percent, while less mechanical strain could cut vehicle maintenance costs by around 35 percent. Lastly, the use of alternative drive systems as well as swarms and convoys on the roads could also reduce fuel consumption by about a third.

“OEMs are doing their bit. Now it is up to governments and the consumers to help pioneer mobility concepts make the breakthrough in the Middle East. We can already see autonomous driving concepts in the region that has a strong car culture, but the success of this innovative concept depends on the collaborative efforts of all players involved,” concluded Zarate.

Photo Caption: Salvador Zarate, Partner, A.T. Kearney

About A.T. Kearney
A.T. Kearney is a global team of forward-thinking partners that delivers immediate impact and growing advantage for its clients. We are passionate problem solvers who excel in collaborating across borders to co-create and realize elegantly simple, practical, and sustainable results.

Since 1926, we have been trusted advisors on the most mission-critical issues to the world’s leading organizations across all major industries and service sectors. A.T. Kearney has more than 60 offices located in major business centers across the world. From our Middle East offices in Abu Dhabi, Dubai, Manama, Doha and Riyadh, A.T. Kearney supports both private and public sector clients as well as nations to excel and prosper by combining our regional expertise and global business insights to achieve results.

For more information, visit www.middle-east.atkearney.com and www.atkearney.com

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