Trends & Technologies Shaping the Future of the Automotive Industry

The automotive industry is in a period of intense change—an unfolding transformation paved by sustainability and digitalization. There is no doubt that mounting ESG (environmental, social, and governance) standards will shape the automotive landscape and that data has become the fuel of the future. We are boldly entering the age of the electric and connected car.

Leaders in automotive have the opportunity to reposition their organizations: to not only prepare for the so-called “mobility of the future” but to play an active role in shaping it. Notably, incumbents—comprising many original equipment manufacturers (OEMs) and tier-one suppliers—are facing fresh competition from new tech-forward players entering the industry. As a result, there is a pressing need to adapt conventional practices, build internal knowledge, form strategic partnerships, and invest in R&D.

This requires that organizations develop and leverage foresight capabilities—beginning with understanding the forces shaping the future of the automotive industry. Through this lens, organizations can identify the trends, technologies, and main players that are driving change in the market. And, importantly, which developments hold the greatest potential impact and strategic relevance.

In this blog, we’ll present some of the forces shaping the future of the automotive industry, along with key trends, game-changing technologies, and practical industry applications, highlighting how automotive organizations are finding and leveraging innovative opportunities.

Forces shaping the future of the automotive industry

1. The ever-changing consumer

Consumer choice and flexibility will be at the heart of new automotive business models. Mobility-as-a-Service (MaaS) and subscription models for vehicles are expected to grow in the coming years. At the same time, dealerships must balance customers’ need for in-person due diligence and the rising demand for virtual showrooms and engagement. Remote work and a new generation of consumers are altering perceptions of vehicle ownership, usage, and mobility in general, while preferences trend toward flexible vehicle financing and personalized multimodal journeys.

Technologies affecting the Ever-Changing Consumer will incorporate ‘distance commerce’ and Extended Reality (XR) to provide online showrooms and test drives. 

Product-as-a-Service highlights the shift from ownership to usership. The changing relationship between consumers and vehicle ownership needs to be understood in conjunction with Redefined Luxury; a younger and more diverse consumer cohort prioritizes high-end experiential offerings, premium access, and sustainable usage over outward-facing status symbols and obsolescence. The Personalized Commerce trend further underscores the need for personalized vehicle financing and flexible MaaS products for the Ever-Changing Consumer. 

2. Sustainability regulations

The automotive industry faces increasingly stringent sustainability regulations. Governments will play a vital role in promoting sustainable business practices and Behavior Shaping through both “carrot” and “stick” approaches and time-bound goals linked to international environmental agreements. Independent regulators are likewise setting higher standards for vehicle manufacturers in terms of greenhouse gas (GHG) emissions and fuel economy. In accordance with these mounting sustainability regulations, expect R&D in green innovation and ESG Investing in the automotive industry.

Technologies such as Alternative Energy Storage, Smart Grids, and Carbon Capture and Storage will all play a key role in ESG automotive policy development. 

Trends such as Blockchain-Track-and-Trace highlight the need for automotive companies to ensure the transparency of their value chains. Policy-makers and consumers alike expect unimpeachable evidence that sustainability is embedded in corporate strategy and results in meaningful action. Expect a rise in the net-positivity discourse in the industry as novel technologies emerge to meet the demands of the sustainability imperative.  

3. Embedded connectivity

Connected vehicles are expected to represent about 95% of all new vehicle sales by 2030—up from 50% currently. This embedded connectivity generates vast amounts of data, enabling and sometimes compelling automotive manufacturers to move toward data-driven business models. With new opportunities for data-driven revenue streams and the promise of greater insight into customer behavior, established ICT companies and startups are entering the automotive industry. Incumbents will need to keep pace with enhanced customer-centricity and product optimization by investing in and leveraging their own data science capabilities.

Vehicle sensors can collect real-time data on usage, performance, electric vehicle (EV) charging habits, and traffic conditions. Technologies like Edge Computing, Internet of Thinking, and Predictive Maintenance make it possible to turn this data into actionable insights that improve the driver experience, mitigate congestion and downtime, and make roads safer. 

Diversified Value is a trend that encapsulates the encroachment of tech companies pivoting into other industries, including automotive, by leveraging historical data to provide personalized user experiences. Other trends, such as Data Ethics, highlight that even as innovations in vehicle interconnectivity are set to revolutionize the automotive industry, consumers are still highly skeptical about how their data is used, shared and stored. 

4. Cities of the future

Cities of the future will rely on smart mobility infrastructure that reimagines private and public transportation. Advancements in IoT, smart sensors, and edge computing make it possible to collect, process, and share vital data that prioritizes safety and sustainability. Solutions include car- and ride-sharing platforms, autonomous vehicles and unmanned delivery, the rollout of electric vehicle (EV) charging stations, and real-time predictive analytics informing users of traffic, navigation, and multimodal transportation options. Alliance building between governments and businesses will be critical in implementing seamless mobility ecosystems. 

Technologies such as Internet of Behavior, 5G Mobile Network, and, eventually, 6G Mobile Network will play a complementary role in molding Cities of the Future. High-speed internet will enable real-time communication between transport modes, reducing congestion and accidents. Advanced connectivity, coupled with the extraction of critical consumer data from sensors and IoT-empowered devices, will kickstart the smart mobility revolution in the years to come.

Trends such as Mobility Ecosystems and Smart Cities emphasize consumer desires for Cities of the Future and the work being done to expedite their creation.  

5. Intelligent manufacturing

The automotive industry is quickly adopting intelligent manufacturing processes that rely on digital supply networks embedded with technologies like industrial IoT, 5G, artificial intelligence, and digital twins. However, many challenges remain, e.g., the high cost of retrofitting older factories, technology skills shortages, security concerns, and cultural resistance associated with job loss arising from automation. While implementing smart factories comes with a high degree of complexity, there are several gains to be made in productivity, customization, response times, energy, and overall cost.

Intelligent Manufacturing will aim to augment real-time feedback mechanisms from both vehicle production and driver behavior. The use of digital twin technology will continue to enable predictive analytics as well as enable international collaboration. The growth of Intelligent Manufacturing will catalyze OEMs to develop new business models and provide adjacent services from enhanced data harvesting activities.   

Distributed Cloud and Machine Learning technology in Intelligent Manufacturing will empower others such as Predictive Maintenance to foresee issues before they arise and make immediate fixes.  

Again, consumer insights will play a prominent role in this innovation area, and trends such as Data Secure by Design will be vital to ensure that information security and privacy are integral to product development, service deployment, and core business operations.

6. Electro-investment

Sales of EVs are predicted to overtake internal combustion engine (ICE) vehicles by 2030. While this shift is partly driven by the market pull of government incentives, ESG standards, and consumer demands, the other force propelling Electromobility forward is investment into Alternative Energy Transition technologies and infrastructure. Zero-emission fuel alternatives and next-generation batteries promise longer ranges, faster refueling and recharging, and reduced vehicle costs. Simultaneously, cities around the world are deploying electromobility options and infrastructure. Together these changes are making electromobility a sustainable and viable alternative for a growing segment of consumers.

Advancements in Next Gen Batteries provide consumers with a variety of options to participate in the EV economy. These technologies have given rise to the purchasing of battery-electric vehicles (BEVs), hybrid electric vehicles (HEVs), and plugged-in hybrid vehicles (PHEVs) by socially aware consumers who also have the spending power to invest in these vehicles. 

Expect an increase in trends such as Behavior Shaping, whereby consumers are incentivized to consider alternatives to pollutant-emitting ICE vehicles. 

If you want to evaluate further the impact and relevance of these trends and technologies for your business, kick-start your innovation journey on the ITONICS Innovation OS today.