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How Technology is Transforming the Auto Industry

How Technology is Transforming the Auto Industry

The automotive industry is in the midst of a fundamental tech-led transformation wave

The automotive industry is in the midst of a fundamental tech-led transformation wave (Image: Pixabay) The automotive industry is in the midst of a fundamental tech-led transformation wave (Image: Pixabay)

Here’s a task: Go to LinkedIn and type ‘autonomous and electric vehicles’ in the jobs section. Among the top results, you’ll find a mix of auto and tech companies such as NVIDIA, Volvo, Qualcomm, Siemens, Audi, Bosch, etc. In a few years from now, it’ll be even more difficult to tell them apart. Even as technology transforms practically every aspect of our lives from payments to entertainment, experts believe that the next decade represents one of the biggest tech disruptions in the automotive industry A.K.A. CASE (connected, autonomous, shared and electric). “CASE is very real and evolving at a much faster pace than anyone would have imagined, especially in India. Globally, the trend was already there. It started with Tesla on the EV side, and connected car technology came from General Motors (GM) globally, but India was lagging behind,” says Rajeev Chaba, President and Managing Director of MG Motor India. 

The tango between tech and auto companies is picking up pace. Globally, for example, GM acquired Cruise Automation, a self-driving technology start-up, in 2016, for $1 billion and announced it will be partnering with Lyft to test self-driving taxis. In March 2022, Sony announced a strategic alliance with Honda Motors for development of high-value battery electric vehicles that are likely to hit the roads by 2025. And smartphone maker Xiaomi announced its entry into the smart EV business in March 2021. 

In India, when MG’s Hector— its first car in the country—was launched in April 2019, Chaba made it a point to mention that the “internet car” was a result of tech collaborations with Microsoft, Adobe, Unlimit, SAP, Cisco, Gaana, TomTom, Nuance and others. Tata Motors, the market leader in India for electric vehicles (EVs), uses Microsoft Azure Intelligent Cloud for advanced navigation, predictive maintenance, remote monitoring features and AI innovation for its connected cars. In short, in today’s automotive market, car companies are no longer merely assembling mechanical parts but developing a complicated computer on wheels. “The next-gen automobile ecosystem will include OEMs, software and service suppliers, systems integrators, device manufacturers, online players and, most importantly, telecom operators,” says Nitin Bansal, Ericsson’s MD for India and Head of Networks for Southeast Asia, Oceania and India. 

A report from Ericsson reveals that the connected automobile market is expected to reach $166 billion globally by 2025. “Glimpses of advancements are already visible in the Indian auto market with the introduction of advanced features such as ADAS (advanced driver assistant system), mobile app-based controls, etc. The most essential factor to build momentum towards connected cars is fast internet connectivity, which 5G will enable,” adds Bansal. For example, Ericsson collaborated with Audi and sensor manufacturer SICK to connect a German factory with superfast 5G, so that automated guided vehicles (AGVs) could manoeuvre safely and wirelessly around the workspace, collaborating in perfect harmony with human workers. It also worked with Volvo to conduct a trial utilising 5G connectivity to ensure that maps were constantly updated with the latest real-time information to aid future autonomous driving operations. “Technology will be the critical factor for success of the next-gen automotive industry, and it will also impact shift in the car value,” says Bansal.


Today an average car is 90 per cent hardware and 10 per cent software. According to industry reports, in the future, hardware’s share will reduce to 40 per cent, and the remaining will be divided amongst software (40 per cent) and content (20 per cent). Auto experts believe that collaboration will be key as it’s difficult for auto manufacturers to sustain in the current disruptive scenario. Pedro Pacheco, Senior Director Analyst at tech consulting firm Gartner, believes auto companies that don’t think technologically could face shrinkage or extinction. “Connected cars and software will be the main revenue growth driver towards the end of this decade in the automotive sector. Companies that aren’t able to do this are basically at great risk from a profitability point of view,” he says. 

Auto companies have already started hiring people with tech backgrounds to future-proof themselves. At MG India, for example, Chaba says that tech hiring at the company has significantly gone up. But Pacheco argues that only hiring tech talent will hardly solve the game. “Being a tech company isn’t about having a lot of software engineers. It’s a company that thinks like a tech company. This is what traditional automakers haven’t been able to do, as many of them are not digitally mature,” he says. Thus, automobile companies and tech companies now see potential to collaborate for new business opportunities. “Technologies like natural language processing, augmented reality, multi-screen environments powered by sensor-rich environments using 5G, and edge computing are bound to disrupt the industry, therefore allowing car manufacturers and their ecosystem of partners to invent new business models,” says Sanjay Gupta (India Head), Vice President, and India Managing Director, NXP India.

The Dutch semiconductor company has helped accelerate EV system development and is now developing technology for autonomous vehicles. It has worked with automakers like BMW, Ford, Tata, Mahindra & Mahindra and Maruti Suzuki in the four-wheeler segment, and Bajaj Auto, TVS Motor, Hero MotoCorp, Ola Electric, and Ather Energy in the two-wheeler segment. Gupta says one key reason behind this collaboration is that margins of EVs are anticipated to be lower than gasoline-powered vehicles. “This places pressure on manufacturers to discover new revenue streams. 

Tech companies venturing into automobile segments is crucial for the industry to evolve in terms of technology. With the rise in processing capability of the chips, various complicated and configurable innovations will be made that will be followed in the future as well. As a result, collaboration is the only option to evolve,” he says. Another fundamental force, experts say, will be the rise of mobility-as-a-service. Globally, there’s a shift away from owned vehicles towards mobility solutions on an on-demand basis. “Car as a service is the future. Which means we can start doing a lot of add-on services from the car itself. In a few years’ time, it’s very clear that the smartphone generation will be our primary buyers. For them, the car is the fourth screen after the TV, laptop and phone. People want a seamless experience across these screens,” says MG’s Chaba. 

Ericsson’s Bansal believes that CASE will drive the transformation of global wireless data networks, making it unnecessary for many of us to even own a car: “Connectivity will take centre stage in the overhaul of the automotive sector. With advanced technologies like 5G, AI, data, cloud, etc., CASE will reshape the automotive industry by helping it evolve to the model in which individual vehicle brands become much less important than the software and services that surround it.” Tech firms say that beyond highly automated driving, there will be numerous use cases of CASE, including car manufacturing enabled by Industry 4.0, vehicle diagnostics and personalisation, smart over-the-air (OTA) updates, connectivity and subscription management, car data monetisation, etc. “We believe technology companies are well equipped to enter the Indian automobile market. There are live use cases that reflect the gradual shift from the autonomy of the in-vehicle technology to democratisation basis collaboration between technology companies and vehicle manufacturers,” says Bansal. According to audit and consulting firm PwC, the convergence of the automotive sector with the technology, media and telecommunications sectors will have wide-ranging impact. And to meet these challenges, automotive companies need to rethink operations from the automotive factory floor to the back office.

And while tech companies like Xiaomi have announced plans to get into EVs, manufacturing at scale is a different ball game altogether. Experts point out that while many would expect tech companies to dominate the auto industry landscape in the coming years, not every tech brand turns out to be a Tesla. Being from a tech background, Elon Musk perfectly sums up auto manufacturing challenges that he had to face while building Tesla cars. “Prototypes are easy and fun, and then reaching volume production with a reliable product at an affordable price is excruciatingly difficult. Our production is hell. There’s nothing harder than mass producing at scale,” he had said in an interview. Swapnil Jain, Co-founder and CTO of Bengaluru-based electric two-wheeler maker Ather Energy, says: “While the entry of tech giants will definitely boost the supply chain and bring down costs, we strongly believe that building a favourable ecosystem in the country is critical for the success of the EV industry.” Ather recently tied up with Foxconn, a Taiwanese company that manufactures iPhones for Apple, which Jain says will help it develop and manufacture key components for Ather scooters. “The transition to EVs is inevitable and technology will play a pivotal role in the future of mobility. Consumers today want modern, compelling vehicles that provide a reliable and hassle-free ownership experience,” he says, adding that companies will need to invest in technology and enter into strategic partnerships to stay relevant. “Technology is critical in every aspect for an electric vehicle, be it performance or experience, and poorly done tech will make things harder for a brand going forward.” 

Today, automotive companies are facing competition from both start-ups and online players. Smaller, more nimble organisations are succeeding in providing transportation services with new business models, agile processes, rapid releases, and a sharp focus on the customer, says Ericsson’s Bansal. “Hence, to sustain this disruption, it is imperative for automakers to reinvent their organisations with digital technologies by building an ecosystem of right partnerships. It’s time for them to reposition themselves in order to expand beyond traditional vehicle sales,” he adds. According to CyberMedia Research, a market research and consulting company, a CASE-led future requires automotive companies and technology giants to build on their traditional strengths. “Traditional automotive companies excel in hardware capabilities, and hardware-centric innovations. On the other hand, technology giants and tech start-ups bring cutting-edge capabilities, especially in areas such as compute, connectivity and computer vision, amongst others,” says Prabhu Ram, Head of Industry Intelligence Group at CyberMedia Research, adding that the success of traditional automotive companies as well as tech majors in a CASE paradigm will be invariably linked to how successful they are in building on their natural synergies.

Experts believe that tech giants will look at creating consumer differentiation and enduring value across the various tech layers in the vehicle. “When one looks at the overall complexity and the constraints that automotive manufacturing entails, as well as the high capital intensity and low margins, the appetite for tech companies to embrace full-scale automotive manufacturing will be lesser,” says Ram. Pacheco reckons that while technology has traditionally started at the upper automotive segments and cascaded to lower segments, this trend is different. “Even for high-end cars, tech wasn’t being used for disruptive purposes. Today what we’re seeing is disruptive innovation in terms of new revenue generation models, and a diversity of new services and features. It will change the industry in this decade,” he says. Both tech and auto companies are well aware of the challenges specific to the Indian market going forward. “The connected cars industry will need to overcome several challenges in its journey including the cost of connectivity, cybersecurity, and regulatory guidelines. Usage of these cars will generate large amounts of data that will draw specific usage patterns and increase vulnerabilities,” says Bansal. He adds that vehicle manufacturers need to determine and evaluate these data sets thoroughly to make their products more effective and robust. Alongside, cybersecurity also requires a major focus. 

As more cars become connected, the efforts and resources required to manage connectivity and subscription will also increase significantly. “The OEMs and their partners will account for this transformation. Automotive companies must chalk out the business plans that can provide them with sufficient support, operational monitoring, and performance management. Apart from that, the sector would also require government support for the development of a conducive policy and regulatory environment,” says Bansal. With tech giants like Apple and Google becoming car manufacturers, where does one draw the line? “Frankly, nobody knows the answer. The automotive industry had a lot to offer to the world in terms of building at scale, cutting costs, managing inventories, etc. Now, tech companies have a lot to offer on the software side. But the lines are blurring,” says Chaba. 

That may just be good news for the consumer.