Are we entering a new era of automotive innovation? Ever since the late nineteenth century and early twentieth century, when steam, electric, and gasoline (or petrol) engines competed for predominance, the automotive industry has been a major source of innovation. The earliest technologies came from Europe and the United States; Asia rose to prominence in the 1960s and 1970s. Today, automotive companies from around the world are competing on a global scale to bring new brands, models, features, technologies, and processes to market first. Innovation hit the brakes briefly in the wake of the 2008 global financial crisis, but our research and experience show that the pace of innovation accelerated again through 2013, and it is continuing as we enter the new year. Indeed, the recent and prospective developments in four key areas—power train, lightweight materials, connectivity, and active safety and assisted driving—may well herald a new golden age of technological advancement and automotive innovation.
Driving these improvements is an intensified focus among automakers and their leading suppliers on introducing new technologies faster, continuing to improve fuel economy and reduce emissions, and developing important connectivity and active-safety features (including assisted driving). Enabling these efforts is the transformation of the car from a collection of mechanical and hydraulic systems to a machine predominantly controlled by electronics and software. Together, these changes are altering the way cars are conceived, designed, manufactured, serviced, and driven. Companies that are today’s innovation leaders will need to keep on top of their game to stay ahead; those that lag risk falling further behind.
New research from The Boston Consulting Group shows that consumers cite innovation—both generally and in key areas such as connectivity, safety, and fuel economy—as an important consideration in their purchase decision. In this report, we examine the state of innovation among automotive original-equipment manufacturers (OEMs) and their leading tier-one suppliers. Our analysis indicates the following:
- Consumers want to buy cars from companies that bring new technologies to market.
- Connectivity and safety are important to consumers; they want to see innovation in these areas as well as in improving fuel efficiency.
- Continued consumer and regulatory concerns about oil prices, oil dependency, and global warming will ensure that technologies related to fuel efficiency and emissions reduction remain at the top of OEMs’ research agendas.
- OEMs will need to expand their R&D capabilities in electronics and software—areas where there is currently a scarcity of talent in the industry and where OEMs will have to compete with start-ups and technology companies.
- Tier one suppliers are becoming increasingly important in bringing innovations to market. This is a potentially tricky issue for OEMs, as these suppliers will develop and own intellectual property that represents important points of marketplace differentiation.
These factors will rapidly accelerate the pace of automotive innovation. They also will necessitate changes in the cost, speed, and quality of automakers’ new product-development programs, as well as in OEMs’ ability to adapt to evolving consumer demands.