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Automotive 2020 Global Study: New Breed of Consumers Seek Intelligent, Connected and Hybrid Vehicles

IBM Offers Five Imperatives for the Future of the Automotive Industry

The IBM Automotive 2020 Study, based on a global collaboration with 125 automotive industry leaders, today revealed an industry grappling with significant change driven by increasingly sophisticated consumers.

As these consumers seek out a comprehensive mobility experience, industry experts predict that flexible transportation services will replace the purchase of personal vehicles for multiple uses, and intelligent vehicles will cater to consumer demands for greater information, safety, and environmental responsibility.

The report was unveiled here today at the Center for Automotive Research’s Management Briefing Seminars conference.

Consumers continue to become better informed and more demanding and they will drive transformation in the current purchasing model for vehicles. The study concludes that consumers will expect to purchase or lease a vehicle that comes with flexible access to a diverse “garage” of vehicles. In the current model, consumers are often restricted by finances and buy a compromise vehicle, or they buy a car with features that don’t get used.

In the new model, consumers will drive a primary vehicle that best meets their daily needs, and have the option to change to a different model, as needed. For example, someone may drive a small, fuel-efficient vehicle during the week, but have access to a sport utility vehicle for a weekend ski trip or a luxury sedan to attend a wedding.

“Basic transportation will no longer be enough for increasingly empowered consumers. They want an automotive experience that matches their lifestyles and lets them move seamlessly from life inside the vehicle to their world outside,” said Sanjay Rishi, Vice President and Global Automotive Industry Leader for IBM.

The IBM Automotive 2020 Global Study is based on interviews with 125 executives in 15 countries from automotive OEMs, suppliers, and other thought leaders. Eighty-five percent of the top automotive companies worldwide — including all of the top 10 — participated. The study, entitled “Automotive 2020: Clarity Beyond the Chaos,” was developed by the IBM Institute for Business Value to determine the needs of and anticipate industry response to today’s changing automotive ecosystem.

The Intelligent Vehicle

Consumers are demanding more information and entertainment from their vehicles, as well as increased safety, economy, and environmental responsibility. This is spurring the manufacturing of “intelligent” vehicles — cars and trucks that use electronics to provide greater assistance with navigation, and provide more information about the vehicle, its environment, and connectivity. Technologies that will have a growing presence in vehicles by 2020 include telematics, including remote vehicle prognostics and active safety (capabilities that sense and respond to driving behaviors and road conditions); a wide array of entertainment choices such as data downloads and streaming media; and power train innovations.

Consumers will benefit from connectivity between their vehicles and other vehicles as well as road infrastructure. Information captured from breaking patterns — for example, from vehicles approaching a recent accident — will be transmitted to other vehicles. Alternate routing options delivered dynamically will help consumers avoid congestion and delays, and active safety features will enable crash avoidance.

Hybrid Engine Trend Accelerates

Alternative power will see continued innovation that extends far beyond 2020, with hybridization and battery technology leading the drive toward environmentally sustainable transportation.

Micro, mild and full hybridization are currently undergoing extensive development today, and study participants believe strongly that by 2020 all new vehicles will have some level of hybridization.

Hydrogen fuel-cell vehicles will remain a viable alternative, but projections put only a small fraction of vehicle production migrating to this technology by 2020, due to cost-prohibitive processes and new infrastructures. Bio-fuels will also see their share of investments, and non-food-based bio-fuels will grow.

Five Imperatives for the Automotive Industry

Based on the Automotive 2020 study and related research, IBM has defined five imperatives that are likely to distinguish the outperformers in the automotive world of 2020:

* Advance mobility. Auto companies must embrace new mobility models, such as new ownership and usage models and integration of other modes of transportation; e.g., when you arrive at the train station your car is waiting for you.

* Transform retail. Auto companies and dealers will need to find new ways to connect with sophisticated consumers and develop a new value proposition for dealerships.

* Simplify complexity. As vehicles become more connected and intelligent, their electronics and embedded software become more complex. IBM recommends that OEMs establish common processes, and standards so to enable innovations from traditional and non-traditional suppliers to be rapidly integrated.

* Partner extensively. To address the increasing cost of innovation, companies need to widen their enterprise innovation networks and extend the partnering concept to go beyond the current suppliers. Close relationships with companies in other industries, especially electronics, energy, and utilities, will become a necessity.

* Execute globally. OEMs and suppliers should create balanced, flexible operations aligned with local economies while having a positive social impact wherever business is done.

“In the face of such significant and chaotic change, finding clarity will require the automotive industry to take sweeping and rapid action. Two of the greatest areas of opportunity are meeting consumer demands for environmental accountability and using technology to transform the way the industry develops products and goes to market,” said Rishi.

About the Automotive 2020 Global Study

The findings of this report are based upon interviews conducted by IBM in 2008 with 125 executives in 15 countries, from a broad representation of automotive OEMs, suppliers and influential third parties.

Participants represented 85 percent of the top auto companies worldwide based on revenue, including all of the top 10. Sixty-two percent of the interviews were with traditional participants in the industry (OEMs and suppliers); other interviews were conducted with industry associations, government economic development groups, specialty companies, academic institutions and other organizations that provide a viewpoint on the future of the automotive industry.

Emerging nations, such as Brazil, Russia, India and China, accounted for 27 percent of the interviews. The Automotive 2020 Global Study provides insights about the future needs and anticipated industry response to the changing automotive ecosystem.