Challenges Facing the Automotive Industry: An Overview
The automotive industry, a significant part of the global economy and a thriving giant has confronted multiple challenges in the current decade. While automakers have been relatively straightforward in adapting to the transformations that the sector has undergone, trends in the technological landscape have prompted the need to swiftly examine the difficulties, challenges and concerns in the automotive industry and devise solutions to address the issues.
“The automotive sector is a major industrial and economic force in the world, contributing for around 3 percent of global GDP.”
The past two years has been a year of challenges, obstacles and upheaval, with the impacts likely to continue for years ahead. The automobile business, like all other sectors, has confronted multiple challenges. Customers’ expectation, demands and behavior are constantly evolving, and industries are striving to adapt. Success and sustainability beyond 2021 will purely depend on the establishment of innovative revenue streams.
Challenges Faced By the Automotive Sector
In 2022, the automotive sector will confront a number of challenges, which are listed below:
Excess Production and Its Costs
Excess production is one of the most important concerns that is confronted by the automotive industry today.
“According to the OICA, more than 11 million cars were produced in 2018, with China accounting for 27 million units and Japan accounting for over 9.7 million.”
This statistics demonstrates how sales have been underwhelming in comparison to previous years.
An uncertain demand graph is the cause of the excess production. Automobile makers spend a lot of money designing and developing automobiles which are not really needed. And by the time the manufacturers realized it, they had already spent a significant amount of money on manpower and production materials.
Excess automotive manufacturing is becoming inescapable as a result of decreasing customer confidence and a highly competitive landscape, resulting in significant financial losses. Ensuring appropriate efficient planning and better MPS (master production scheduling) processes is one of the effective approaches to address this challenge.
One of the most significant challenges that the automotive industry is currently facing is the advent of connected technologies. Automobiles are becoming increasingly data-driven, and digitization is becoming more prevalent. Modern cars with automotive software collect a massive quantity of data on a daily basis, which allows for real-time analysis of parameters. Increased demand for connected technologies will contribute to increased competition as well as the need for significant planning and cross-channel integration. Increased technological integration on connected technologies comes greater complexity in terms of data security and consumer safety.
Advent of Autonomous Vehicles
Automotive industries are undergoing rapid technological advancements. Autonomous cars are one of the most revolutionary technologies in the automobile business. It was launched at the beginning of the twenty-first century, and it has unexpectedly become a challenge for this business. This concept has just reached stage 4, and it may take a few more years to achieve ultimate popularity and acceptance. Many manufacturers, including Tesla and Ford, have already released their initial level 4 autonomous vehicles.
Automakers encounter a range of hurdles in delivering completely autonomous vehicles. Technical constraints are also a major impediment to the development, and the entire process entails significant investments.
Shift of Ownership Access
It’s also one of the hardest challenges the automotive industry has ever faced. People can afford the vehicle since their living conditions are better. People are also open to the concept of using their automobile to earn additional revenue. Due to practical ownership challenges such as parking charges, repair and maintenance costs, and even environmental consequences, there has been a significant drop in the number of consumers who want to own a car. Customers now spur service providers such as Uber and Lyft to place more emphasis on this desire for on-demand access to vehicles.
Challenges have always persisted in the automotive industry. COVID-19 will certainly have an irrevocable effect, while technology will continue to revolutionize how organizations function. Data is the key to survival in such a scenario. Business intelligence solutions give a great deal of information about your customers and operations, allowing you to make more informed decisions. Predictive analytics is required to ensure forecasting efficiency as well as to improve your performance and processes.