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3 trends could fuel success in 2020

The automotive manufacturing landscape is changing before our eyes. The rise of the Internet of Things and machine learning are paving the way for automakers to design and build incredibly powerful and technology-enabled vehicles.

The rise of IoT, coupled with an ever-evolving customer landscape and the independent aftermarket, is leading many automakers to explore product-as-a-service business models, where customers purchase a desired result or output of a product rather than the product itself.

And, with experts forecasting another dip in new-vehicle sales, automakers must begin exploring new revenue streams. Below are three key trends we can expect in the auto industry this year, with tips on how automakers can use these trends to fuel success in 2020 and beyond.

1. Subscription model booms

As consumers increasingly expect more flexible consumption models, they are exploring nontraditional mobility options. Vehicle subscriptions are popping up everywhere — major luxury brands such as Audi, BMW, Cadillac, Mercedes-Benz, Porsche and Volvo have launched services.

In 2020, we can expect to see even more adoption (the anticipated compound annual growth rate through 2022 is 71 percent). The benefits of insurance and maintenance — coupled with unlimited access — will become increasingly appealing to consumers. And for automakers to successfully prepare for more interest and adoption in vehicle subscriptions, optimizing their current service operations is a prerequisite to successfully delivering products as services.

2. IoT adoption expands

As vehicle subscriptions become more commonplace, the responsibility, cost and risk associated with maintenance and repairs shifts from the end user to the automaker. This will accelerate automakers’ adoption of IoT technology in 2020 and will be key to monitoring vehicle performance and forecasting when service is needed.

IoT has paved the way for the “as-a-service” business model by introducing low-cost sensors, powerful embedded controllers and wireless communication. With a strong IoT network now available, manufacturers can combine remote monitoring with data analysis to facilitate predictive maintenance, reduce machine downtime and optimize productivity.

In addition, as more advanced technology comes on line, expect automakers to invest more in their technician training infrastructure. This will ensure that preemptive maintenance and repairs can be made as quickly and accurately as possible.

3. Governments and customers push for sustainability

Automakers have made headway into greener business practices with the proliferation of electric vehicles. However, in 2020 and the years to come, automakers will aim to reduce waste and use fewer natural resources as the circular economy takes hold.

The way value is created in business today is very linear: We use natural resources to build a product, sell that product into market and dispose of it at the end of its life cycle, filling up landfills and using energy to continuously dig for natural resources.

We’re seeing the circular economy in consumer brands such as Adidas and its Futurecraft Loop shoe. Consumers return the shoe to Adidas once they have worn them out and the shoes are repurposed for future Loops. It’s inevitable that this same model will make its way to the automotive space, as governments, consumers and Wall Street will all expect to more sustainable business practices.

And, with automakers increasing their focus on delivering vehicles as a service, many will begin thinking about how to design products that can be reused, repaired, recycled and redistributed. This will impact teams within the entire organization — from r&d to sales, service, finance and more.

The year 2020 is shaping up to be one of the most pivotal the automotive industry has seen. And, it will be exciting to see how automakers adapt to these changes, and which ones are able to carve out new avenues for success. Ultimately, the journey to fully delivering products as services will take time, but when handled correctly, the benefits for both manufacturers and their customers will prove well worth the effort.

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