Car manufacturing is a crucial aspect of the automotive industry. It has somewhat recovered from the setback caused by the pandemic, but there have since been other challenges like semiconductor shortages, security breaches in software, and so on. The future of product pipelines now depends on several factors which is exactly what we’ll be discussing this time.
Software upgrades
Real-time software updates are in huge demand when it comes to car manufacturing. Consumers expect vehicles to continuously adapt in terms of new features and capabilities. Over-the-air updates include driver assistance features, onboard infotainment upgrades, digitally-enabled services, and so on. They enhance safety and improve the driving experience, while ensuring customers don’t have to run to dealerships every time an upgrade is required.
Automakers will greatly benefit from the rise of software-defined vehicles, as they map the path for the future of mobility. McKinsey & Company has released a report that says the automotive software market will grow to $80 billion in 2030, from $31 billion in 2018. These vehicles utilize centralized vehicle architectures, with lesser, yet more robust and scalable computing solutions. This enables faster, updatable, and more fully-featured software while greatly reducing vehicle wiring and overall system component counts.
Production volumes to go up in automotive industry
Before the pandemic, inventories in the automotive industry were available in plenty, while vehicles were present on dealer lots on an average of more than 90 days. As a result of that, OEMs and dealers had to put in a lot of effort to make a sale. Incentives were offered, and the percentage of average offers in relation to transaction price, had shot up to 11.1% in 2019. But over the course of the next three years, dwindling supplies and resilient demand had rendered incentives all but unnecessary. In 2022, the offer had gone down to just 2.2% of transaction price.
New vehicle inventories in the automotive industry stood at 1.64 million at the end of 2022, which was double the supply chain challenged figures of 2021, but much below pre-pandemic levels. However, the inventory has steadily gone up, with the count passing 2 million in September 2023, thanks to the acceleration of supply gains. 2023 inventories ended exactly one million vehicles higher than the year prior. It is clear that supply chain issues are easing, as OEMs buckle up to fill their pipelines and introduce or refurbish vehicles in the post-pandemic era. The inventory will likely improve further in the future, provided there aren’t any supply chain related problems. But it is safe to say, if it continues to grow by 1.5% on a monthly basis, the average monthly new vehicle count will likely be above 3 million soon.
Semiconductor capacity and automotive industry
When talking about car manufacturing, it is imperative to amp up the semiconductor pipeline in the automotive industry. Even though supply chain problems have been resolved to a large extent, the ongoing semiconductor shortages have really challenged the automotive industry. While the industry is still recovering from these disruptions, the automotive technology and advancements enabling software-defined vehicles and electric vehicles are creating transformational opportunities for both the automotive industry and semiconductor suppliers.
It is essential for the semiconductor industry to invest in automotive capacity, in order to build a more resilient supply chain. Next-generation mobility requires a balance between chips and hardware, be it high-end system-on-chip devices, processors, sensors, power electronics, or other enabling electronic components. Involvement of semiconductor partners in the product development process is necessary, so automakers can secure supply and accelerate innovation cycles.
There is ample opportunity in the automotive industry for automakers to offer differentiated experiences and build long-term brand loyalty with customers. Whether it is over-the-air updates or driver assistance features, customers are more likely to align with a brand after adopting digital services and customized software, which is good news for both dealerships and OEMs.
