This chapter provides an overview of the global production and sales of the automotive industry . Thus, Sect. 2.1 reports on the current global automotive market . The focus of Sect. 2.2 is on the megatrends in the automotive industry, such as tighter emmission controls and the rise of electric vehicles (Sect. 2.2.1), car ownership versus mobility Sect. 2.2.2, and Chaps. 5 and 8), connectivity (Sect. 2.2.3), advanced driving assistance systems (ADAS) (see Chap. 11) and autonomous driving (Sect. 2.2.4 and Chap. 6), and digitalization (Sect. 2.2.5). Section 2.3 introduces the supply chain between original equipment manufacturers (OEMs) and suppliers. Section 2.4 describes new players and challenges. Finally, Sect. 2.5 introduces the background of the digital transformation in the automotive industry. Section 2.6 contains a comprehensive set of questions on the challenges, while the last section includes references and suggestions for further reading.

2.1 The Automotive Market

The automotive industry is one of the most important industries in the world generating a total revenue of more than 3 trillion € in 2015 (URL1 2017) producing nearly 95 million units (passenger cars , light commercial vehicles , minibuses, trucks, buses, and coaches) in 2016 (URL2 2017). There are more than 1 billion (bn) cars in use worldwide. Traditionally, the product spectrum is divided into passenger cars and commercial vehicles. The term passenger car does not only includes the classic sedan and station wagon type of vehicles but also encompasses sport utility vehicles (SUVs) and multipurpose vehicles (MPVs). The segment of light commercial vehicles includes pickup trucks, which are particularly popular in the USA, and is defined by a weight class of <3.5 t trucks (medium >3.5 t and heavy), buses, and coaches which form the classic commercial vehicle segment.

In Germany , the automotive industry and its vast supply chain account for 20% of its overall industry production with a turnover of more than 400 billion € (URL3 2017). Other countries with large automotive industries are France, Spain, Italy, Great Britain, Japan , the USA, Mexico, South Korea, and China , as can be seen in Fig. 2.1.

Fig. 2.1
figure 1

Global vehicle production by country (see URL11 2017)

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One of the most noticeable trends is the shift toward Asia where China is increasing its lead as the most important automotive market, both in terms of production and sales (URL1 2016). China alone is responsible for more than 30% of all vehicles produced and sold globally (URL18 2017), as shown in Fig. 2.2.

Fig. 2.2
figure 2

Global vehicle sales by region (see URL1 2016)

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The global automotive market has always undergone cycles. The last years after the financial crisis in 2007–2008 have seen an incredible growth driven by low fuel prices and low interest rates . The US market has recovered in an amazing way and this happened after a near bankruptcy of the leading automotive manufacturers in Detroit (Dietz et al. 2016). Figure 2.3 gives a perspective of the market trends, comparing the production numbers of the so-called Triade (NAFTA, Europe , Japan , Taiwan, Hong Kong, South Korea, Singapore) with BRIC (Brazil, Russia, India , and China ) and the Rest of World (RoW) for the years 2000 and 2014 (Dietz et al. 2016).

Fig. 2.3
figure 3

Worldwide production of cars (sources: International Organization of Motor Vehicle Manufacturers OICA (URL2 2014), (Dietz et al. 2016))

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Registration and production numbers in a particular country differ (Dietz et al. 2016). Examples are Germany and the USA. Germany is the number one exporter in terms of the size of its own market and produces more than 6 million cars, while the USA is the number one importer. The USA produced >12 million cars in 2016, while the total market size of new cars sold was >16 million. The latest registration statistics for the first quarter of 2017 are shown in Fig. 2.4.

Fig. 2.4
figure 4

Registration numbers in the first quarter of 2017 (URL11 2017)

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By far, the biggest market is China (Dietz et al. 2016). The growth has been unprecedented if one takes into account that the Chinese market was only one-third of this size in 2008 (Dietz et al. 2016). Europe accounts for a little more than 15 million units, as it can be seen in Fig. 2.2. This is roughly the same number as the number of cars sold in the U.S. (URL1 2016; URL18 2017).

The passenger car market in India has been sluggish from 2008 to 2013 but showed promising signs of healthy growth during the last few years (URL15 2017). It has surpassed 3.5 million passenger cars annually with a growth of more than 10% (URL14 2017). The leading passenger car manufacturers in India , by unit sales volume, are Maruti Suzuki , Tata Motors , Mahindra , and Hyundai (URL14 2017).

Worldwide, 2.9 million trucks were sold in 2016. One out of every three of these was sold in China , i.e., in 2016 that amounted to nearly 1 million units (URL4 2017). In India, the market reached nearly 300,000 units in 2016, an increase of 7% compared to 2015 (URL4 2017).

The worldwide number of buses sold is around 500,000; 170,000 of those in China (URL16 2017). India is already the second largest market for buses, as measured by absolute numbers, and the fastest growing. New entries, such as Daimler’s Bharat-Benz , have created competition and eat up market shares from established players, such as Ashok-Leyland and Tata Motors .

The turnover by revenue of the largest manufacturers of commercial vehicles worldwide is shown in Fig. 2.5. If one looks at the number of units sold, the ranking is different; then, the top producers come from China, with Dongfeng at the top (URL19 2017).

Fig. 2.5
figure 5

Largest commercial vehicle manufacturers by revenue in FY 2015, in million USD (URL1 2017)

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An important figure is the number of cars per person, which differs widely. Saturated markets, such as the U.S., have more than one car per every three citizens, as shown in Figs. 2.6 and 2.7 (Dietz et al. 2016). In 2005, the European market had, on average, 448 cars per 1000 inhabitants, China had 11 cars per 1000 inhabitants, and India had only 6 cars per 1000 inhabitants.

Fig. 2.6
figure 6

Vehicle density (number of cars per thousand inhabitants) in 2005 (sources: European Automobile Manufacturers Association ACEA (URL31 2017), International Organization of Motor Vehicle Manufacturers OICA (URL16 2015), Dietz et al. 2016)

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Fig. 2.7
figure 7

Vehicle density (number of cars per thousand inhabitants) in 2012 (sources: European Automobile Manufacturers Association ACEA (URL31 2017), Dietz et al. 2016)

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The graph in Fig. 2.7 shows the situation in 2012. While the vehicle density numbers for the U.S., Europe , and Japan have not changed that much, the number of cars per 1000 inhabitants has literally exploded in China. Also, India has seen a near doubling of the numbers for 2005. This clearly shows the potential of the Chinese and the Indian markets in the years to come.

The automotive aftermarket revenues in Germany from 2007 until 2015 are shown in Fig. 2.8. It reached a turnover of nearly 42 bn € in 2015, while the European aftermarket reached a total revenue of more than 180 bn €.

Fig. 2.8
figure 8

The automotive aftermarket in Germany (source: DAT report 1995–2015, see also Reindl et al. (2016))

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Currently, there are 45 million cars in Germany; 25% of these are older than 8 years. Every year the ownership of over 6 million used cars changes. The aftermarket is very important as it contributes to the bottom line of retailers and garages in a major way (Reindl et al. 2016).

One typically differentiates between:

  • Accident repair

  • Wear and tear repair

  • and Maintenance

As the quality of cars has increased significantly with less wear and tear repairs today, there are fewer than 0.8 repair jobs per vehicle, per year (Reindl et al. 2016).

There is fierce competition going on between the 38,000 branded and independent garages in Germany . While new cars (Segment I, < 4 years) are predominantly serviced in OEM-branded workshops , older cars (Segment III, > 8 years, and Segment IV, >10 years) are often taken to independent repair shops because of their lower costs.

Another important player in the automotive market are the car insurance companies . They face huge cost pressures ; but as car insurance policies are a means to connect with customers, they are an essential part of the service offerings.

Usage-based insurance (UBI) , digital retail, and connected aftermarket services are upcoming trends that are based on connectivity and the digital transformation of value chains.

2.2 The Automotive Megatrends

In addition to traditional combustion engine vehicles with their carbon emissions , the number of electric vehicles is on the rise. Therefore, the automotive industry is facing a challenge in vehicle powertrain technology . Also, car ownership has become less important; and mobility on demand focuses more on the flexibility to choose between different modes of transportation . Another trend is vehicle connection with the Internet, which is becoming an important criterion for vehicles because of their increasing connectivity to other systems. However, with connectivity comes the threat of cybercriminal attacks with different kinds of risks; and the automakers are faced with the need for intrusion detection and defense against malware. Finally, embedding of digital technologies will change automotive industry business models and will provide new revenue and value-producing opportunities.

2.2.1 Tighter Emission Controls and the Rise of Electric Vehicles

There is a rising concern about health problems in Europe , the USA, and emerging countries due to carbon emissions from a rapidly growing fleet of cars. The problem can clearly be seen if one considers the enormous growth in car ownership and car density , as shown in Figs. 2.6 and 2.7.

Moreover, if one looks at the concentration of cars in Asia, for example, where the largest concentrations of cars are mostly in large cities with growth rates of more than 15%, the seriousness of the situation becomes clear. The metropolitan areas in crowded Asian countries are suffering from an increasing pollution load of small particles. The smog in China ’s capital, Beijing, has become infamous with a rise in particulates, especially during the winter season, from November to April, when heating is being used. Indian cities, such as Delhi, Mumbai, and Bangalore , also suffer from severe traffic congestion and smog, as shown in Fig. 2.9.

Fig. 2.9
figure 9

Traffc jam in Bangalore , India

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The danger to the health of citizens is now well documented and can no longer be ignored. China already has enforced electrical propulsion for two wheelers in cities (Hinderer et al. 2016). Other countries will follow. Also, many second and third tier cities in India are suffering from high pollution due to vehicle emissions. Figure 2.9 shows the congested traffic situation during rush hour in Bangalore.

Vehicle emissions account for the majority of the particle emissions in southern Indian cities. The Volkswagen (VW) “dieselgate scandal” (Gates et al. 2015; URL12 2016) has accelerated the shift towards electric cars and boosted electrical drivetrain technologies (Hinderer et al. 2016). The Volkswagen group has committed itself to offering a full range of electric cars and is focusing on the electric drive as the dominant powertrain technology (URL2 2016).

Recently, Germany ’s state government discussed legislation that bans combustion engines from 2030 onward (Schmitt 2016a). This is an ambitious goal, which certainly may be relaxed and weakened (Schmitt 2016b). However, it shows a clear trend and a general social acceptance of electric cars (URL8 2016; Kampker et al. 2013; Hinderer et al. 2016).

The BMW i8 hybrid, shown in Fig. 2.10, is an example of the shift from the classical internal combustion engine powertrain (ICE) to hybrid and full electrical powertrain technologies.

Fig. 2.10
figure 10

BMW invests heavily in e-mobility , e.g., the hybrid i8 seen here at the 2016 Paris Motor Show

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Nevertheless, the number of electric vehicles sold in Europe so far is still small. Some countries, such as Norway, have taken the lead; but in Germany , for example, actual sales still lag behind the original government plans and projections (Hinderer et al. 2016). This is due to several reasons, most importantly:

  • Cost of the vehicle, with the battery as the primary cost driver

  • Inadequate charging infrastructure

  • Limited range

  • Time needed for charging

Without an adequate charging infrastructure, sales of electric vehicles will remain slow; and without enough vehicles on the road, there is no incentive for investors to provide an adequate charging infrastructure. The same holds true for battery prices . They remain high when only a few electric cars are being sold; and the high battery prices in turn affect the attractiveness of electric cars . Another factor which slows down the market penetration of electric cars is the competing charging standards . In Europe , there are at least three infrastructure standards for fast charging (Kampker et al. 2013; Hinderer et al. 2016):

  • Charge De Move (CHAdeMO™): Trade name of a cross-brand electrical interface of a battery management system for electric vehicles, developed in Japan . With this DC-based interface, the accumulator of an electric vehicle or plug-in hybrid vehicle can be charged directly with high-voltage electrical power up to 43 kWh.

  • Combined Charging System (CCS): A quick charging method for electric vehicle batteries, delivering high-voltage DC via a special electrical connector with high charging power up to 50 kWh.

  • Type 2/Mode 3 : Load clutch connector for charging electric vehicles.

Another option was recently introduced by Bosch, the so called charging app (URL1 2018), an approach described in the following six steps:

  • Step 1: Register and download app for Android or iOS for free and register once - without contract and basic charges.

  • Step 2: Searching with map / filter to have the nearest charging station automatically displayed and refines the search via address input or filter.

  • Step 3: Plan route and app will navigate you to the nearest available charging point.

  • Step 4: Control charging meaning watch the entire charging process through the app and start or stop at any time.

  • Step 5: Paying by easy payment via Paypal, credit or debit card.

  • Step 6: View history by keeping an eye on all downloads and costs in your logbook.

Fortunately, things are changing; and favorable governmental policies, social trends, and upfront investments in fast-charging infrastructure are turning the market step by step. This is also beginning to affect battery costs; and over the last year, one could see significant drops in battery prices (Hinderer et al. 2016).

Ambitious projects, such as Tesla’s Gigafactory , a joint venture with Panasonic, are expected to accelerate the trend of declining costs (Kampker et al. 2013).

A price range of 200 $US per kWh is seen as a game changer, where the cost of electric vehicles will actually fall below the costs of internal combustion engine (ICE) cars (Hinderer et al. 2016).

There are already several electric vehicle models available in the European market, e.g., BMW’s i3 and the hybrid i8, shown in Fig. 2.10, Nissan’s Leaf, and Tesla’s Model S and the future Model X (Braun 2016). Renault already has quite a bit of experience and has experimented with new designs. Recently, they announced the new Renault Zoe with a range of up to 400 km.

Mercedes has launched a new brand called EQ for ist e-mobility activities , as shown in Fig. 2.11 (URL9 2016; URL10 2016; URL13 2016). So far, the model lines with pure electric drive comprise the B class and the Smart-E-ForTwo. Also, a new smart Smart ForFour was recently introduced as an e-drive version. It is interesting to note that electric vehicles were quite common in the early days of the automotive industry (Kampker et al. 2013), so in a way, the industry has come full circle. Figure 2.12 shows a picture of such a vehicle, which was presented at the eCarTec in Munich in October 2016 (URL11 2016).

Fig. 2.11
figure 11

Daimler started the new EQ brand for the company’s e-mobility activities

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Fig. 2.12
figure 12

Electric cars are not new; a vintage e-car in Munich

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2.2.2 Car Ownership Versus Mobility

Over the last few years, a clear trend has emerged in Europe , especially among the younger population (Knieps 2016). Car ownership has become less important, and many younger people don’t even have a driver’s license anymore (Haas 2015). The main focus is on mobility and the flexibility to choose between different means of transportation, such as train , bus, taxi, aircraft , shared car, etc. A car is regarded as a costly asset, which refers not only to the purchase price but to many other factors too, such as:

  • Depreciation costs, which are typically very high in the first two years

  • Fuel costs

  • Insurance

  • Maintenance and repair costs

  • Parking space , which is a particular problem in metropolitan areas (Rees 2016)

  • Taxes

A similar trend can be seen in other economic sectors, too (URL2 2015). Airbnb, for example, has threatened the classical hotel business as practically everyone can rent out spare rooms to visitors using the Airbnb platform (URL23 2017). As the billing is done exclusively through the Internet platform, there is no problem with no-shows and late cancelations.

For many younger people, car ownership has lost its attractiveness as there are many alternative means of transport, such as car sharing , car rental , ride hailing , public transport , etc., with no fixed costs, pay-per-use business models , and a high degree of flexibility . However, this flexibility also has a flip side that is discussed extensively in (Freitag 2016; Meyer and Shaheen 2017; Schultz 2016).

2.2.3 Connectivity

Connectivity refers to the connection between cars and other systems, such as Car2Car (C2C) or Vehicle-2-Vehicle (V2V), Vehicle-2-Infrastructure (V2I), and Vehicle-2-Backend (V2B), and often involves a connection to the Internet (see Chap. 5, and Siebenpfeiffer 2014). This concept and the related business models have the potential to disrupt the automotive industry, as illustrated in Fig. 2.13. Driven by the rapid adoption of the smart phone , car owners have become demanding. Forecasts predict that nearly every car sold in 2025 will be connected penetration of connected cars in developed countries by 2025 (URL1 2013). Connectivity is typically based on a global system for communication (GSM), a connection which provides access to the Internet and backend systems (Spehr 2016; Johanning and Mildner 2015). Navigation benefits largely from connectivity as traffic information can be shared in real time. An important topic will be C2I communication as this provides the basis for advanced driver assistance systems (ADAS) (see Chap. 11) and higher levels of automation. Connected cars provide a platform for many new services and stronger customer interaction between OEMs and customers (see Chap. 5 and Viereckl et al. 2016). However, with connectivity comes the threat of cyberattacks (see Chaps. 5 and 6, and Greenberg 2013; Lobe 2016; Grünweg 2016a; Gerhager 2016).

Fig. 2.13
figure 13

Application areas of the connected car (see Doll and Fuest 2015)

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Multiple cyberattacks were reported over the last few years, and automotive OEMs now take this threat very seriously (Gerhager 2016); even Google’s autonomous car and mobility division is concerned (URL29 2017). Many have started to include intrusion detection and prevention systems that constantly monitor the data which is being exchanged between the outside world and the car’s internal electrical/electronic (E/E) systems (see Chaps. 4 and 6 and Haas et al. 2017). This topic is also a current theme at conferences on cybersecurity, as shown in Fig. 2.14. The 2016 DEF CON® Hacking Conference (URL24 2017; URL25 2017) organized a special session, called Car Hacking Village , that dealt with the topic of cybersecurity in cars and invited interested parties, such as students, professionals, and automakers , to discuss and learn about car hacking, automotive cybersecurity, and protection mechanisms (Haas et al. 2017; Möller et al. 2017; URL25 2017).

Fig. 2.14
figure 14

Car Hacking Village at the 2016 DEF CON conference

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2.2.4 Safety and Advanced Driver Assistance Systems

The effect of regulatory measures and the introduction of safety systems can be seen very clearly when looking at the number of fatal traffic accidents in any given year. Figure 2.15 shows these numbers with regard to the German Automotive Trust (DAT) report and (Dietz et al. 2016) for Germany from the early 1950s up to now (URL30 2017).

Fig. 2.15
figure 15

Impact of regulations and safety measures on traffic casualties (URL30 2017)

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Major deflection points are due to the following:

  • Introduction of speed limits (50 km/h) within cities in 1957.

  • Introduction of speed limits (50 km/h) on roads (except motorways) outside of cities in 1972.

  • Introduction of a general limit of alcohol blood level permitted for driving in 1973.

  • Introduction of a 0.5 per 1000 limit for blood alcohol.

  • Safety belts became mandatory.

It is important to note that the years 1950–1970 saw a tremendous increase in road traffic. Without regulatory measures and their proper enforcement the number of fatal accidents would have exploded (Dietz et al. 2016).  Today, the number of fatal road accidents in Germany has come down to around 3300 per year. This, of course, should still be decreased substantially but to set this number in perspective, it is interesting to look at China and India, where fatal road accidents with respect to the total population size are many times higher.

Automotive manufacturers continue to work on increasing safety in various ways:

  • Advanced driving assistance systems (ADAS)

  • Passive safety measures (crashworthiness improvements to the car body)

  • Protection for pedestrians (e.g., soft bumpers)

The development of sensor technology and signal processing algorithms laid the foundation for the rapid development of the ADAS market. With the increased safety standards and consumer demand for safety performance , the ADAS market has become one of the fastest-growing segments in automotive E/E systems (see Chaps. 4 and 11). Although the technological barrier for unmanned driving, also called autonomous driving, is relatively high, this area is seen as an attractive opportunity for high-tech companies (such as Google) to enter the automotive industry. The development of unmanned vehicles may drive efficient automotive sharing and improve vehicle utilization resulting in a significant reduction in traffic accidents, which will have a disruptive impact on OEMs , parts manufacturers , and car financing and insurance companies (Grünweg 2016b; Beck 2016; URL5 2016; Freitag 2016).

2.2.5 Autonomous Driving

Autonomous driving is one of the most important cutting edge technological innovations in the automotive industry today (Maurer et al. 2015). However, it is by no means a new topic. Research in this field dates back decades, for example, the Prometheus project (URL26 2017). Daimler, for example, was active in a research project in the 1990s to explore the possibility of a self-driving car; and other OEMs had similar initiatives (Oagana 2016). Daimler also did a lot of research in service robotics . In the 1990s, however, the computing platforms were not that powerful; and building a self-driving vehicle on an affordable budget was out of scope. Today, this has changed; and the cheap access to computing power in the range of gigaflops or even teraflops (Tanenbaum and Austin 2013) has sparked new interest in self-driving vehicles. The embedded computing power of even a smartphone is large enough for complex image processing and analysis. With an ever-increasing demand for low-cost mobility in passenger and freight transportation , autonomous vehicles are now at the center of many OEM and Tier 1 suppliers ’ research and development (R&D) initiatives.

Different steps toward full autonomous driving are required according to the European and US definitions (URL4 2015; URL27 2017). The first step defines classical driving without any interference from driver assistance systems ; the next steps include assistance functions of various degrees of sophistication and complexity . In highly automated driving , the onboard computers can do most of the driving, which can be compared with the autopilot systems of an aircraft ; however, the driver can still interfere. Finally, fully automated driving does not need any interference at all. It is clear, that although advanced driver assistance system already take over a lot of responsibilities, full autonomy is still some time away (URL5 2017).

The reasons for this are manifold:

  • Cybersecurity issues: an autonomous car that is hacked could turn into a potential weapon.

  • Ethical issues : if an accident is unavoidable, would one hurt a child or an elderly person?

  • Handover from full autonomy back to driver interaction.

  • Heterogeneous or mixed mode traffic with fully autonomous, semiautonomous, and classic human-driven cars.

  • Integration of high-definition (HD) maps , onboard driving assistance (lane keeping), and infrastructure information, such as traffic signals, traffic lights , and others.

  • General functional safety of autonomous driving.

Some OEMs have made bold announcements (Doll 2015; Lambert 2017; URL5 2017), while others have taken a more cautious stance (Beck 2016). The timeline for autonomous driving is the focus of a lively debate both in public as well as in scientific and industrial task forces. The impact will not only be technical but also social and ethical as the transport industry offers many jobs that are being challenged. Thus, the topic of autonomous driving is addressed in more detail in the upcoming chapters of this book, examining it from different perspectives, especially from a general cyber physical system point of view (Möller 2016) and from connectivity and cybersecurity perspectives.

2.2.6 Digitalization

Digitalization and the digital transformation of value chains has become a central topic for the economy (URL5 2017), and the automotive industry takes this very seriously (Gnirke 2016; URL1 2015). It is interesting to note that the automotive industry is no stranger to information technology (IT)-based innovations and the digital transformation of processes. The product development process , for example, is highly sophisticated and digital in nature. The computer has become an indispensable tool for design and analysis (Gusig and Kruse 2010; Sinha and Haas 2006; Grieb 2010), so much so that one refers to the activities of automotive engineering as virtual product creation (see Chap. 3). All relevant data today is digital, and computational models dominate the product development process. Automotive manufacturing is already very advanced, and most manufacturing processes are analyzed and optimized on the computer. No factory is built until everything, from manufacturing processes, tooling, logistics, and even ergonomics, has been simulated thoroughly (Grieb 2010; Bracht et al. 2011). For an in-depth coverage of the digital factory see Bracht et al. (2011) and also refer to Chap. 3.

The direct interaction with the customer, however, apart from using social media channels, has been less digital (Eckl-Dorna 2016a). Also, the aftersales market still has a huge potential for digital transformation. Maintenance costs can be estimated, the workflow for a repair determined, and spare parts can be ordered in real time—these are just a few examples of what is possible (URL1 2014; URL15 2016).

2.3 Automotive OEMs and Suppliers

The automotive industry is dominated by several large companies, also called original equipment manufacturers (OEMs), as shown in Figs. 2.16 and 2.17 :

Fig. 2.16
figure 16

The largest automotive OEMs (URL11 2017)

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Fig. 2.17
figure 17

Mergers and acquisitions in the German automotive industry from the 1960s until now (modified after (Dietz et al. 2016))

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  • General Motors (GM)

  • Toyota

  • Volkswagen (VW)

  • Renault -Nissan

  • Hyundai

The biggest automakers , VW and Toyota, are multibrand groups that have a global footprint and sell around 10 million units a year (URL11 2017). The premium passenger car sector is dominated by German companies, such as Daimler, BMW, Porsche , and Audi .

Commercial vehicles form another important segment of the global automotive market . Again, big international groups, such as Daimler, with its brands Actros , Freightliner , Fuso , Bharat-Benz , etc., and Volkswagen, with its brands, VW, Scania , and MAN , dominate the market. In terms of unit sales, however, the Chinese manufacturer , Dongfeng , is now the largest commercial vehicle manufacturer in the world (URL19 2017).

The supply chain is also dominated by big players, such as Bosch, Conti , Denso , ZF/TRW, Aptiv/Delphi , etc., also called first-tier suppliers . The biggest, Bosch and Continental, account for roughly 20% each of the total revenues in automotive E/E (URL20 2017); and mergers and acquisitions are still going on, as the recent merger between the German auto supplier, ZF Friedrichshafen AG, and the US TRW Automotive Holdings Corporation clearly shows.

This even had ripple effects on the semiconductor market, largely driven by market opportunities. Qualcomm, for example, planned to take over NXP which had already bought FreeScale in 2015 (URL3 2015). Figure 2.18 gives an overview of the largest players in the automotive E/E market (URL20 2017; Borgeest 2013) and shows their shares of the total market. Leading suppliers such as Bosch and Conti together account for 40% of the global market (URL20 2017).

Fig. 2.18
figure 18

Automotive E/E suppliers by market share (URL20 2017)

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As shown in Figs. 2.19 and 2.20, the concentration wave in the OEMs peaked around 1910, while the number of suppliers was highest in the middle 1970s (Dietz et al. 2016; Bopp 2016b).

Fig. 2.19
figure 19

Number of automotive OEMs from 1900s to today (source: Kalmbach 2004, modified after Bopp 2016b)

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Fig. 2.20
figure 20

Number of suppliers from the 1900s to today (source: Kalmbach 2004, modified after (Bopp 2016b))

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Figure 2.17 illustrates the mergers and acquisition activities in the German automotive industry. In the 1960s, there were nearly 50 different manufacturers active in Germany . This number was reduced to 4 in the 1990s and eventually came down to 3 today:

  • Volkswagen group (with a total number of 12 brands, including Audi and Porsche )

  • BMW

  • Mercedes-Benz

2.4 New Players and Challenges

A 3-trillion Euro market, like the global automotive industry, attracts new players; the electric vehicle market is especially dynamic. Each year, new start-ups, many from China or funded by Chinese investors, are coming up, e.g., Byton, Faraday Future, Karma , BYD , and others (Sorge 2016). Other new players come from totally different industries (Kahnert 2016) and are attracted by the many hours drivers and passengers spend in a car every day. This is the perfect time to provide content, entertainment, and information, especially if driver assistance functions and autonomous driving will free up the driver in the future. Google, for example, has been experimenting with autonomous driving for years (URL22 2017; Burkert 2015).

Originally launched as a “Google X Moon Shot” project, the company’s autonomous driving activities are steered by the subsidiary, Waymo (URL21 2017; URL22 2017). Every day, Google cars generate thousands of test kilometers in California and elsewhere. The goal is not to build Google car factories but to use the company’s vast digital infrastructure, such as search capabilities, maps, the Android mobile operating system, speech-based assistance functions , and so forth (Doll 2015; Hecking 2016). Google has recently partnered with Fiat Chrysler Automobiles (FCA) to develop an autonomous minivan (Eckl-Dorna 2016b). They have agreed to work together to build a fleet of 100 self-driving minivans, marking the first time that a Silicon Valley firm has teamed up with a traditional automaker to develop an autonomous vehicle .

Also, the biggest IT and consumer electronics company, Apple, is looking at the car market with great interest (Eckl-Dorna 2016d). Apple launched a highly secretive project code named Project Titan headed up by Vice President Steve Zadesky, a veteran of Ford who helped to build the first iPod , to explore the feasibility of a highly autonomous electric Apple car fully integrated into the Apple ecosystem . Apple’s Project Titan research facility was set up last year, away from Apple’s main campus in Cupertino, California, for which Doug Betts, an automotive executive from FCA, was hired. Betts spent nearly 30 years in the industry and is an expert in manufacturing . Assuming Apple ultimately decides to bring the electric car to market, a commercial rollout will still be several years away. Currently, Apple is running a fleet of vehicles equipped with camera rigs . Following some speculation that this could be testing of a self-driving vehicle technology, the company revealed that the vehicles were collecting data to improve its Maps products. As such, the information captured will probably manifest as an Apple equivalent of Google’s Street View product—but it’s a sign the company is continuing to invest in technologies relevant to the automotive industry. Although, the recent news about Apple restructuring the project and laying off automotive experts (URL6 2016; Gurman and Webb 2016) has caused some amusement within the traditional automotive industry, the interest of the IT giants and their resilience should not be underestimated (Freitag and Rest 2016). It might be difficult to build a vehicle from scratch; but the suppliers are already responsible for a large part of the technology, and even factories can be rented/leased/subcontracted (Dietz et al. 2016). It is also important to note that the cost and part structure of an electric car is very different from one with an internal combustion engine (ICE) where the engine needs a lot of special manufacturing knowledge and accounts for a major chunk of the total cost and internal value added in the traditional automotive industry. In an electric vehicle , the battery is a major cost factor, while the cost of power electronics and software increases significantly (Kampker et al. 2013; Hinderer et al. 2016; Steinacker 2016). This shift in cost structure , value added, and supply chain for electrical components is an encouragement for new players as many of the established automotive companies lack experience in these domains.

2.5 The Digital Transformation of the Automotive Industry

The smart watch , shown in Fig. 2.21, is an example of a new human-machine interface (HMI) to the vehicle. It can be used as a key to open the vehicle door , to display status information about key physical parameters, or even as a remote control to switch on lights and the A/C, or to trigger an acoustic alarm (Eckl-Dorna 2016c).

Fig. 2.21
figure 21

Smartwatch and smartphone get connected to the car

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In a few years from now, nearly all vehicles will be connected and offering full access to the Internet (URL1 2014; URL6 2017; Viereckl et al. 2016). There is an evolving value chain around this connected vehicle ecosystem (Werle 2015). Although, it is not yet clear which players will benefit in the end and how many of the new business models will be adopted, the opportunities for more than a billion vehicles globally—most of them connected—inspires the pundits (URL8 2016; Viereckl et al. 2016). The possibilities seem endless. Refined diagnostic instruments and radio-telemetrics will enable mechanics to diagnose and partly solve problems, without the need to bring the vehicle to the garage. Integrated information systems, computerized motor management , and opto-electronic displays will enhance safety, performance , and comfort.

Toyota recently introduced a small robot that can be bought as a companion (Mullen 2016). The SoftBank-funded Pepper robot (URL7 2017) was one of the stars at the 2017 CeBIT fair and is shown in Fig. 2.22.

Fig. 2.22
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SoftBank ’s Pepper robot

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One way automotive OEMs reacted to this challenge of digitalization and widespread impact of IT on every aspect of our lives is their close cooperation with innovative start-ups. Daimler’s initiative, called STARTUP AUTOBAHN , is shown in Fig. 2.23 (URL8 2017). STARTUP AUTOBAHN is a program jointly run with Plug and Play and modeled as an accelerator and hub for new companies. Plug and Play is a well-known accelerator/incubator company from Silicon Valley that hosts start-ups in an early phase (URL9 2017). The service includes office space, mentoring, consulting, and introductions to potential customers and venture capital firms .

Fig. 2.23
figure 23

STARTUP AUTOBAHN is Daimler’s start-up accelerator/hub program

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Daimler collaborates with Plug and Play to work with start-ups on various innovation projects. The range is quite wide from production optimization to new ideas in HMI , cybersecurity , and big data. Earlier in 2017, the program was extended to include other OEMs such as Porsche , first-tier suppliers such as ZF, and IT companies such as Hewlett Packard Enterprise (HPE)  under the umbrella of Arena 2036 (URL1 2017).

Another indicator of how much the megatrends are changing the automotive business is the general increase in R&D budgets . Daimler, for the first time in decades, for example, has increased its spending on R&D for the running year by a whopping 18% (URL10 2016). Recently, Daimler’s van division invested in the robotics company Starship Technologies in Tallinn, which develops autonomous delivery robots , as shown in Fig. 2.24.

Fig. 2.24
figure 24

A starship delivery robot in Tallinn

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2.6 Exercises

  • What is meant by the term global automotive market?

  • Describe some key aspects of the global automotive market .

  • What was the worldwide production of cars in 2012?

  • Describe the production numbers w.r.t. to regions.

  • What shifts have occurred in the last decade regarding the different markets?

  • Describe the shifts w.r.t. to American, Asian, and European regions.

  • What is meant by penetration of cars/the ratio of cars to inhabitants?

  • Describe the differences between different countries.

  • What is meant by the term aftermarket?

  • Describe the aftermarket constraints .

  • What is meant by the term Triade market?

  • Give an example of the Triade market.

  • What is meant by the term OEM?

  • Give an example of some automotive OEMs.

  • What is meant by concentration trends among OEMs over the last decades?

  • Give an example of the concentration trend.

  • What is meant by the term x-tier supplier?

  • Give an example of some x-tier suppliers.

  • What is meant by the term automotive megatrends ?

  • Give an example of some automotive megatrends.

  • What is meant by the term electromobility?

  • Give an example of the drivers of electromobility.

  • What is meant by the term electric cars?

  • Give an example of hurdles to more electric cars on the roads.

  • What role does price of the battery play in electric cars?

  • Give an example of battery prices w.r.t kWh in electric cars.

  • What price level in batteries (in GW/h) is supposed to be a game changer?

  • Give an example.

  • What is the projected output of Tesla’s Gigafactory concept?

  • Describe Tesla’s Gigafactory concept.

  • Who are the corporate partners for the Gigafactory?

  • Describe the partners involved.

  • What charging concepts do you know?

  • Describe the concepts in detail.

  • What are the benefits of electric cars?

  • Describe the benefits in detail.

  • What are the disadvantages compared to combustion engines?

  • Describe the disadvantages in detail.

  • What is meant by the term autonomous driving?

  • Describe the concept of autonomous driving.

  • What mobility trends are changing the automotive industry?

  • Describe the trends in detail.

  • What does the term carsharing mean?

  • Give an example.

  • What is meant by the term digital transformation?

  • Give an example.

  • What are the effects of digital transformation on the automotive industry?

  • Give an example.

  • What is meant by the term connected car ?

  • Give an example.

  • What services does a connected car offer?

  • Give an example.

  • What are the projections for connected cars in the future?

  • Give an example.

  • What are the benefits to automotive OEMs and suppliers from technology start-ups?

  • Give an example.

  • What is a start-up accelerator?

  • Give an example.

  • What is meant by the term Daimler’s ST ARTUP AUTOBAHN ?

  • Describe the term in detail.