The Future of “Core” Vehicle Systems

Managing Director IHS Markit
Somewhere within the supplier ecosphere, amid the rise of ACES (Autonomous, Connected, Electrified and Shared) technologies, an important point is being lost. That is, the traditional “core” vehicle systems and capabilities which will remain as vital to mobility’s future trajectory — including self-driving and robotic SAE Levels 4 and 5 vehicles — as they are today.
Engineers, technicians and planners who work in these areas know what I’m talking about here. While the key constituents of ACES — cameras, radars, lidars, proximity sensors, chipsets and software — are currently “golden” on Wall Street (and ubiquitous on the industry-conference circuit), equally important “old school” systems tech is not getting its due attention.
Seating, interior systems, glass, tires, wheels, ICE-efficiency hardware and scores of other traditional automotive technologies — all will be impacted by the growth/influence of ACES. Yet their importance to vehicle functionality, occupant safety, and convenience will continue, and even grow.
Yes, some of the incumbent tech will see lower rates of change through the mid-term horizon compared to lidar, for example. But many others — including thermal management, infotainment, steering, braking, lightweight materials, and joining/fastener solutions — will also drive greater value as they find alternative modes and applications.
Don’t despair. The industry and those placing bets on its future can’t afford to let their attention stray too far from the traditional “core” because it’s all about scale. While electrified propulsion overall is attracting resources, hybrids and EVs will still only account for a projected 22 percent of global production by 2023, according to IHS Markit. And most of this will be mild hybrids such as 48-volt systems. Of course, these and the non-electrified fleet will incorporate some form of optimized combustion engine.
Sure, a greater portion of total vehicle value will emanate from investment in the new propulsion and vehicle-control solutions. But others outside the current limelight are still critical to vehicle efficiency, convenience and safety.
Growing at a slower albeit substantive rate versus electrified propulsion is ADAS (advanced driver assistance systems) technology. From a position of around 2 percent today, automated driving and autopilot systems used in SAE Levels 2 and 3 are slated to rise to more than 10 percent of NA production by 2023, according to IHS Markit. The growth of these systems and their critical human-machine interfaces are benefiting from the attention.
Meanwhile, increased pressure for cost reduction on the traditional core automotive systems continues unabated. As the vehicle value “pie” is sliced more thinly for traditional systems, OEMs are working hard to find room for all the additional content. They’re also guarding against the pie expanding. Unless suppliers can outline and adopt technology to improve their relative value equation — lower tooling costs, reduced bill of material and assembly time, improved functionality, mass reduction, reliability — it will be more difficult to expand margins.
If suppliers cannot draw attention to their products’ improved value equation in the face of emergent technologies entering the game, they run the risk of being relegated to commodity status.
In my regular meetings with suppliers at all tier levels, I observe the leading companies evolving their “traditional” products and processes to drive value and remain relevant and profitable. Steel, for example, while faced with market pressure from lighter aluminum and composite substitutes, keeps fighting back with new, stronger and lighter grades to maintain its predominant position in vehicle structures.
Seating, too, is finding a new role in the self-driving revolution, with lighter and more comfortable solutions increasingly enhanced by sensors, to help mitigate motion sickness. Glazing and suspension system suppliers also are innovating their way into the new ecosystem.
As the industry looks to the future, let’s pay attention to the critical role ahead for traditional systems. Differentiating and driving value will sustain their success.
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