Digital Transformation Strategies for the Automotive Sector

Author photo: Greg Gorbach and Fabian Wanke
ByGreg Gorbach and Fabian Wanke
ARC Report Abstract


Digital transformation is roiling the automotive sector.  Manufacturing companies are reinventing business processes and relationships and remaking legacy IT systems for business, engineering, supply chain, and manufacturing operations.  The transformation involves modern software systems, artificial intelligence, robotics, connected things, and developing creative new ways to collaborate with and support customers.  The automotive industry is transforming in a highly competitive environment.  While car manufacturers are typically on the forefront, Tier 2 and Tier 3 component suppliers typically lag in terms of technology adoption, but they are certainly feeling the pressure. 

This is intensified by the prospect that we may be approaching “peak car,” or the point after which total sales of cars will begin to fall.  In as little as five years, mobility services will eat into automobile sales.  Component and auto makers will be vulnerable if they don’t innovate around new technologies, products, services, and business models. 

While outsourcing has been a major trend since the 1970s, many car manufacturers now seek to keep and increase their level of production and value add.  For these, operational excellence and further automation are key.  In 2017, revenues and capital expenditures (CapEx) increased to a new all-time high in the automotive industry.  However, it seems that the capital expenditure rally of the last years is slowing down.  In the long run, CapEx will slow down slightly as electric vehicles will need less investments.  On the other hand, investments in battery manufacturing will increase.

Digital Transformation Involves a Host of Interrelated Things

Collaborative Robot Interaction in Assembly for digital transformation dtgg.PNGDigital transformation involves a host of interrelated things that need to be considered.  It involves disruptive/transformational technologies, but also affects how products are designed, sourced, manufactured, sold, delivered, and serviced.  New business processes, value chains, management practices, information systems, and customer relationships will have to be cultivated, implemented, and optimized.  Unlike many other recent technology trends, digital transformation could have “life or death” implications for companies that fail to address it successfully in time.  It is not sufficient to pay lip service and wait for a solution to manifest itself.  It’s time to act. 

Table of Contents

  • Introduction
  • Critical Digital Transformation Initiatives
    • IT Systems:  Business Systems and Cloud Infrastructure
    • ET Systems:  Product Design, Simulation, Engineering
    • OT Systems:  Drive Performance throughout Production Operations
    • Robotics
    • Integrated Supply Chain
    • ST (Service Technology) Systems:  Services for Connected Products
    • Lightweight Materials
    • Additive Manufacturing
    • Artificial Intelligence and Machine Learning
    • Workforce Considerations
  • Recommendations


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