Images: IMD

The world is constantly changing and with it everything that is in it. Along with the constant changes, the automotive industry is also changing, which must meet the current and future needs of humanity. As such, cars with internal combustion engines (ICE) are being replaced by electric vehicles (EV), which are increasingly capturing the attention of consumers. They have a ton of new technologies and are prized for their connectivity—software, infotainment, and autonomous driving. The convergence that is taking place now requires a new set of capabilities, but the value of traditional know-how in mechanical engineering is being lost. The days of internal combustion engines are numbered and an IMD study is trying to figure out which automaker is best prepared for the future.

According to the study, Tesla is the only car manufacturer that is 100% future-proof. In second place is Toyota, which scored 77.9 points out of 100 possible. While this may seem like a pretty good result, it’s lagging behind Tesla and not wanting to change quickly can be costly. BMW is in third place with 75.5 points. Ford also scored more or less sufficient points (73.5). However, the rest of the industry players made average scores and some cami in quite low.

Audi is almost at the very bottom of the list, with 21.6 points, which shows a significant brand lag that is fraught with a complete loss of consumer interest and lack of demand in the future. For comparison, last year the brand had 27.5 points. Still, Renault is in an even worse situation, having scored only 1 point. The lack of aspiration to be relevant can lead a company to complete extinction in the future.

To determine this rating, IMD measured seven factors:

1. Financial performance - you can’t invest in the future if your current business has already collapsed.
2. Business diversity in terms of geographic spread.
3. Employee diversity, as well as that of leadership - diversity of thought is crucial to reinvention.
4. Research and development intensity - reinvention requires money and resources.
5. The early results of these companies' innovation efforts.
6. Cash generation capability as well as their debt situation.
7. Stock market performance, as an indicator of investor confidence.

IMD points out that the architecture of all cars is different and electric cars are already outperforming cars with internal combustion engines. The electrical and electronic architecture is a patchwork quilt of modern demands, sewn together as it evolves. This means that traditional carmakers will only succeed if they rethink how a car is built. IMD believes that Tesla is the best role model:

"This brings us to Tesla. Contrary to how almost everyone else builds cars, Tesla splits the overall architecture differently. It optimizes always-on connectivity. There are four controlled domains: the autopilot; the central information displays; the instrument clusters; and the drivetrain and energy storage. They are prioritized for digital and electric technologies, allowing for over-the-air software updates, and enabling remote access and autonomous driving. This design is also optimized for data collection and algorithm testing, making software deployment easier.

Tesla's are the car features of the future; they will enable interaction with traffic infrastructure and make wireless communication with other vehicles possible."

Traditional carmakers must explore a new space in order to learn. Developing a software system to control all the infotainment can’t be done right the first time; it requires learning. Once they have learned enough, they can start exploiting their newly acquired capabilities. The X-axis in the graph below depicts this.

Automotive companies: digital savviness vs. explore/exploit

© 2022, Eva Fox | Tesmanian. All rights reserved.

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Article edited by @SmokeyShorts, you can follow him on Twitter

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