The Problem with the 'Next Big Thing' in the Automotive Industry

Abhishek Kolekar / December 2024 (2915 Words, 17 Minutes)

automotive

“Those who cannot remember the past are condemned to repeat it.”

The quote, taken from George Santayana’s book The Life of Reason, is echoed by Winston Churchill, and gives a cautionary tales of the past and the future. Time and again, humanity has fallen into the trap of speculative excess, resulting in catastrophic outcomes like:

While the reasonings are simplified here, the key factor uniting these debacles is the capitalization on the illusion of investment invincibility, fuelled by a venture capitalist-esque narrative of ‘The Next Big Thing’.

Unfortunately, the automotive industry is not impervious to the influence of such narratives, with significant investments being made chasing the allure of industry-revolutionizing innovation, which begs a couple of questions: Are we innovating for progress or chasing hype? And perhaps more importantly from a business standpoint, are we truly moving in the direction consumers want, or are we simply assuming that this ‘progress’ is what they need?

Autonomous Disasters?

Road injury is the 12th highest cause of death among all ages, with human factors like recklessness, speeding, distraction, drunk driving, tiredness, driving under influence being significant causes. Replacing drivers with automations should, in theory, reduce the number of accidents. Moreover, sci-fi and cinema have made the working of autonomous vehicles seem shockingly effortless, not to say extremely cool. So, in conclusion, a system that improves road safety, frees up the passengers from the mundane task of driving, all while looking futuristic, i.e., Autonomous Vehicles (AVs) should be an ideal solution, right?

Well, yes, but also no. While autonomous vehicles promise safety and convenience, the reality is far more complex, just like the implementation of a system to which one can responsibly and reliably outsource agency on a consistent basis. It is riddled with issues of technological reliability and ethical and moral ambiguity. For instance, the dilemma of programming a car to choose who survives in the event of an unavoidable and fatal crash—often posed in studies like MIT’s Moral Machine—illustrates the deep ethical quandaries that need to be addressed. This means navigating the wide range of ethical views that variety of consumers hold—whether duty-based (deontological) or outcome-based (utilitarian) or virtue-ethics based, or maybe a combination of different moral philosophies—which is another monumental non-generalizable challenge, but an extremely complicated labyrinth of individual scenarios.

Keeping the moral quagmire aside, allowing AVs on the road without federally mandated reliability testing standards has resulted in over 190 accidents in the United States in 2022 according to KNRLegal, 5 of which were fatal. While accidents are an unfortunate reality for any form of transportation, there exists a need for an independent, enforceable oversight to ensure safety. Currently, there are no federal regulations governing commercial autonomous vehicles in the United States (there exist NHTSA guidelines), leaving automakers free to set their own testing standards, which in turn depends on a mishmash of individual state level testing regulations. This lack of regulatory oversight on a national level means that the rigor of testing depends on each company’s internal policies—a system that could (the word is used in a cynically cautious manner) incentivize speed-to-market over safety. By contrast, other regions like the European Union and China have taken a more structured approach. Such measures aim to balance technological progress with public safety, serving as models for what robust oversight could look like.

As per KNRLegal above, only 16% of the consumers interviewed feel comfortable in fully autonomous vehicles, while 57% are outspokenly uncomfortable, which could likely be the initial skepticism for an emerging technology, like that of mobile phones and e-commerce. Then, there is also the issue of liability in the event of an accident involving AVs—whether responsibility should fall on the passenger or the parent company. Tesla’s Full Self-Driving terms of service and user agreements make it clear that drivers are responsible for the safe operation of their vehicles, and must take over in case of hazardous situation. Volvo, on the other hand, has claimed to accept “full liability” for its AVs. It is, as of yet, up to companies when and whether to take on the liability from their autonomous (and even driver assistance) systems, and there seems no consensus—from a legislatory standpoint—for this.

All these nuances reflects a broader dubiety about the safety and legality of autonomous vehicles. While AVs are undoubtedly a bold step going forward and would certainly revolutionize transportation, some level of skepticism is warranted, as this technology directly impacts public safety. Automakers—and, by extension, legislators—should prioritize refining an oversight to the development of these innovations until they are demonstrably safe and reliable. Until that happens, the rush to label them as ‘The Next Big Thing’ discounts the gap between business aspirations and the current readiness of both the technology and consumers.

Yes, electric vehicles (EVs) are better for the environment in most cases, but T&C apply.

There has been extensive research about how EVs reduce CO2 emissions over the lifecycle in comparison to a conventional internal combustion engine vehicle (ICEV) for a plethora of vehicles. They have zero tailpipe emissions, lower running cost, lesser maintenance cost, are fun to zoom around in, reduce noise pollution, enjoy exemption from taxes, and registration and insurance benefits. There is well-deserved global push from governments and media for the adoption of electric vehicles. It does the same job as an internal combustion engine, better in many ways, while being green and sustainable, with only a few minor inconveniences. Seems like the perfect recipe for ‘The Next Big Thing’—or is it?

EVs are a lot of things going for them, but not without their own caveats and counterpoints to consider. The sustainability of rare-earth elements as its demand increases to cope with heightened EV research, development and manufacturing is a point of contention. However, automakers and suppliers pushing to cut rare earths from EVs, which would be a good thing once established. There is also the issue of emissions depending on the carbon footprint of the grid used to recharge the car, driving habits, the model of the car, and other factors, which is a whole different topic in itself and explained in great detail by 8billiontrees.

Localizing manufacturing, especially for batteries, seems to be a priority for Europe and the USA, to reduce reliance on overseas supply chains with substantial efforts and investments having been made to accomplish this. However, scaling these facilities to meet the demands from automotive OEMs have faced numerous challenges, exemplified by Northvolt’s struggle, illustrating how difficult it is to balance ambitious plans with economic realities. The economic structures present in the western countries lay down a crucial challenge for stakeholders trying to set up localized manufacturing of EVs and their batteries. This challenge is highlighted by a surprising perspective from the consumer tech channel Linus Tech Tips, which notes:

“As heartless as it sounds, the math says, that our standard of living in the western world is enabled by unfettered access to cheap overseas labour.”

Adding to supply chain voes is consumers showcasing range anxiety—unlike an internal combustion vehicle, the range of EVs is substantially affected by the weather, cabin climatization, speed, gross vehicle weight, battery degradation—leaving drivers worried of not reaching their destination, especially if undertaking longer road trips. This is, somewhat, mitigated by the widening network of public superchargers; but these have their own set of issues. They are not absolutely reliable (though human misuse can contribute to this), they are monopolized—with proprietary chargers that are incompatible with other vehicles. Moreover, the charging network is decentralized and privatized—meaning that different types of chargers require separate apps, payment methods, and may not be compatible with all vehicles. (A typical EV driver would need to have multiple phone apps and several RFID cards to manage all the possible chargers on the road). Additionally, refuelling an ICE vehicle remains much faster than charging an EV. The result is a frustrating mess for drivers who just want a quick refuel to get from point A to point B.

And finally, the elephant in the room: $$$

It is an undeniable fact that an EV variant of a car model is often cheaper over its lifetime compared to its ICE counterpart, and the trend continues to expand over time. However, as calculated in the article, the total cost of ownership is sometimes lower because of the benefits offered by governments, which can be reduced or withdrawn in the future. This has already occurred in places like India and Australia and what seems to be on the horizon for the USA. Setting aside government incentives, the argument that EVs are cheaper than ICEVs often assumes that the base models of both types are directly comparable in terms of price and features. A “good car” is often subjective—a Honda Accord, a Hyundai Sonata, a Mazda 6 and a Tesla Model 3 can all be deemed good and comparable cars for prospective buyers, in terms of regular, safe driving. However, the ICEVs mentioned are significantly cheaper than the Tesla, and would still be reliable even after 10+ years and tens of thousands of kilometers. While this is not to say that EVs are inherently expensive, it’s important to note that, even in 2024, affordable EVs often don’t offer the same level of value or performance as similarly priced ICEVs, which benefit from decades of refinement and research. In a time where cost of living is significantly higher, people need a reliable, flexible and convenient mode of transport, especially for those living in suburbs and in places which have subpar public transport.

While EVs are undoubtedly an essential part of the future towards sustainability, they must be viewed as one solution among many. The future of sustainable transportation will likely be a blend of electric vehicles, hybrid technologies, cleaner fuels, and more importantly improved public transit, all working together to reduce emissions and improve urban mobility.

EVs are undoubtedly here to stay, there are important nuances that must be considered before we label them the ‘Next Big Thing’—lest we risk inflating expectations to unsustainable levels, potentially leading to a bubble.

Over-the-Air Hype, Under-the-Hood Issues

Over the years, a plethora of systems in vehicles have migrated, partially or completely, from mechanical control to software control, like ECUs (taken over from carburetor, distributors, and fuel pumps), braking and steering (which has a software intermediary to modulate and assist the input), climate control system, lighting, and infotainment. Softwarization has a lot of benefits: feature evolution over lifecycle of the vehicle, improved safety, cost reduction, aesthetic appeal and convenience. Furthermore, a software defined vehicle can collect data, and send it back to the automaker for analysis and continuous improvement. Imagine unlocking a few additional kilometers of range, because real-time data provided to the manufacturer allowed them to fine tune the ECU! Or playing games on the car infotainment, while waiting for someone. Sounds like it satisfies the criteria to be in the ‘Next Big Thing’ league.

There is a lot of opportunities to improve performance, safety, and reliability of cars by implementing software, but they pose their own challenges. Firstly, there is a lack of standardization or a well-defined platform across the industry. While frameworks like AUTOSAR (Classic and Adaptive) exist to create standard architectures for Electronic Control Units (ECUs), it aims to standardize certain aspects of automotive software, but not all companies adhere to it uniformly, especially for complex systems like those in autonomous or connected vehicles​. Due to this, every supplier has their own internal standard and OEMs mash together software components from suppliers to create an ever evolving platform, resulting in a ever growing labyrinth of complexity buried in millions of lines of code. This combined with the integration of software required for EVs and Autonomous systems has resulted in unmanageable complexity.

The problem of ever growing complexity extends beyond automakers, with consumers frequently caught in the fallout. A example of this would be, sometimes, over-the-air updates released to the end user (drivers), cause unintended consequences—like what happened with Tesla, Chevrolet, and Rivian. Chevrolet’s software update left the infotainment system stuck in recovery mode, causing the battery to drain even when the car was off. Similarly, Rivian’s update affected both the main infotainment screen and the instrument cluster, leaving them completely or partially inoperable. In modern cars, where even starting the vehicle often relies on the infotainment screen, a bug of this sort can effectively brick the car (temporarily). Another issue with over-the-air updates is their tendency to install at inconvenient times, which can be mildly infuriating. While this is not very common and can probably be mitigated by setting update times, it can be understandably frustration and potentially dangerous if it happens in emergency situations.

Owing to the fact that a lot of automotive features depend on software, it also becomes a cybersecurity issue to keep the cars from getting hacked. The automotive industry has experienced an increase in cyberattacks on cars by 225% from 2018 to 2021, a majority of them focused on keyless entry systems. Infotainment systems which are often linked to personal devices and (Google, Apple, Spotify) accounts are also at a risk.

Like both the other points before, softwarization and over-the-air is here, and is here to stay. But the acknowledgement of its limitations and a necessity for standardization is necessary, and automakers should be treated it as a good-to-have than a key selling point as the ‘Next Big Thing’.

The Impact

“In Europe, vehicle sales have stagnated due to lower demand, high car prices, high interest rates, and the ending of certain EV subsidies.”

So says Kroll, an independent financial advisory solutions company. This has led to a lot of European automakers and their subsidiaries being impacted—with Ford Motor Co., Volkswagen, Stellantis and Bosch being hit the hardest. Even established manufacturers outside of Europe, like Toyota, Hyundai, Honda, are facing the problem of stagnant sales over the last few years.

One of the reason for this is the emergence of the Chinese battery giant-turned-automaker BYD capturing a significant portion of the automotive market, with a year-on-year increase of 264% (from about 730k to 2.6M in gross sales) between 2021 and 2023, even though most of its sale happened in its home market. BYD has had a significant market share of global battery manufacturing, and has been leveraging that technological development to make their cars affordable in comparison to their competitors (something that consumers want).

Conclusion: Rethinking the Hype

In the rush to embrace innovation, the automotive industry risks losing sight of what truly matters to consumers. Electric and autonomous vehicles may be crucial to long-term sustainability, but the reality is that they are not the immediate solutions people need right now. Today’s consumers are grappling with the economic pressures of wage stagnation and rising costs of living (possibly due to the post-COVID inflationary shock) and need vehicles that are affordable, spacious, reliable, and safe. While EVs are undoubtedly an essential part of the future towards sustainability, their adoption is not without challenges, such as high upfront costs, infrastructure limitations, and range anxiety. Similarly, autonomous vehicles, despite their allure of safety and convenience, are marred by technological uncertainties, ethical dilemmas, and consumer discomfort.

The constant churn of “new” car models, often with only minor updates and slightly modified looks, creates a sense of apathy, making it harder for consumers to get excited about the choices available. Instead of focusing on the latest trends, car manufacturers should be paying closer attention to consumer preferences and delivering products that address the tangible needs of today’s drivers. The goal should not be to chase the “Next Big Thing” but to offer vehicles that resonate with real-world needs.

Furthermore, many promising technologies such as hybrid vehicles, biofuels, compressed natural gas and other relatively sustainable solutions have been somewhat sidelined in favor of an exclusive focus on EVs. While electric vehicles are important, they are not the only path to a greener future. As the famous maxim goes:

“Rome wasn’t built in a day”

so too does the path towards sustainability, a path that encompasses not just the development of sustainable technologies, but also their adoption. Hybrid vehicles, for instance, offer immediate sustainability benefits without a significant cost increase and without the need for a complete overhaul of infrastructure. Biofuels, too, present a viable alternative for reducing carbon emissions, especially in regions where electric charging infrastructure is still developing. Compressed natural gas, while still being a fossil fuel, produce fewer greenhouse gas emissions, and it can be retrofitted directly—and quite cheaply—into the existing ICE vehicles. Automakers must look at all available options and implement a diverse set of solutions to meet the needs of different types of consumers and reduce overall environmental impact in the most pragmatic way.

True progress in the automotive industry will come not from a rush to adopt a single technology but from a thoughtful, sustainable innovation strategy that takes consumers’ current needs and practical realities into account. It’s about creating long-term value, fostering genuine consumer trust, and steadily working toward a truly sustainable future. As we move forward, the industry must prioritize reliability, affordability, and safety—qualities that matter most to consumers—while steadily advancing technology and infrastructure that will allow for more sustainable choices in the long run.

Author’s note:
This analysis primarily explores the gap between consumer preferences and the evolving dynamics of the automotive industry. However, it is essential to acknowledge that many other factors—such as legislation, trade restrictions, supply chain disruptions, government programs and incentives, and geopolitics—also play critical roles in shaping the industry’s landscape. These complexities must be considered when evaluating the future of automotive technologies and market trends.

Additonally, the objective of this post is not to criticize emerging technologies but to offer a lens of guarded optimism for viewing hyped-up trends.

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