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Digital Transformation in Germany: What’s Next for the Automotive Industry

Digital Transformation in Germany: What’s Next for the Automotive Industry

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By Shoshana Friedman

Volvo, Mercedes Benz, Audi – without thinking twice the logos and images of these car companies automatically pop into your head. Recognized throughout the world, Germany is well known as one of the principal leaders of the automotive industry.

Today, digital transformation is taking the automotive industry by storm. And as you will read, German automakers are finding themselves on the cusp of technologically moving forward or being left behind.

From combustion engine to electric motor

Auto industry standards have changed and innovation is driven by software. Today, electric cars are becoming increasingly common, with a rise in gas stations with electric chargers.

The electric car is giving way to even more advanced software, self-driving cars. Large sums of money are being invested by top tech companies like Apple and Google to make self-driving cars a reality.

German automakers, lauded for their high-quality premium cars and complex mechanical systems, are now starting to catch up to the software. “As the differentiators of autos shift from ‘mechanical’ aspects [chassis, engine, etc.] to ‘software’-based features [connectivity, user interface], the more the core capabilities of tech companies become a threat to automakers who have to build these skill sets rapidly themselves,” says Arthur Kipferler, of automotive consulting firm Berylls Strategy Advisors.

Digital transformation is influencing the competitive landscape. Veteran industries are now competing against seemingly unrelated sectors, like software companies.

Transportation isn’t what it used to be

Trends in transportation are transforming across the globe, specifically in cities. With the advent of car-sharing services like Uber and Lyft, owning a car is less of a necessity. Included in the urban mobility milieu, are rideshare bikes and scooters. People are traveling shorter distances, and as cities become more congested, parking is harder to come by. Ride and car-sharing services are powered by software apps equipped with GPS, user activation and billing. These new modes of transport have a direct impact on how many people are purchasing cars annually, which is decreasing. However, the drop in car purchases is not unique to the German auto industry. Keeping up with the transportation trends underscores the need for leaders to invest in digital transformation to respond to consumer needs.

Clean and green transport

The environment is a global topic of concern and people are looking to minimize their carbon footprint and reduce unnecessary waste. Electric cars have been shown to reduce fewer carbon emissions compared to cars that run on diesel.

In 2015, Volkswagen was at the center of a controversy when it was discovered that they had manipulated vehicle emission tests. This prompted legislation, and the EU set strict CO2 emissions restrictions rules with fines for companies that don’t comply. The European car industry is paying heed, and according to the president of the Verband der Automobilindustrie (VDA), “Germany’s automotive industry is planning an aggressive investment (€58 billion) in electric and autonomous cars, along with digitization.” 

Credit: CBInsights

The time to innovate is now

Due to consumer preferences and environmental regulations, the German auto industry needs to undergo a drastic digital transformation. German automakers are vital to the health of the country’s economy, representing 5% of the GDP and employing 820,000 people according to The Financial Times. 

Industry shift to digital transformation

But automakers aren’t the only ones feeling the wave of digital transformation. Traditional industries like oil and gas and banking are also making the move into a digital forward restructure.

For the German auto industry and their workforce, implementing and ensuring software alignment will be a game-changer that will have many upstream and downstream effects.

Digitalization brings change

To embark on a digital transformation, German automakers will need to evaluate and audit systems and business processes that currently exist. They’ll need to consider the following questions:

– How many steps does each process take?
– Can these processes be automated?  
– If automated, what implications does that have for employees? 

Change can be daunting and adding technology or automating processes can initially be disruptive. With automation, some traditional roles will shift. This might increase efficiency but may cause resistance from seasoned employees. Digitalization also means that new roles will be created. Enabling hardware engineers, quality managers, salespeople, project managers and other key players within the automotive industry to be more digitally driven, will aid them in viewing digital transformation as a welcome development.  

New software learning curve

Onboarding employees to new software requires a deliberate change management commitment. Setting out on a digital transformation journey means that employees need guidance to learn and adapt to freshly introduced software. Digital adoption solutions maximize users’ continued understanding and handle on software, serving as a GPS of sorts. Beyond that, a digital adoption platform can provide valuable insights to understand where internal users are at a crossroads. Reliable data is collected, which drives sound decision- making versus relying on qualitative feedback. 

Driving the German automotive industry forward

Strides are being made by German automakers to invest in digital technologies and focus on cleaner cars. Industry leaders are now at a pivotal time where they have the golden opportunity to propel their companies even further. Investment in digital transformation, inclusive of digital adoption solutions, is a necessary tool for moving ahead. By streamlining and automating operations, maximizing employee productivity while minimizing costs and mitigating risk, a digital adoption platform solution can be the turning point in realizing a digital transformation. 

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Shoshana Friedman
Shoshana's background in product and user experience gives her writing a focus on the human aspect of the business and technology landscapes. Her unique UX angle allows her to assess the digital era in a way that is both practical and insightful.