Automobile Sector a Main Innovation Driver in 2013

By February 03, 2014
innovation in car industry

The automobile industry has become one of the main sectors driving innovation, both in terms of R&D investment and in the growing number of practical applications.

At the North American Auto Show which took place last week in Detroit, global management consulting firm BCG provided a summary of a forthcoming report entitled ‘Accelerating Innovation: New Challenges for Automakers’. Whereas in 2005 there were only five automakers among the top 50 most innovative companies, in 2013 there were 14, with three companies –Toyota, Ford, and BMW – featuring in the top 10. The vast automobile sector, with its huge manufacturing base and mass market, seems particularly suited to the penetration of a variety of new technologies, including such innovations as the use of connected objects and the application of gesture recognition techniques. For the first time in the history of the BCG innovation reports, the authors list more carmakers and firms which are directly linked to the automobile sector than technology firms in their ranking of the 20 most innovative companies.

Increase in R&D investment and patents

The speed of the progress made in this sector between 2005 and 2013 is impressive, but these results stem from a sound longer-term investment strategy, particularly in research and development. R&D spending at the 14 original equipment manufacturers (OEMs) listed has increased at an annual rate of 8% since 2009, while spending at leading tier-one suppliers to OEMs has risen by 5% a year. These figures are corroborated and illustrated by the leap since 2011 in the number of patents filed by tier-one suppliers – up by 37% – while the number filed by OEMs has jumped by 28%. The survey shows average investment rising constantly, and the BCG experts predict that ability to innovate in four key areas will be a major factor in individual carmakers’ success in the years ahead. The first area is power train, i.e. the set of components which generate power and deliver it to the road surface, while the other three areas call for more cutting-edge technological innovation – connectivity, active safety & assisted driving, and lightweight materials. The latest BCG research indicates that the technological features of the car have now become a key competitive factor, especially with the advent of electric cars on to the market.

Consumers crave innovation

The BCG researchers have been probing the importance of embedded technology to automobile drivers. Their survey among US consumers reveals that most want to purchase a vehicle from a company which projects a flair for innovation, for example being the first to introduce a given new technology. Almost 60% say this is a very or somewhat important consideration in their choice when buying a car. In fact there are strong indications that the ‘gadget’ aspect is gaining the upper hand among US consumers, the majority of those polled by BCG stating that they are more interested in the novelty of the innovation than its precise use in the driving process or how it fits into the overall auto ecosystem.

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