Team first week of working with Audi Innovation

Team Research Brief

By Team 2

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During the first week of working with Audi Innovation Research
(AIR) Team on the Corporate Business Challenge, we spent most of our time on
brainstorming and discussions. We want to make sure that we do not
automatically exclude innovative ideas before conducting thorough research. At
this point, we are still open to all of our ideas, because in that way our
decision will be based upon the following Market and Customer Research.

 

We are interpreting and emphasizing Audi’s three key factors in
continuously driving their Vorsprung (advancement) in technology, in how we are
researching the U.S. market and customers. More specifically, our
interpretations will reflect urbanization and sustainability, through
digitalization. This will be our basis for generating recurring revenue and
strengthen brand loyalty for Audi.

 

Market and Customer Research

According to Selectusa.gov (2018), the United States has one of
the largest automotive markets in the world. It is an oligopoly and consists
mainly of three major firms: General Motors (GM), Ford, and Chrysler (Falter,
2010). These corporations have dominated the U.S. market with large
manufacturing capabilities. With new technological advances, the market can be
disrupted to allow a new competitor to control the market.

 

Urban Commuters

 

According to Statista (2017), 54% of the world’s population lived
in urban areas in 2017. This percentage is expected to increase to 70% by 2050.
The key element for success and sustainability in cities is a transport system
that is meeting the needs for economic growth and taking care of the
environment (Attard & Shiftan, 2015). Additionally, as more people choose
to live in urban areas, this is challenged by the positive contributions of
transport in terms of opportunities for employment and education, combined with
the high costs associated with pollution, congestion, accidents, and noise.
Moreover, communities and their built environments are positively impacted by a
sustainable urban transport. Though, there are not enough facts that show signs
of succeeding in economic growth.

 

The urban commuter market is becoming more innovative and the
options for transportation are increasing. Nowadays, people own fewer cars
compared to some years ago, because of alternative transport options (Mulalic
and Pilegaard, 2015). They prefer other alternatives such as car sharing,
public transport, and bicycle. The convenience of amenities close by in
residential areas decreases the necessity of owning a car.

 

Public transit

Urban
cities around the world are investing a lot in public transportation to improve
mobility. San Francisco is currently extending the Caltrain to reach the city
center, upgrading the rail system, and initiating bus rapid transits. Washington
DC also currently expanding the metro system from the city to the suburbs and
is creating more dedicated bus lanes. Some regions of the United States are
also bringing back the light rails.

 

The
urban cities are also becoming more digitalize with their public transit system
and are experimenting a lot of mobility innovation.  In Santa Clara, California, the Valley
Transportation Authority (VTA) has created an Innovation Center, where VTA
teams, startups, companies, and students can develop transportation-related
innovation(Kraatz,2015)

 

Car

The four trends in technological
innovation in the car industry are; vehicle
connectivity, car sharing, electric vehicle and autonomous driving. If urban cities find
a way to combine the four elements, mobility solutions could be substantially
improved.  

 

Vehicle connectivity

Vehicle connectivity is opening up opportunities,
either through apps on a smartphone or an embedded system and screen. Possibilities
such as real-time analytics and traffic information can help cities reduce or
avoid congestion, with apps that help drivers reroute and shift the timing of
travel. Car to car and car to infrastructure reports can eventually be used to
avoid accidents and anticipate traffic congestion.  A developed infrastructure and vehicle
connectivity will be essential for optimal traffic flow. This information would
be valuable for traffic control centers. For example, to clear bottlenecks
effectively by help drivers avoid congested areas. The traffic information can also help cities to respond to emergencies.

 

Car sharing

Most cars are idle 95 percent of the time or more (Greef, 2017).
Car sharing and other services could decrease this number significantly, and at
the same time possibly reduce cars on the roads. The study of car sharing rates
and effect is still undergoing, but it is clear that car will be used more intensively.
The upside will be that shared and fully autonomous car could lower the cost of
mobility and car ownership.

 

Electrical vehicle

According to market research, the annual
sales of electric vehicles and hybrids is going to increase from around 2.3
million in 2014 to 11.5 million in 2022, this will be 11% of the global market (AlphaBeta,
2016). Electric powered trains can increase the energy efficiency of
the car and decrease the pollutants released. The short-term forecast for the electric
vehicle is lower than their fossil fuel counterparts, but companies such as
Tesla have proved that the market can certainly be disrupted. The interest in electrical
vehicle is certainly increasing in urban cities where distances are shorter. The
cost of a battery is also falling faster than predicted, and therefore shifting
the economic trends over to the electrical vehicle in the long term.

 

Autonomous driving

It is difficult to predict but the self-driven car is
becoming closer to reality. We can already see some car models that offer a
degree of autonomy. Google has announced that they plan to launch a pilot of a
fully autonomous car by 2020. The predictions are that self-driven cars could
cut accidents by 90%, which will save thousands of lives and save United states
190 billion dollars a year by 2050(De Mars, 2017). It will also make it able
for passengers to free up time and do others tasks.

 

Walking and
bicycling

A lot of urban cities
such as London, New York, Paris have pedestrianized parts of the city centers.  Not only do they have restricted access to cars,
but they have also made the streets more suitable for pedestrians and bicycles
by better street signage, better lighting, adding more greenery and paving
materials. Cities are also experimenting with closing streets on the weekends.
These implementations can have a positive effect on urban mobility. Many cities
have also made bicycling more popular by making it safer and easier. Bike
sharing, for example, a growing trend. More than 850 cities have bike-sharing
options now, compared to 68 in 2007(Armstrong, 2016). But it is still from a
low base. For example, in New York, where bicycling has tripled since 2000 but only
account for around 1% of commuters (Copeland, 2016).

Urban Transport Challenges

When transport systems cannot satisfy the numerous requirements of
urban mobility, the urban productivity weakens (Rodrigue, 2018). Urban
productivity is highly affected by the efficiency of its transport system to
move labor, consumers, and freight between multiple origins and destinations.

 

Congestion is one of the most prevalent transport problems in
large urban agglomerations (Rodrigue, 2018). The demand for transport
infrastructures is growing at a fast pace, but the supply is not able to keep
up with the growth of mobility. Vehicles spend the majority of the time parked,
which has created space consumption problems, particularly in central areas.
Furthermore, these two factors are interrelated since looking for a parking
space (called “cruising”) creates additional delays and impairs local
circulation.

 

Other factors: people are spending an increasing amount of time
commuting (between their residence and workplace), public transport inadequacy,
difficulties for non-motorized transport, loss of public space, high
infrastructure maintenance costs, environmental impacts and energy consumption,
accidents and safety, land consumption, and freight distribution.

 

Solving
the challenge of mobility will demand coordinated and daring actions from the
public and private sectors. Technological commercialization and advances, intelligent
policies, business-model innovation technological and a lot of funding are acquired
to legalize improvement and create sustainable environments at the same time.

 

Commuters in San Francisco

After interviewing and observing people in San Francisco, we found
out that they perceive the traffic as stressful and chaotic. The people we
interviewed that used public transport, said that they felt intimidated by the
traffic in the city and that this was the main reason why they did not drive a
car. Common factors amongst the interviewees were: safety as a reason for commuting
with public transport, mobility, comfort, status, speed, and convenience.
According to a report by traffic data and measurement company INRIX (2015), San
Francisco is the third worst state in the U.S. when it comes to traffic.
Average time wasted per San Francisco citizen was 75 hours. We also interviewed
some South Korean tourists, who on the other hand, was not satisfied with the
public transport in San Francisco. According to them, the public transport in
South Korea is more efficient and cheaper than here. The field test allowed us
to get direct feedback from commuters and validate customer needs. Our research
gave us insight on how commuters in the city of San Francisco feel about public
transportation.

 

Future insight

The auto industry will be changed by technology to get more green,
convenient, safe, and affordable (Goldmansachs.com, 2018). By that, Goldman
Sachs (2018) is stating that the transformation will be driven by “Filling up,
plugging in”, “Lightening up”, “Self-driving cars”, “Evolving the supply
chain”, “New competitors”, and “The internet of cars”.

 

Furthermore, Goldman Sachs (2018) presents that 18% of Millennials
in North America are willing to share cars. But only 4% of Generation Z would
do the same.

 

The future of Artificial Intelligence in mobility is not just
products, but also transportation planning, urban design, real-time traffic
management and control, transport policy, environmental issues. The development
of these technological innovations can save an economy billions of dollars.
According to Forbes, U.S. traffic congestion costs the trucking industry around
$50 billion per year; due to fuel that is wasted during the idling of vehicles,
productivity loss, air pollution and road crashes (Lohar, 2017). According to a
new World Bank report (Worland, 2016), air pollution costs the global economy
more than $5 trillion annually in welfare costs, with the most devastating
damage occurring in the developing world.

 

Discussion & Summary

Taking into consideration our Market and Customer Research in
relation to the future of the automotive industry, we assume that Millennials
are the generation that is most likely to be open to car sharing. The
self-driving cars seem to be closer to becoming a reality than we first
thought. Therefore, the customer segment will drastically change within the
next couple of years. However, we do not know much about liability issues that
automotive companies are facing. For large companies, mitigating risks will
most likely increase the R&D budgets and the needs of diversifying in
different technologies.

 

The
thing we can be certain of is that the rising incomes and aspiration, the
demand for mobility will increase. Many urban cities today still require owning
a car, other alternatives might be insufficient or unavailable. But
technological innovations are changing the market, from apps where car owners
can share their rides or renting their cars. So how will the future of urban
communication be? Our point of view is that it will be more sharing, more on-demand
and we will have more alternative services.  The self-driving cars seem to be feasible and
closer to becoming a reality than we first thought, in regulatory- and technical
terms. Urban commute will most likely be more effective, safer, cheaper, and
the difference between public and private transport will be less certain. Many
countries are actively changing policies to support the changes to come. The
USA is preparing for a framework to govern self-driven cars. Innovation in
connectivity, autonomy, lightweight materials will continue to accelerate, and
the mindset of cities and citizens are progressing. Taking everything into consideration
it is easy to feel eager about the promising future for urban mobility.