Digitalisation and new business models create big opportunities for cooperation between suppliers and the automotive industry

The automotive industry is facing a new era. Ambitions such as self-driving vehicles, electrification, new business models, increased digitalisation and artificial intelligence mean that requirements for in-house development and innovation are sky high for the industry’s suppliers.

“For us this involves cooperating more closely with our suppliers to become more efficient and create new, innovative solutions and products,” explains Magnus Leiner, Vice President, Global Procurement Software & Electronics, Volvo Cars. “Our ambition at Volvo is to use digitalisation and new technology to be able to offer our customers a full extra week of time by 2025.”

There are both opportunities and threats within the automotive industry, and it is critical to keep up with developments in what is an ever-more technological and digitalised world. This is because development also brings with it business opportunities that will also force traditional industries to face competition in a new way.

“There are many Swedish suppliers who need to think of what the customer needs tomorrow, not sometime later on. New players can easily enter the market, which means that the supplier chain can be somewhat turned upside down,” Leiner says.

“In our industry, with ambitions to have self-driving vehicles in future, the focus is on developing new technology and new values for our customers. In time, this means that we will be selling a service more than a car. Now is exactly the right time to develop services and mobility solutions that are better suited to what the customer wants, such as a subscription that develops along with the customers’ needs. We’re seeing this clearly with our offering Care by Volvo.” 

Leiner argues that we have to wake up more in Sweden, and compares the current development process with previous huge technological shifts, such as industrialisation and post-war major investments in Sweden involving public- and private-sector cooperation.

“I believe there is a big opportunity for new suppliers and players to get a foothold in the automotive industry, where more Swedish companies and their expertise will become established in future. All these new players will exploit the possibilities being created by artificial intelligence and machine learning so that they can understand their customers and create tailor-made solutions that develop along with the customers’ needs.

“The development process is happening fast now and this means we must invest more in Sweden via schools and research, and link this together with the public sector, the corporate world, and investments.” 

To achieve this, cooperation between suppliers and Volvo Cars must be close, focused and timed right. Examples of such cooperation are with the car safety company Veoneer, Google, and Nvidia.

It is also important to position oneself right. Volvo Cars has done this by creating its own companies within the overall corporation in order to focus on the right place and on important details.

“We want to lead this change in the car industry instead of becoming a victim of it,” Magnus Leiner concludes. “We need the help of many suppliers and many cooperation arrangements to succeed with this – to think in new ways and understand what total experience the customer wants and how we can improve our customers’ existence – every day.”