Volvo CIO Atif Rafiq believes the automotive industry is undergoing its biggest changes for 100 years, and has been set a series of objectives to help Volvo thrive through the disruption.
The first goal is to ensure Volvo is the leading producer of the cars of the future. By 2025, the company wants half of its sales to be electric vehicles, and a third of them to be autonomous cars.
The ambition concerns the way in which these vehicles are sold. Rafiq predicts that the car ownership model may be coming to an end, and has put plans in place to replace purchases with rentals.
In 2017, Volvo launched the Care by Volvo subscription programme. By 2025, the company aims to make 50% of sales through the service.
“You set a standard national price, so everybody gets a fair deal,” Rafiq explained at the AI Summit.
“It includes insurance and maintenance, and it has a very flexible term. And then when it comes the time for renewal, if you like the car you drive, you can just keep going for the same price but with the current model version of that car. We really think it takes out some of the pain points in accessing cars.”
Partnerships with disruptors
Volvo is competing in a crowded market of established auto giants compete and digital upstarts.
Sometimes the disruptors can be turned from threats to allies, as Volvo proved by partnering with Uber to develop autonomous cars.
The collaboration reflects a growing trend in the industry for carmakers to team up with car-sharing firms. Ford is working with Lyft on its own driverless cars, while Chrysler has joined up with Waymo, Google’s self-driving vehicles unit.
Volvo embraced this mindset when it established Zeunity, a joint venture to develop software for autonomous driving and driver assistance systems. Volvo supplies the software, while Autoliv provides the hardware and Ericson adds the connectivity for self-driving cars.
Volvo also worked with Google to add Google Maps, Assistant, and Google Play Store to the Sensus vehicle infotainment system and with Amazon to develop two new services for customers: an in-car delivery system, in which couriers use Amazon Key to drop packages in cars while the driver’s away, and a test driving service that delivers a Volvo to a potential buyer’s house and then gives them a test drive on their local roads.
Rafiq admits that Tesla remains the most innovative player in the space, but believes these collaborations have brought Volvo close behind them. In some areas of innovation, he believes his company has already overtaken Elon Musk’s automaker.
“They certainly woke up the industry but they’re not ahead everywhere,” he said. “A number of those partnerships I think put us ahead of the pack.”
Rafiq’s route to Volvo
Rafiq joined Volvo at the end of 2016, after a three-year stint as the first Chief Digital Officer at McDonald’s in which he helped launch on-demand delivery, introduce digital ordering and pilot power charging stations.
He spent two years working on IPOs and mergers and acquisitions as a financial analyst at Goldman Sachs, and cofoundedand sold a content management startup called Covigna.
These experiences helped when earlier this year Volvo made its first investment through its new investment arm, the Volvo Cars Tech Fund. The company bought a stake in Luminar, a startup that develops sensors for autonomous vehicles, an area of the Volvo business that is set for rapid growth.
The company has already demonstrated self-driving trucks, busesandboats, but Rafiq believes the development of autonomous vehicles will vary by region.
“It will depend on the use cases and the geographies,” he said. “In the United Statesforexample, it is very state-by-state, and some environments are much more embracing and want to take it on because they see it as a net benefit safety-wise for people and because they don’t want to stop regulation that’s coming very fast.”
Volvo is renowned for its focus onsafety, a reputation that gives it an edge inthe self-driving cars market.
The company has already achieved Level 2 autonomy, which means computers control for at least two driving functions but still need the help of a human to control the car. Volvo plans to skip the next step and move straight to Level 4 driverless cars, which are fully autonomous in controlled areas. It aims to sell its first driverless vehicles in 2021.
The move to Level 4 will require coordination with other cars on the road. Volvo’s connected safety technology uses live data-sharing through a cloud-based system to allow vehicles to communicate with each other and alert drivers of nearby hazards, but the system is currently only available to Volvo owners.
“The question might be, well would be open to sharing that with other companies because why should just a Volvo be aware of the fact that a road is slippery,” said Rafiq.
“We just have to design the mechanisms to in the appropriate way. I think companies should be much more open from the data-sharing perspective, because in that way society benefits.”
Volvo is also investigating how AI could assess the condition of a car a customer is buying and how it could improve predictive maintenance.
The whole maintenance process could be automated. Volvo could receive an alert of a potential issue and instantly arrange a visit from a mechanic, who could then remotely unlock the car and make the necessary repairs. The growing role of automation will be supported by constant software updates and improvements to transform the industry’s static business model.
“This is an industry with a heritage of long car lifecycles where the product doesn’t change for four or five years,” said Rafiq. “That is absolutely the opposite of where this industry is going.”
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