More Automakers Are Collaborating with Technology Companies | ISG

There’s no two ways about it. Automotive makers must embrace new technologies to meet the evolving demands of consumers. Vehicles are transitioning from traditional mechanical machines to sophisticated technological platforms with advanced software, sensors and connectivity features. Relying solely on internal resources and knowledge is not sufficient; manufacturers must collaborate with technology firms. By doing so, automotive manufacturers are leveraging shared expertise to address challenges and expedite groundbreaking technologies to market.

Today’s vehicles are intricate networks that require specialists in fields such as computer vision, the Internet of Things (IoT) and big data analytics. In one example of where this is happening, automotive leaders from the BMW Group and specialists at Tata Technologies are collaborating to advance automated driving, infotainment and digital services. Tata Motors is using Microsoft Azure Intelligent Cloud for improved navigation and predictive maintenance in its electric vehicles.

3 Areas of Collaboration Between Auto and Tech

Auto makers and IT firms are collaborating in the following areas:

1. Autonomous driving technologies: The development of autonomous vehicles requires significant R&D investment in AI and machine learning. To accelerate this, the automotive industry is working closely with technology giants, software start-ups, research institutions, telecom providers, insurance companies and others to develop advanced technology, share risk and prepare the market. For instance, General Motors has formed a dedicated team of senior autonomous vehicle engineers and made a $500 million investment in Lyft, while also expanding its R&D efforts in collaboration with Honda, Volkswagen and Mobileye. Ford Motor has teamed up with Google, AT&T and Amazon, promoting its SmartDeviceLink open-source software. Toyota has expanded its five-year telematics partnership with Microsoft and invested $1 billion in R&D, which includes the establishment of two new AV research centers adjacent to Stanford and MIT.
2. Data analytics and cloud computing: Collaboration between cloud service providers (CSPs) and original equipment manufacturers (OEMs) is at the heart of innovation and progress in the automotive industry. CSPs play a vital role by offering essential cloud infrastructure and services that support various automotive advancements. This collaboration is to critical to numerous initiative, including developing features for connected and autonomous vehicles, processing and analyzing vast volumes of vehicle-generated data, enabling seamless communication among vehicles and external systems, ensuring robust data security and privacy and leveraging cloud computing to test autonomous vehicle technologies. An increasing number of examples highlight the success of such collaborations in shaping the future of mobility. For example: Mercedes-Benz collaborates with Microsoft to improve efficiency, resilience and sustainability in car production. The Renault-Nissan-Mitsubishi Alliance works with Microsoft to create the Alliance Intelligent Cloud, enabling global vehicle connectivity, digital innovations and services like remote assistance and over-the-air updates. Rivian uses AWS for advanced simulations to minimize reliance on costly physical prototypes, while Volvo partners with Google to enhance in-car entertainment and leverage Google’s cloud computing for its digital infrastructure.
3. 5G technology: This is the essential element needed for the continuous development of communication between the vehicle and other systems, for example vehicle to vehicle (V2V), vehicle to device (V2D), vehicle to infrastructure (V2I), vehicle to cloud (V2C) and/or vehicle to pedestrian (V2P). Ford Motor Company uses a 5G private network to support critical production and maintenance processes at its Dunton, Essex, manufacturing plant. Collaborating with Vodafone, Ford implemented a mobile private network (MPN) using the mid-range 1GHz–6GHz spectrum. This solution combines the reliability and responsiveness of wired connections with the flexibility and cost-efficiency of wireless technology. Mercedes-Benz Cars, in collaboration with Telefónica Deutschland and Ericsson, is pioneering the world's first 5G mobile network for automobile production at its "Factory 56" in Sindelfingen, Germany. Spanning more than 20,000 square miles, this project integrates the 5G communications standard into active production processes for the first time.

How Technology Is Impacting the Auto Supply Chain

Automotive OEMs have long been working together to solve common supply chain challenges. Most recently in September 2024, as part of a broader collaboration agreement, GM and Hyundai agreed to work together on common supply chain issues that could be resolved through technology and enhanced analytics. As far back as 1999, the Renault-Nissan-Mitsubishi Alliance (RNM) was formed primarily to solve common supply chain challenges.

Automakers are rapidly embracing digital transformation to create a more agile, responsive and efficient supply chain ecosystem. With its predictive analytics, demand forecasting, and real-time decision-making capabilities, AI is making huge strides in the supply chain optimization space. Blockchain technology offers a decentralized, immutable ledger, revolutionizing transparency and security in supply chain management.

How to Face the Challenges to the Automobile Manufacturing Industry

Where should auto makers focus their energy this year? Here are top four areas:

1. Creating sustainable supply chain strategies—such as smart logistics, fleet electrification, renewable energy usage, adopting circular economy principles, etc.
2. Collaborating with governments and industry stakeholders to establish a transparent and sustainable automotive value chain.
3. Conducting specialized training programs and best practices with smaller players engaged in automotive value chains.
4. Expanding infrastructure to further strengthen the domestic EV manufacturing ecosystem to help create sustainable supply chains.

How Connectivity Poses More Cybersecurity Risk

In recent years, Industry 4.0 has transformed industries through widespread digitalization. However, this progress has increased cyber risk, even in industries once considered secure. The automotive industry saw a rise in cyber-attacks, challenging its earlier reputation for safety.

The automotive industry lacks standardized cybersecurity practices. And the automotive supply chain is complex, with many stakeholders, interconnected systems and a variety of components and software. This complexity gives cyber attackers many opportunities to exploit vulnerabilities, making it hard to secure the entire supply chain. Many systems still use outdated technologies without built-in cybersecurity, and adding security to these older systems is a tough challenge for cybersecurity teams.  Different supply chain players have their own security requirements and compliance standards, leading to integration problems and vulnerabilities.

To reduce cyber risks, a multi-layered security strategy is essential. This involves using various defenses at different levels to create a strong barrier against threats. Several frameworks have been developed to address these challenges, such as ISO/SAE 21434 for cybersecurity engineering, UN Regulation No. 155 for cybersecurity management, AUTOSAR for secure software, and ISO 26262 for functional safety. Following these standards builds a solid cybersecurity foundation and shows a commitment to securing the supply chain. As the automotive industry continues to grow, adopting advanced technologies like machine learning and AI can further improve cybersecurity. These tools enhance threat detection and response, enabling proactive protection against cyber-attacks.

How ISG Can Help

ISG helps automotive enterprises adopt new technologies to keep up with changing consumer needs. We have a specialized understanding of the ecosystem of providers that can support advanced platforms with modern software and connectivity features. These partnerships can drive innovation, improve sustainability and enhance customer experience – but they must be built on strong contracts with clear business outcomes. This is what we do best. Contact us to discuss how we can help you.