Cards reshuffled in mobility, but CES showed incumbents fight back
New mobility service providers have emerged rapidly. Electric mobility, autonomous and connected vehicles are maturing quickly and tech companies are eager to use these disrupting innovations to grab part of the mobility business. A drop in individual car ownership is clearly foreseeable. Consequently, traditional carmakers’ revenue and profits from selling and maintaining cars are being threatened. They are now forced to redefine their business model and adapt at warp speed. How are tech companies moving in? What strategic options do carmakers have given their current positioning and resources? What if a new player was to gain a dominant position in a critical space? CES 2017 gave us some indications as to how the mobility deck of cards is being reshuffled.
Tech companies are entering the mobility space
Google's Way Apple, Microsoft and IBM fight to make inroads in the automotive ecosystem. Google and Apple want to take over the core system of cars with some sort of “carOS”. Way is already working closely with Chrysler with their autonomous driving system. Microsoft has recently entered the game with Azure, a cloud-based platform hosting carmakers’ connected vehicle applications. Renault-Nissan and BMW are collaborating with Microsoft on this venture.
Amazon, Microsoft and Apple are progressively positioning themselves inside cars via their AI-based, voice-activated assistants Alexa, Cortana and Siri. This technology will enable vehicle-to-home communications, help manage agendas and offer many other applications that make life easier. By the way, it was clear at CES that Alexa is in the lead in gaining a foothold with OEMs such as VW, BMW, Ford or Hyundai.
Chip makers Intel, Nvidia and Qualcomm are also investing heavily in the mobility space, mainly through autonomous driving. Nvidia already powers Tesla’s camera and radar-based autonomous driving functions with its computing platform and is getting ready to launch a much more powerful version, PX2. Nvidia presence at CES 2017 was significant and included an autonomous driving demonstration on a closed track. Intel just announced they will take a 15% stake in map maker and location service provider Here which BMW, Daimler and Audi acquired in 2015. Qualcomm recently announced its “Connected Car Reference” platform dedicated to connected cars and V2X.
Ride hailing services (Uber, Lyft, Gett, Didi Chuxing…), car sharing programs (ZipCar, Bollore’s BlueCarSharing…) and ride sharing services (BlaBlaCar, WazeRider…) are progressively pulling mobility customers away from the carmakers’ sphere. They offer anywhere-anytime mobility solutions which are particularly appealing to a young urban demographic who realize that individual car ownership means money is tied up in an asset that is used only 10% of the time.
Incumbents have few options to react
Few carmakers have anticipated this profound shift and recognized the need to take action. Among them is Ford, whose chairman Bill Ford declared in Jan 2008, “Don’t assume we’re always going to be in the car business. We’re going to be in the transportation business, and it’s going to look very different 20, 30, or 50 years from now.” In 2009, Daimler launched Car2Go, its car sharing program which reportedly now has 2 million registered customers and has passed the break-even point.
The mobility transformation has clearly accelerated in the past 12-18 months. Many newcomers have now changed gears and are investing heavily to grab a share of the mobility market. Given this, carmakers are certainly not standing still; they are fighting to protect their revenue and profitability. Most of them are pivoting from making cars to providing mobility solutions — or at least communicating about it! The increasing technological content brought about by autonomous driving and vehicle connectivity will necessarily result in hi-tech players gaining an increased share of the value chain. They will provide hardware for autonomous and connected vehicles, mapping services, new sensors, cloud-based platforms, voice activated and artificial intelligence-based functionalities, etc., which carmakers have neither the expertise nor the financial justification to develop on their own. Yet, they need to build the necessary expertise to integrate these new technologies in their vehicles and progressively bring to market electric mobility, autonomous driving and connectivity.
Carmakers integrate new tech and pivot to provide mobility solutions
Given the above limitations on technology and the need to react to revenue and profitability threats, manufacturers should extend the scope of the relationship with their customers and enrich the user experience; this is what incumbent players call becoming “mobility providers.” They must also avoid any one player gaining a dominant position in a strategic space of the mobility market.
What does it mean to become a mobility provider for a carmaker? In what adjacent space are they legitimate? What extra expertise can they reasonably bolt on to their existing business? What new activities will make the best use of their existing assets, at least in the medium term? This is a complex equation, especially as neither the precise steps of this deep transformation nor their timing can be quantified. We just know it is happening!
Given that people are increasingly looking at cars as one of the means to get from A to B, carmakers must reposition the automobile on a continuum and build the journey around it. This will include many more touch points with customers and therefore potential value added through an extended user experience. Carmakers have the opportunity to use the car as a multipurpose user interface, repositioning the pure mobility role within a multimodal network. They must build the in-house expertise to offer completely new services. The main players are building new structures with armies of coders to address this challenge.
Some carmakers showed possible way forward at CES
At CES 2017, Mercedes presented an extended user experience where they accompany their customers from the time they wake up to the end of their day. Wake-up time is adjusted based on the person’s agenda, traffic and weather. Days are organized with the help of artificial intelligence, including (autonomously) picking up kids at school, reserving a restaurant, adapting the day’s agenda in case a reshuffling is needed, etc. These services would certainly provide brand differentiation. They would also allow to sell content and collect fees as reservations are made and services rendered. The vehicle becomes a comfortable, work/entertainment-enabled space to travel and make the day a pleasant one.
BMW focused their CES exhibit on the vehicle interior: a moving cocoon adapted to autonomous driving. This was their opportunity to showcase applications of haptic technology and holographic controls in order to enrich the “driver’s” experience. They also presented their vision of an extended user experience — which seems less mature that Daimler’s — aimed at helping customers throughout their day.
Several carmakers are also building their own car sharing and ride hailing services, following in Daimler’s footsteps (Car2Go). Ford launched GoDrive, VW announced Moia, BMW has DriveNow, etc. The alternative consists in partnering with (or buying into) existing businesses. GM invested $500 million in Lyft, VW put $300 million in Gett and PSA invested in Communauto. Speed is of the essence here as there are now strong players. Uber and Didi have taken a head start and already built significant awareness by investing huge sums of money to develop a wide presence, with over 250 cities for Uber.
Carmakers are also taking steps to avoid any sort of market domination by one single player. BMW, Audi and Mercedes-Benz jointly acquired map maker Here from Nokia in 2015, so as to create a counter-balance to Google. In Sept 2016, the same players launched an alliance with 5 major mobile telecoms network equipment firms to accelerate the development of the infrastructure needed for self-driving cars.
To secure the development of electric mobility, carmakers are also playing an increased role in the critical development of the EV charging network, addressing both density and charging speed issues. Ford, VW Group, BMW and Daimler announced a plan in late 2016 to set up charging stations along major highways in Europe. They aim for increased density and faster charging points (up to 350 kW when only 8% of charging points in Europe are above 43 kW today).
Overall, carmakers have taken full measure of what is happening in the mobility space. They are investing heavily, changing their culture to become more agile and building the necessary competencies to secure their sustainability. Even so, the future is far from written.
Also published on LinkedIn (https://goo.gl/Bj4s7u)