How can automakers succeed in the new mobility ecosystem?
What does the future of mobility look like? Digitalization, new business models, changing consumer habits and social trends are rapidly disrupting the automotive industry. Although transportation remains its primary aim, the way drivers -and soon users- interact with vehicles is going through a mighty technology-driven transformation (Figure 1). It is still uncertain how fast this transition will be, but experts agree that the above-mentioned driving forces are giving rise to four main trends in the auto sector: autonomous driving, electrification, connectivity and MaaS.
This major shift compels companies to become software-focused and speed up their technological progress in order to retain a competitive edge.
CASE: Connected, Autonomous, Shared and Electric
Autonomy, electrification, connectivity and sharing will reshape transport over the next years. Electric cars are on the rise as new regulations are pushing to lower carbon emissions, charging infrastructure is growing and marketability is increasing. Although batteries and cooperation between traditional auto manufacturers, governments and new players keep being a challenge for the industry. SCOUT retrieves a McKinsey’s study, according to which in 2030 the share of electrified vehicles could range from 10 percent to 50 percent of new-vehicle sales, with higher adoption rates in large urban areas (Figure 2).
Connected and autonomous vehicles will enable drivers and passengers to use their cars as a platform that will be highly linked to multimedia services and will presumably free up the time spent in our journeys. Both connectivity and autonomy are among the most captivating automotive trends. Different industries are working on new technologies that will make autonomous driving more attractive to customers: vehicle to vehicle (V2V), vehicle to infrastructure (V2I) and vehicle to everything (V2X). Connected vehicles will accentuate the improvements in mobility, safety and C02 emissions as well as in the usage of infrastructures and public transit systems. The autonomous vehicle market, closely related to CVs, is expected to expand promptly, reaching 67.5 million units by 2028, as found in SCOUT’s Forecasts timeline (Figure 3).
The graph below depicts how MaaS is currently the leading trend in the auto sector (Figure 4). A growing number of companies are transforming patterns and models of transportation, providing on-demand services to adapt to individual needs. Consumer preferences are changing and commuters are becoming accustomed to using different types of transportation. It is believed that up to one out of ten new cars sold in 2030 may likely be a shared vehicle and one out of three by 2050. It seems clear that on-demand and data-driven mobility services will be a significant part of the revenue generated by the automotive industry.
But what role do traditional carmakers play here? As shown in Figure 5, tech-companies have displaced old automotive manufacturers and a new competitive landscape has taken shape in recent years. Traditional players need to find their place in the market and in order to do so, they are required to find new partnerships, and make further investments.
Volkswagen: A closer look at the largest OEM in the automotive industry
While the main objective of VW’s “Strategy 2018” was to “position the Volkswagen Group as a global economic and environmental leader among automobile manufacturers”, in this new market environment, VW aims to shift from one-time purchase business to provide value periodically from new services, as stated in their new plan “Together 2025”: “By 2025, the Volkswagen Group and its brands will not only stand for the best vehicles, but also for exciting and superior digital products and services (…) In a rapidly expanding market, Volkswagen’s aim is for the new mobility solutions business unit to generate sales revenue in the billions.”
In order to achieve VW’s wish to become a “world-leading provider of sustainable mobility”, the German company will have to take prompt action and invest on new partnerships as many more entrants are likely to agitate the industry. A quick search on SCOUT shows the number of startups founded last year (Figure 6).
Established car makers are on the race to fund high-tech startups that will help them design the future car. Well-known companies as BMW, Daimler, Ford or Toyota are investing on newcomers in order to accelerate the development of new technologies.
If we compare the startup investments made by Daimler and VW using Mapegy’s database, we will see a remarkable difference between the two. Daimler has funded almost 20 new entrants and its investment reaches €19 billion, whereas Volkswagen Group’s funding amount is €1.5 billion distributed across 9 companies (Figure 7).
German giants are also teaming up with their historical competitors, another sign of how much the industry has changed. Over the last months we have witnessed tie-ups that seemed impossible not so long ago: BMW and Daimler, Ford and Volkswagen, Honda and General Motors or Volvo and PSA are looking for different ways to collaborate in specific areas while remaining rivals in others. The future is so uncertain that corporations are working together to lower risk.
The automotive industry is undergoing an unprecedented metamorphosis. Companies like Volkswagen Group have lost their once incontestable stability and are suffering after the emergence of innovative services that better suit the demands of the new economy. Consequently, they need to explore new ways to profit from a market that is more competitive and unpredictable than ever.
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