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Mobility Trends: From Ownership to Usership

As transit ecosystems evolve, automakers are struggling to navigate the industry’s enormous shift from an ownership economy to a usership economy. The industry must adapt to the changing needs and expectations of entire populations—not just individual customers. And with the COVID-19 crisis impacting household income, consumers will be looking for even more flexible and cost effective options.

The early stages of this transition are already underway, and how original equipment manufacturers (OEMs) position themselves now will determine the road ahead.

How can OEMs turn a looming crisis into an opportunity?

The drivers of change

Here are several reasons for this sea change—urbanization, digitization and automation to name a few—and understanding them can help OEMs address customer needs in the coming years.

While urbanization continues to take place across cities globally, the need to connect urban and rural areas remains critical for the flow of people, information, goods and services to maintain a healthy economy. While cities have moved to discourage car ownership with initiatives like the UK’s Future of Mobility Grand Challenge, they must simultaneously invest in infrastructure like commuter rails and roads to encourage greater integration and mutually beneficial relationships between urban and rural areas.

In response to a plethora of transportation options, environmental concerns and increasingly limited space in major urban areas, consumers are downsizing their vehicles and choosing to buy inexpensive, smaller, less-equipped cars—if they buy at all. At the same time, the Worldwide Harmonized Light Vehicle Test Procedure (WLTP), which aims to make European fuel economy labels more realistic, is causing OEMs to stop the production of small cars like the Opel Adam, Ford Ka and Volkswagen Up that run on gasoline or diesel engines. To meet WLTP standards, OEMs would have to spend an additional €3500 per car on technology—a cost that would ultimately be passed onto unwilling consumers.

The convenience of living in a city with comprehensive public transportation and flexible mobility solutions like ride-hailing, bike-sharing and electric scooters will expand outward as the former outskirts become more integrated into city life. The restrictions placed on mobility and social distancing guidelines in response to COVID-19 will also further consumer demand for flexible, individual transportation options.

Mobility consolidation

Previously disparate modes of transportation are blending together as technology progresses. Ride-hailing and taxis will become one. The promise of self-driving cars will cut into services featuring drivers. Car-shares and rentals are already merging and will continue to do so. The transition away from standalone mobility services to complete mobility platforms is underway.

Sixt, a German multinational car rental service, combines rental and sharing into one service for higher utilization of each car, which has had a positive impact on overall profitability. Sixt’s app also offers scooters, taxis and ride-hailing. The service is joined by several automakers who have invested in, partnered with or acquired mobility companies. Daimler and BMW merged their urban mobility services under Your Now, which includes ride-hailing, car-sharing, trip planning, mobile parking and electric vehicle charging. Toyota has invested in Revel, May Mobility and several others. GM has established Maven, a holistic mobility solution. Even pioneers of mobility sharing are investing in other forms of mobility, like Uber’s acquisition of bikeshare company, Jump, and partnership with scootershare, Lime.

This graphic illustrates the transportation and mobility consolidation we expect to see over the next couple of decades:

Protecting the core while upgrading to services

In response to shifting preferences and smaller margins, OEMs have been forced to reduce their portfolios. In the past, OEMs established new concepts in each segment. Now, the cannibalization and overlap of vehicle segments is high. Even though automobile sales are remaining stable in many markets, it’s important for OEMs to maintain their market share in the face of strong competition while adjusting to changes in mobility.

Though mobility trends may paint a dire picture for OEMs, there are ways to shore up support for the traditional business of selling cars while evolving to address the mobility market’s future needs. OEMs are rethinking how they approach products and services to protect the core business as long as possible.

On one hand, OEMs know they need to become lean and efficient in their product offerings, and they are determining which products are most valuable for the markets they serve and cutting anything superfluous in this new era. Developing a car can take up to 60 months from the first idea until the start of production. The standard process requires automakers to establish target parameters—weight, velocity, speed, volume, pricing, how many to deliver—and reach them. After production, not much can be changed throughout the vehicle’s seven-year life cycle. However, telematic solutions will support the shift from a hardware-driven customer relationship to one that’s software-driven and integrates the offline and online world.

On the other hand, OEMs are now thinking about how they develop services.Developing a service requires continual adjustments and up-to-date solutions, similar to operating system and app updates. While services require  decisionmaking processes to be much faster and leaner, they also provide more direct and frequent access to customers, allowing OEMs to understand their customers better and therefore continually improve their experience.

5 ways OEMs can compete in the future of mobility

Here’s how OEMs can compete in the market while making new inroads along the way:

  1. Optimize the core business: Reduce current portfolio and increase efficiencies
  2. Take advantage of telematics: Combine telecommunications and infomatics to gather data, improve and integrate the driver experience and create opportunities for new revenue streams
  3. Invest in mobility services: Create a separate brand or partner with an existing platform to scale fast and continually add new partners and services
  4. Integrate your dealers: Dealers are your partners in the mobility services ecosystem
  5. Vehicles as open platforms: Allow vehicles to become open platforms used by various external partners in an open API approach

Kick the tires

Regardless of an OEM’s strategy to compete and thrive in the future of mobility, they must become customer-centric to adapt to changing consumer preferences and build customer loyalty. Ownership models are just one way to address customer expectations; to provide value, OEMs need to understand their customers.

When it comes to creating and launching new services while optimizing your current portfolio, it’s essential to test and learn. Risk is always involved, so it’s important to test the viability of concepts, learn, adjust and scale these innovations quickly before others enter the market. OEMs should regard every service and product as beta; nothing is finished if constant innovation is the goal.

Alyssa Altman
Alyssa Altman
Industry Lead, Transportation and Mobility - North America

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