Why the Automotive industry needs a new model
While the world is recovering from the VW emissions scandal, it is clear, to industry insiders at least, that the events at the world’s second largest car manufacturer are just a foretaste of the upcoming disruption about to wreak havoc on the global automotive sector.
To date, car manufacturers have largely ruled the automotive sector uncontested, positioning themselves at the top of the food chain, building up ultra-strong brands and enjoying almost complete control over the entire automobile eco-system. However, one fundamental factor is about to change this, and it relates to the very nature of how cars will be sold, financed and used.
Until today, cars were largely sold as individual units, to individual people. Consumers made emotional purchase decisions to buy a ‘red’, ‘sporty’, ‘family’ or ‘luxury’ vehicle, to support their daily commuting requirements as well as the occasional weekend road trip. However, very much like other modernized industries, the automotive industry is likely to move towards a service driven business model. This, in turn, will re-position car manufacturers beneath a new, stronger and more powerful industry group that is beginning to emerge - the Mobility Service Provider (MSP).
It is clear that car manufacturers are very much aware of this threat and are already closely following what players like Google and Apple (two of the likely MSPs) are doing in the mobility services space. However, while we can expect that car manufacturers will be working to position themselves as mobility service leaders, it is very much in doubt if the current car manufacturer DNA is capable of leading a ‘digital revolution’, of reinventing their business model, and moving away from their traditional supply chain. Combined with the already fierce industry pressures, we can expect to see some of today's automotive leaders morph into automotive dinosaurs, but a relic of their glorious past.
After a century of automotive evolution, we need to brace for a mobility revolution.
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