Auto manufacturers and dealers have made major adjustments to meet demand in the digitized auto market. High performance is taking a back seat to vehicle connectivity as a growing sales driver. Online research now is the preferred way to assess a car’s value.
But perhaps the most transformational shift is yet to come – the passenger economy.
Digital technologies are enabling the real prospect of this entirely new paradigm where car-ownership could become optional, car-sharing the norm and mobility services key growth drivers.
It is a possibility closer to reality than not, as the elements needed to make such a market viable – including connected vehicles, self-driving technologies, car-sharing and electric drivetrains – already exist.
Moreover, the potential lower cost associated with sharing a ride in a self-driving electric vehicle could add to the popularity of the passenger economy. One shared autonomous car, for example, could meet the needs of multiple commuters who typically would require up to seven traditional vehicles to accommodate.
The economic advantages and growth potential of car-sharing also will attract increased competition. New EV-dedicated automakers, mobility start-ups, digital platform providers and other interested enterprises already are entering the race to develop new markets around this segment.
Most of these potential rivals have considerable digital expertise and deep investment capital. Many of them also have a competitive edge in terms of established customer relationships, customer insight and a strong track record of innovating and creating new digital offerings.
So, given potentially more competitive pressures, and having to adapt to one of the most disruptive transportation developments since the advent of the automobile, should automakers take down their marques and dealers close their showrooms? On the contrary.
While major shifts come with risks, they can present new opportunities. Today’s automakers and dealers have a wealth of experience and know-how to take advantage of the opportunities such a passenger economy would bring.
Car manufacturers are experts at building the hardware that the passenger economy would require. They are experienced in controlling the interface between that hardware and digital services. Dealers are master marketers of end-products.
The industry also has a legacy of strong brands and access to broad, long-standing customer bases. It possesses well-established distribution networks. Key to succeeding in such an environment, however, will require a willingness by automakers and dealers to adjust these attributes and strategies to succeed in a market that ultimately could move the auto sector from a product-focused business closer to a mobility-services industry.
New markets for connected, self-driving cars would open around the world. New opportunities for the auto industry would enable carmakers to expand traditional vehicle sales to include mobility-as-a-service models.
Ford recently announced plans to develop a fleet of self-driving cars for commercial use that will be able to drive pre-set, mapped areas by 2021. In this new market, dealers also would be able to take advantage of selling car usage by the mile instead of car ownership alone. Their ability to monetize in-vehicle connected services would increase.
There would be an opportunity to manufacture such autonomous vehicles and related technologies, such as touch interface, voice recognition, short-and long-range sensors, advanced collision-warning systems and new software related to new autonomous vehicles.
Signs of a potential monumental shift in the auto industry have been surfacing for some time.
For instance, some consumers are becoming more interested in the experiences provided by in-car connectivity services during the drive rather than the drive itself. The car is being viewed more and more as primarily a means of transportation to get from points A to B. There is a willingness by a growing share of consumers to order mobility rather than own it.
Such trends are fueling the emergence of the passenger economy, while the auto industry is experiencing increasing disruption, driven by digital advances. In such a rapidly changing business environment, auto companies and dealers should prepare for a passenger economy that could dramatically re-define the industry.
Brian Irwin is Accenture’s managing director-Automotive & Industrials, North America, & Products Industry X.0 Consulting. He can be reached at [email protected]