The Automotive industry is going through a massive transformation, as electric vehicles, autonomous driving, car sharing business models flourish everywhere, fueled by digital-savvy customers. New entrants like Tesla make a leapfrog by answering a naive, yet disrupting, What If question:
What would a car look like, if it had been invented after the computer, the internet, and the smartphone?
At the same time, smartphones are becoming day after day a big part of our lives and show a strong appetite for cars.
We shall not underestimate what is going on: a War for Eyeballs is heating up, structured as a Play in 3 Acts.
Act I: The Cockpit and The Driver
For years the Cockpit has been one of the main focus of cars engineering and marketing. Slogans such as “The Ultimate Driving Machine” have strongly and durably impacted our vision of cars.
There has been a strong alignment of desires and motivations between the Buyer, the Owner and the Driver, who used to be the same person. And as long as cars were powerful beasts to drive, the Cockpit deserved all this attention and the strong connection to the Brand and its Values.
Now the Rules of the Games are profoundly changing.
Each generation of cars becomes safer and safer, driving assistance mechanisms are flourishing and autonmous vehicles are making progress so quickly, that Waymo already started operating the first autonomous taxis service.
As we’ll be getting more freedom and more time to do anything else but driving, the perceived value of the Cockpit will shrink. To make an analogy, just put yourself in the mind and the shoes of an airplane pilot who would be moving from the cockpit to a comfortable First Class seat and would be asked to stop thinking about piloting and just relax.
At the same time, business models are also shifting from car ownership to On Demand Mobility Services, through a large range of car rental, sharing, pooling services.
Although customers may still pick up their favourite services based on the car brands and categories, we are definitely loosening the connection to our beloved Driving Cocoon.
Act II: The Mobile Black Hole
The mobile acts like a gigantic Black Hole, capturing as much of the Value Chains as it can. GAFAM and BATX are relentlessly looking for growth opportunities: any time slot where we are not using our smartphones is a target, like all the time we spend every day, stuck in our cars during peak hours.
Beside our captive time, the entire car interior represents a huge inventory of qualitative ads placeholders, when compared to the small screen of our smartphone. Autonomous driving will free additional space and this will represent a significant growth opportunity for the mobile behemoths.
No wonder why Google is investing so much in autonomous driving software.
Google and Apple started infiltrating the cars with proposal you cannot refuse. As a Consumer and a human being stuck in your car, you want to access seamlessly all your music and social connections, interact with them, at least on the phone while you still have to drive.
Intermission: Mobility as a huge Opportunity for Growth
After these thrilling two acts, now is a good time for the intermission and to think a little bit out of the [cockpit] box.
The whole mobility experience is also going through a major revolution.
Fast disruption [uber-ization] has been named after a famous new entrant in mobility services, that counts many copycats in each country. Car sharing ventures are also hatching everywhere, rapidly seized by car manufacturers, looking for alternatives to the car ownership model. Short and long-distance carpooling companies are also adding flexibility, like BlaBlaCar here in France.
Ultimately, customers want to access anytime and anywhere, the right category of car for the best price. Then it will be up to the brands, both car and mobility companies to earn customers loyalty day after day, delighting them like Amazon does in the e-commerce arena.
And like smartphones, customers will expect continuous platform upgrades, renewing the interest and nurturing the connection between the car brand and the customer.
After the Magic, now is the time for Numbers, as my colleagues from Fahrenheit 212would say.
A recent article from Alex Koster evaluates the size of the mobility market to an whopping $2.2 trillion opportunity by 2030. Although he sees this as “a bad news to auto OEMs”, I think that it represents on the contrary a major opportunity for them. Not really a low hanging fruit for sure, but a real Blue Ocean to dive and swim in.
Another study about robo-taxis found out that car companies are earning an average $2,500 per new car sold. Spread over a 150,000-mile vehicle life span, that works out to about a penny a mile.
The chasm between the two numbers may make you feel dizzy and that’s a good sign. Now just assume that car brands would earn a couple of pennies per mile and do the math. The potential for margin improvement and lower CAPEX is huge, but now comes the tough part: learning how to extract additional value through long lasting and fruitful conversations with customers, which is a very different business model and a completely new set of processes.
Act III: The Conversational Commerce Era
Let’s now have a look at the main business models in the digital era and especially among the GAFAM and BATX:
- Build Products and increase the average margin (Apple): car manufacturers already master this kind of business model and the platform play, to optimize their costs and Go-To-Marker
- Sell Ads or referrals (Google, Facebook): Ole Harms, MOIA‘s CEO, said that ads-sponsored autonomous fleets could be one of the future Business Models for car brands. Premium car brands won’t probably go that way, as it would commoditize their products, lowering the perceived value and thereby their margins. But entry level brands and new entrants could definitly adopt such a disruptive Business Model.
- Operate Megafleets, either directly or through marketplaces (Uber): car manufacturers started testing or embracing part of this model, like Free2Move by PSA, Drive Now by BMW or Car2Go by Mercedes .
- Sell products and services through E-commerce marketplaces (Amazon): all car companies now expand their sales channels online, for both new and used cars. But the $2.2 trillion mobility market size tells us that there is still more value to extract from the customers every day.
“Markets are Conversations.”
Conversational Commerce is the next big opportunity for car companies. It is still a grey area, stuck between the cockpit and the infotainment unit but growing. The Driver’s Distraction constraint limits the information that can be pushed to the Driver, but that won’t last.
This constraint will shrink with autonomous driving but there is already a strong move toward in-Car vocal assistants, either through mirrored smartphone OS (Apple CarPlay and Siri, Android Auto and Google Assistant) or through custom integration (Amazon Alexa).
If they conversely don’t seize this nascent opportunity, the gravitational force of the Mobile Black Hole will be so strong that the car will end up as being a set of long-lasting batteries and wide area screens for AI-powered / 5G / 4K+ smartphones, conected to GAFAM & BATX Clouds and Adservers.
Epilogue: The Return of the Five Senses
Now comes the time of the Epilogue … or the cliffhanger for a sequel.
Beside all the threats from GAFAM & BATX, despite the growing power of the smartphones, cars still hold a unique power, that will be hard to replicate on a smartphone.
Although our smartphones start listening and talking to us, they don’t taste, smell and even touch like an automobile, which bring a unique set of emotions. Autonomous driving is a fantastic opportunity to reinvent the car cockpit and rejuvenate its emotional dimension.
If the car companies blend and connect all the digital capabilities available today, together with their centennial Know-How in building digitally-powered emotional machines, they will hold a bright future into their hands.