Driving is not so much about trying to open up on the expressway as it is about the experience while driving— listening to music, holding a meeting, or catching up on current events.
Technology is taking more of the judgment work out of operating a motor vehicle and letting people go on autopilot. And that means automakers need to focus on the experience as much as the mechanics.
Digitally-enabled ride-hailing is set to become a key driver of growth and profitability in tomorrow’s auto markets, far outstripping the profitability potential of traditional car-selling to buyers.
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And car owners increasingly are seeking vehicles with a lower carbon footprint such as electric vehicles, or EVs—when they do decide to buy cars instead of simply using ride-sharing services.
Taken together, these trends—autonomous driving, connectivity, electrification, and the sharing economy—are fuelling a huge potential market for mobility services, appealing to the gradual shift away from “vehicle ownership”.
Accenture research shows that by 2030, globally traditional automotive sales will grow marginally to USD$2.2 trillion. In contrast, revenues from mobility services will soar to over half of that at $1.3 trillion during the same period.
Many new services will come from businesses that are pushing forward into this exploding market, challenging the automotive incumbent with creative, user-centric solutions. One example is Puppy Auto, which design affairs, part of Accenture Industry X.0, will demonstrate at the Industrial Transformation Asia-Pacific (ITAP) this week.
Using technology from a Massachusetts Institute of Technology spin-off, this autonomous electric vehicle allows real estate developers and home sellers to offer transportation-as-a-service to residents of large gated compounds found in Chinese cities. Residents can use the vehicle to cover the last mile from their doorsteps to the gate—and vice versa.
Next-generation mobility service like this will ultimately change the auto manufacturing work in Asia-Pacific. Assembly plants from Thailand to Japan will still be building cars, but they may have opportunities to become the producers of new components, as well.
It should also impact the thinking of the national car makers who are trying to enter the market with low-cost niche cars. From Vinfast, a subsidiary of Vietnam’s Vingroup, which is making its first made-in-Vietnam automobile model, a combustion engine hatchback to Indonesia’s low-cost green cars or the China manufacturers looking to enter the Southeast Asian market.
All need to address the evolving expectations of customers while spurring the creative juices of entrepreneurs. In Japan, where digitizing the nation is part of its vision of “Japan 5.0” utilising sensors in industry and manufacturing is high on the agenda. Sensor technology is also increasingly a key part of self-driving cars and could be an area of focus that Japanese manufacturers seize to lead.
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Connectivity options are endless – as people drive less in their cars or their shared-vehicles they will expect to do more while commuting. The scope for inventing new services is open to all, which should be a reason for optimism in Asia-Pacific entrepreneurs who could be pitching their ideas to national and multinational auto manufacturers.
While there are new opportunities and the world is Asia’s automakers’ and entrepreneurs’ oyster – that doesn’t mean it’s easy pickings. Out of the 199 automotive companies with annual revenues in excess of USD$1 billion we studied, only a quarter are succeeding at scaling digital innovation. We call them the “Automotive Champions.” They not only have successfully scaled more than half their digital POCs, but also earned higher than average returns on their digital investment (RODI).
What sets them apart?
Automotive Champions are spending more time and money on design updates and reviews that would have looked counterproductive in the past.
Nissan, for instance, is hiring a team of engineers and scientists at its digital innovation hub in India. The goal is to innovate user experience and interfaces through the adoption of digital technologies such as AI, cognitive analytics, and machine learning.
To succeed, companies may have to leave their comfort zones and focus on new skills, platforms, technology, partnerships and different types of leadership.
What does that mean in practice? Take partnerships for instance. Regular companies continue to be wary of competition. Automotive Champions, on the other hand, partner with competitors with complementary competencies to neutralize disruptive threats from new entrants.
Toyota is one such example. In 2019, the company partnered with Chinese automotive major BYD to jointly develop electric vehicles in China. The two automakers will work together on electric sedans and SUVs, while also partnering on developing electric batteries.
These new ways of thinking about what works in the auto industry shouldn’t be viewed as hurdles. They should be seen as opportunities for executives in the Asia Pacific to go back to the drawing board and say: What can we offer that’s different?
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