Future mobility solutions: What role for the carmaker? Part II

Jan

Jan Stojaspal

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12th February 2014

New business models for carmakers

According to Ulrich Fastenrath, head of traffic and touting at BMW, offering an electric vehicle with multimodal routing is not only environmentally sound, but it is also good business. “This is a possibility for us to access customers who would not become BMW customers otherwise,” he said in Munich, referring to a younger demographic that, surveys have shown, is far more digitally sophisticated and eco-friendly than previous generations.

Nick Ford, senior consultant at Frost & Sullivan, agrees. “Carmakers have to adapt and change for the next generation of high-volume buyers,” he says. “They have different values.  For [car] OEMs, mobility solutions will be as important as the vehicle itself. Increasingly we’re all undertaking a general move to mobility solutions rather than pervasive car ownership.”

Another differentiator may well be the degree of mobility flexibility an OEM provides its customers. 

For example, because the i3 is promoted as an urban vehicle, BMW offers a service called “Add-On Mobility,” which enables its i3 customers to drive a conventional BMW for longer trips or trips that require a car with more storage room. In Germany, the offer also includes access to car-sharing and car rental offerings.

An even more comprehensive service is offered by French carmaker Peugeot.  Its “Mu by Peugeot” service resembles Gothenburg’s UbiGo project in many ways. Consumers purchase credit online in whatever amount they choose. They can then select from a wide selection of modes of transportation, including a car, van, electric vehicle, scooter and bicycle, for whatever length of time it is needed.

“Carmakers are seeing the need to change their business models,” Ford says. ”This is a business model we’ll see more of in the future. These flexible solutions are examples of what OEMs will have to offer.”

The rise of the smartphone

According to Dominique Bonte, group director telematics at ABI Research, the use of multimodal routing will make the smartphone even more important to users than it is today.

“The objective is to have a system in place to plan your entire journey,” he says. “Carmakers are thinking that if you use the smartphone for navigation in the car, you will use the same app outside the car, and also to get back to your vehicle. The smartphone will increasingly play an important role because it provides a seamless mobility experience.“

Magnus Kuschel notes that Commute Greener!’s project in Mexico City relied, to a large degree, on participants using their smartphones to access information and to provide feedback. “The smartphone is the carrier of multimodality,” he says.

According to Ford, there will almost certainly come a time when the car is no more than “an app on the mobile phone, just one mobility solution accessible via a mobile device.”

The reason is not only technological, he says. It is, again, the behavior of a new generation of consumers. “Mobile devices represent a more personal definition of who they are,” he says. “Younger people define themselves more by mobile devices rather than by cars.”

These younger consumers tend to view car ownership as more of a burden than a benefit, according to Ford, and they will look to mobile devices for alternative mobility solutions.

Bonte agrees. “I would say the car as a service concept is going to be interesting,” he says. “You won’t own a car. It could just be an application.”

He foresees a time when the consumer will order a vehicle via an app on his or her mobile device. The car will be self-driven, and the destination and route, chosen either by the car’s navigation service or by the driver, will be pre-programmed. “When the car is fully self-driven, it will become a service,” Bonte says, “not only because owning a car is expensive but also because it’s an inconvenience.”

Paradigm disruptions

The search for sustainable mobility solutions will almost certainly involve partnerships between private- and public-sector players. In addition, different industries within the telematics value chain – consumer electronics, car OEMs, telematics suppliers, MNOs and Internet companies – are beginning to view the challenges as an enormous opportunity.

These developments, as well as the changing consumer expectations, will almost certainly disrupt the ecosystems of the industries involved and profoundly transform the business models of companies in these sectors.

At Telematics Update’s Consumer Telematics Show, held on Jan. 6 in Las Vegas, Thilo Koslowski, vice president of automotive vehicle ICT at the global consultancy Gartner, termed this paradigm shift “industry convergence.”

“You will see companies in specific industries … with walls around it going beyond these walls and [doing] other things,” he explained. “Maybe car manufacturers will become technology companies going forward in the sense of Silicon Valley technology companies. … You might see other companies from the technology side becoming car companies in the future.”

One prominent example of that is Google’s development of a driverless car. Another take is the announcement of the Open Automotive Alliance, in which (again) Google will work with several carmakers, including Audi, Honda and GM, to bring Android to automobiles.

Because the search for future mobility solutions will involve close cooperation and even partnerships among numerous players, eventually one of them will need to step up and take charge. Ford says that this will be the mobility integrator, “the company that pulls all the solutions together, connects the services” and even acts as a catalyst.

In Gothenburg, the integrator was WirelessCar. But, according to Ford, the integrator “could be anybody in the value chain – the OEM, the tier 1, the MNO.” That integrator could also be the public sector.

Public-private convergence

An old saying – a misquote of a statement made by a former head of GM – has it that “What’s good for General Motors is good for the country.”

The critical need for effective mobility solutions is actually bridging the gap between public and private good because providing effective mobility solutions will also be very good for the bottom line of GM and other carmakers, as well as other links in the telematics value chain.

One example is the recent announcement by UN-Habitat, the United Nations Human Settlements Programme, that it will use TomTom’s global Traffic Index data to make strategic decisions to tackle urban congestion.

Another, current example is the project to make a “smart city” of the mid-sized British city Milton Keynes. The consortium engaged in this undertaking is a broad mix that includes the University of Cambridge, British Telecom, Dell, E.ON and the Milton Keynes Council.

According to Ford, megacities will eventually have their own economies, and they will make their own investments in resolving mobility issues. (A WWF study estimates that cities alone will have invested more than $200 trillion in low-carbon solutions for essential services, buildings and transportation by the year 2039.)

For example, municipal authorities will have to rely on MNOs for total and reliable connectivity to ensure that real-time data on traffic, air pollution and public transport schedules are always available.

And, as Bonte says, public sector bodies “will eventually become the most important customers of real-time traffic information and navigation providers such as TomTom and INRIX. Because they want all traffic to run smoothly.”

In fact, Ford suggests that the way cities resolve mobility problems may become a selling point in attracting business to the cities. “Cities could even become brands,” he says. “A city will sell itself on the basis of its connectivity.”

(For part one of the series, see Future mobility solutions: What role for the carmaker? Part I.)

Siegfried Mortkowitz is a regular contributor to TU.

For all the latest telematics trends, check out Telematics for Fleet Management Europe 2014 on March 12-13 in Amsterdam, The Netherlands, Content and Apps for Automotive Europe 2014 on April 8-9 in Munich, Germany, Insurance Telematics Europe 2014 on May 6-7 in London, Telematics India and South Asia 2014 on May 28-29 in Bangalore, India, Insurance Telematics Canada 2014 on May 28-29 in Toronto, Telematics Detroit 2014 on June 4-5 in Novi, Michigan, Advanced Automotive Safety USA 2014 on July 8-9 in Novi, Michigan, and Telematics Munich 2014 on Nov. 10-11 in Munich, Germany.

For exclusive telematics business analysis and insight, check out TU’s reports: Telematics Connectivity Strategies Report 2013, The Automotive HMI Report 2013, Insurance Telematics Report 2013 and Fleet & Asset Management Report 2012.