How Automakers Hope to Grow Revenue As Ownership Slides

The numbers of city dwellers are growing globally.

As such, the next generation of consumers are looking to alternatives to car ownership forcing automakers to explore various mobility as a service (MaaS) strategies that could offset potential losses from sliding consumer vehicle sales. The potential for lucrative partnerships between carmakers and ride-sharing specialists, micro mobility organization and ride hailing services are changing the way automakers think about sales.

“It’s important to note that this is not an imminent trend and that the timeline for this shift will likely vary significantly by region,” Brandon Mason, PwC’s mobility leader, told TU-Automotive. “Globally, a significant drop off in vehicle ownership is not expected over the near to midterm.”

Europe, for example, is expected to see much quicker adoption of electric and autonomous vehicles than the United States given urban infrastructure and the regulatory environment. “While no one can accurately predict the exact inflection point for various MaaS offerings to accelerate, there is no doubt that it’s impact will be significant when it does happen,” Mason said.

He explained that as various MaaS platforms, including ride-hailing, car-sharing, micro mobility and the like continue to mature and grow, a gradual shift away from private ownership will occur, with urban areas seeing a quicker adoption rate than rural areas. “In the meantime, automakers are continuing to test various MaaS business models and technologies to prepare for this eventuality,” he said. “It is generally agreed that the overall value chain for mobility services will grow.”

However, he noted automakers find themselves in a difficult position since much of the growth is expected to come from outside their current areas of expertise – software development, payment systems and artificial intelligence (AI).

Mason said that means there is the need for automakers to invest in research and development and strategic partnerships but the return on these investments will probably not be seen in the near term. “If you were to look 10 years in the future, the overall size of the global vehicle parcel might be largely unchanged but once Level 4 and Level 5 autonomous vehicles become commonplace alongside a host of other MaaS options, it’s plausible that personal vehicle ownership could begin to decline at a rapid rate,” he said.

Mason also pointed out that overcoming the cost, technology, regulatory and consumer sentiment challenges, among others, would take time, noting many industry participants have begun to come down from previously aggressive forecasts for autonomous vehicles and other smart mobility offerings. He said the types of partnerships and their subsequent value to a carmaker would vary depending on their core set of competencies and evolving smart mobility strategy.

For those who are aggressively investing in and testing autonomous vehicles, partnering with, or acquiring, technology companies that have AI capabilities may be the best option. Also, companies focused on car and ride sharing applications or charging stations, a public-private partnership (PPP) could have significant advantages.

Mason said some automakers have even taken the previously unheard of step of creating joint ventures with their rivals, Audi, Daimler and BMW, in order to share costs and increase the business case for their MaaS operations. “There is no one single scenario that represents maximizes return for all,” he said. “It’s likely that a combination of many different partnerships will be needed to offer a full suite of solutions to consumers.”

Employing the huge amount of data being generated, everything from consumer interests to mapping data, is at the top of the list for many companies and using that data to predict future mobility strategies is top of mind to many automakers. “Seat faces the challenge of providing vehicles designed for sharing as well as for private ownership,” said Estela González, head of new business at XMOBA, Seat’s independent company that invests in new smart mobility solutions. “In the case of cars, this will imply fewer cars in the market but with a higher user rate which will reduce the current lifetime from 10 to seven years.”

González said having the appropriate vehicle that reduces operating cost is key for MaaS operators. Recent examples of this include the Bolt Nano, Renault’s Twizy and Seat’s own Minimó concept car, all designed to merge the benefits of the car, such as security and comfort, and those of the motor cycle with agility and ease of parking. “In addition, 5G technology and a battery swap system allows for recharging in a few minutes and improves sharing operations,” she said. “Data management and artificial intelligence is as well key to improving MaaS business by optimizing the fleet and providing the right vehicle, at the right place and at the right time for a specific individual with a specific mobility need.”

She noted MaaS trends are already affecting car ownership demographics, with the average age of buying the first car now between 33 and 38 years and the number of young people applying for driving licenses is dropping sharply. “Personal mobility needs are going to double in urban areas as a consequence of the increase of population on these areas,” González noted. “Yet, mobility needs are still there and a car is still a good alternative for specific use cases. So, we just need to provide access to cars in a different way. Flexible renting or car-sharing models but also provide new types of vehicles that efficient and sustainable as an alternative, especially in urban areas.”

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