Over the last few years, the sale of passenger cars globally has either dipped or been sluggish at best.
This is despite automakers launching new models with modern designs, superior features, extended battery range, and innovative onboard and offboard technologies. While a large part of this is due to the rising costs of owning a car and the emergence of hybrid work models, we see environmentally conscious customers as a key factor here. There are also new entrants in the automobile industry that are making a dent in the battery-electric-vehicle market.
People who own cars or are looking to buy one, on the other hand, are demanding more flexibility and options in car ownership and conveyance models. That is making automakers go back to their drawing boards with the realization that they need to explore new opportunities.
While automotive start-ups have made the first move in the business to business (B2B) and business to business to consumer (B2B2C) segments, automakers are yet to tap into this opportunity in a big way.
A solution-centric mindset
B2B and B2B2C segments are throwing up new mobility opportunities due to increasing customer expectations and technological advancement.
New businesses in the digital economy are creating numerous mobility opportunities. While good design is a critical starting point, automotive OEMs should explore adding industry specific software solutions with the same hardware platform. Automotive companies are known to use the same hardware platform to build multiple models, which provides them with cost advantage and faster time to market due to shared design and engineering. For example, the Workhorse Group is offering W750 all-electric step van for several last-mile delivery use cases like utility services, package delivery, construction and maintenance services. Similarly, Robomart relies on varying configuration of its vehicles for different store on the wheel offerings like pharmacy, grocery, and snacks.
Retailers offering grocery shop-on-the-wheel will benefit from a service package that enhances their understanding of possible service zones, products and stock requirements, and pricing points that are competitive with surrounding stores. Also, they need technological capabilities to do tasks like scanning, tagging, quality control, and replenishment to run day-to-day business. Automotive OEMs offering these services, bundled along with the vehicles that hosts the mobile retail store, will be uniquely positioned to tap these new opportunities.
For OEMs offering service solutions, the best opportunity is to stay close to the customer and be a part of their everyday business while gaining insights into their needs. Services also add a continuous revenue stream throughout the life of the product. US-based Rivian is building electric vehicles and offering multiple service streams like fleet management platforms, charging solutions, and 24x7 support for their fleet customers.
Forming deeper connects
Customer feedback is a critical piece in the puzzle.
Automotive OEMs, their suppliers, and partners thus need to work together to understand the customers’ needs. It is therefore prudent to co-develop a mobility offering with an anchor customer in the target segment as that would help incorporating feedback in the product development cycle, iteratively. Even after the product is launched, the feedback process should continue as this new product is built for a specific purpose where the requirements are still evolving. The objective is to bring out the best version of the product, bundled with services, that will equip the customers to do their business better. Rivian, for example, is building electric delivery vans specifically for Amazon. The move is an attempt by the world’s largest online retailer to create a more sustainable delivery fleet and decarbonize its last mile logistics.
Automotive OEMs that are part of conglomerates may have an advantage here. Cross industry projects with a group level mandate ensures product development and refinement, makes product launches easier, brings down costs, and shortens the time to market. For example, GM’s subsidiary BrightDrop is offering light commercial EV with a complete software suite for last-mile logistics.
As automotive OEMs expand their portfolio offerings to include services, their business models will also have to change. Such OEMs will need to set up robust front and back-end processes to support continuous engagement with the customers throughout the product lifecycle.
In the services business, automotive OEMs won’t have all the capabilities under the hood. The capabilities required may not be core to their business model either. There is always a question of build versus buy and the associated trade off. This decision is subject to the automotive OEM’s strategy in the short and long term. We have seen partnering with service providers with specific skills brings great value. Irrespective of who brings in the capabilities, a comprehensive services portfolio should be included along with the product.
New mobility opportunities
Solve a current challenge or identify an opportunity which will help in doing business every day.
Let’s take the example of the courier, express, and parcel (CEP) business, delivering courier in city centers with narrow access roads, where internal combustion engine (ICE) vehicles are restricted. Besides having vehicles designed to provide drivers’ accessibility to the road from both sides and run on sustainable fuel, courier, express and parcel companies would expect additional services which will ultimately help them to complete their tasks. They would need recommendations on vehicle size based on the width of the approach road while rostering for daily mail deliveries. If all the enablement services are offered by one provider, CEP companies will not require maintaining multiple supplier relationships.
Identifying these challenges requires a deep analysis of the domain. The integrated mobility product and service provider will have the first-mover advantage and an opportunity to create a new product segment. There are enough whitespaces across industries already and more are emerging.
A good starting point could be to identify the business segments where an automotive OEM would like to operate. An opportunity deep-dive will reveal the pain points in the target business segments. Next, they should perform market-sizing to secure the necessary investment.
A look into the future
Historic strengths won't help traditional auto makers retain their market shares.
Technological disruption and competitive pressure will only accelerate. Relying purely on the traditional business of selling cars and aftermarket products may prove counter-productive in the long run. Creating new product segments and a solution centric business model is the only way to de-risk the future. This is the right time to expand the horizon beyond traditional offerings.