Business models in the Asian auto market

Although the service economy gradually gains popularity, the individual ownership model continues to thrive with pandemic-induced social distancing norms in recent times. However, as big money lies in the service economy, we see two major business models emerging in the APAC region: 

• Make car ownership and shared mobility complementary 

The way to drive exponential growth in the automotive sector in Asia is to make cars more affordable over their lifetime so that private vehicles also generate revenue for owners. This will be possible if owners have access to a platform that enables them to lease, share, subscribe, and maintain their vehicles at ease. The idea is to make private ownership and shared mobility complementary and not exclusive. There are other possible ways to monetize, such as by trading the energy generated by the car. Car owners must have the freedom to utilize their assets as much as they want. Original equipment manufacturers (OEMs) for vehicles are in a better position to offer complementary services that are a combination of ownership and shared mobility, as they can benefit from the two existing models. However, they need to switch from a product-centric business model to a user-centric one. One recent example in the Asian market is that of a shared mobility firm acquiring an automotive OEM to offer these complementary capabilities. 

• Aggregate demands and crowdsource mobility  

Platform aggregators have gained prominence with the growing demand for mobility in Asia. These car firms serve their customers by selling other services during and beyond the period of engagement on the wheel. Successful mobility demand aggregators in Asia such as China’s Didi Chuxing, India’s Ola, and Singapore’s Grab have capitalized on the mobility demand in the region and expanded their business to other parts of the world. Such companies are at an advantage because the platform aggregation business model already exists and is growing in Asia. However, there is an opportunity for scaling up and optimization. The demand fulfillment process can be crowdsourced, and people can participate by picking up requests available on the platform. This will also give them an opportunity to maximize the utilization of personal assets. Although there is an established crowdsourced mobility model for people, the goods mobility business model is yet to mature. Freight uberization is gaining popularity. For instance, Didi Chuxing launched a subsidiary Didi Freight, which matches China’s vast pool of self-employed truck drivers with jobs such as goods deliveries and home removals. The subsidiary is yet to reach scale to cover all demand segments. Additionally, there is sub-optimal usage of data and insights on the platform to cross-sell and upsell services. 

Besides platform aggregation and freight mobility, what will also make the entire mobility process efficient and effective is the vehicle’s design. Automotive firms have invested heavily into design, as it ties into their purpose-drive business models. Firms like China’s Yanfeng Technology, which leads in automotive interior design, has developed a smart cabin design for shared mobility, where passengers with different comfort preferences can pool together. OEMs need to align their strategies with design to ensure that vehicles can be maintained over their lifetime.

Purpose-driven business models to power future growth

The automotive industry has been the primary driver of economic prosperity globally. Personal mobility, which has made automotive firms mature, is disrupting the industry today. Carmakers no longer enjoy exclusivity, and there is no more a high entry barrier for new entrants. This is eating into the profitability of industry players. While the demand for mobility is increasing, it cannot be capitalized with the old ways of demand fulfillment. Innovation in product and enterprise processes is not good enough to meet the ever-increasing untapped demands. The companies that operate with a purpose-driven business model built around an innovative partner ecosystem will emerge as winners.