Mobility is a huge challenge, especially in congested and polluted urban cities. Some cities have centralized transportation systems; Others rely on market forces and still others use a mixture of centralization and markets. Most existing urban mobility systems can undergo a major transition process in the coming years. According to Neckermann (2015), the “mobility revolution” will lead to zero emissions, zero accidents and zero property. Independent of the wide variation of local public transport rules, the new mobility industry is probably on the defining edge of a next dominant design.
The question is when and to what degree this will happen. What are the future growth rates of electric vehicle sales? No one knows at what price batteries can go down. Also, it is not known how and where cars without drivers will be used or to what extent the cars will be shared. Last but not least, we do not know which companies will be part of the new dominant transportation design.
Established automakers are faced with difficult decisions. At this point, we must take into account the social integration of these companies in the automotive industry (Holweg and Oliver, 2016) and how difficult it will be to change existing infrastructure and networks. A major dilemma of dominant automakers could be the obligation to show profitability to their investors who may be unwilling to accept investments (and initial losses) for new infrastructures and networks. Investors may prefer to hedge against risks on their own by investing in smaller, more agile firms that are better equipped to meet the challenges of the mobility revolution. Sometimes we can not believe that big automakers or gas and oil giants could face existence problems, but some predictions indicate that this is exactly what will happen.
Global Vehicle Manufacturing
Around 40 companies in the world produced 100,000 cars or more in 2014 (Holweg and Oliver, 2016), and established companies are under pressure from manufacturers in emerging countries such as China and India. The four largest manufacturers – Volkswagen, Toyota, GM and Ford – account for about a third of global revenues. In recent years, the mature automotive industry is characterized by mergers and acquisitions, alliances and moving assembly lines as close as possible to target markets. Size is an important but not the only factor that helps manufacturers make use of economies of scale. Finding the balance between the preferences of individual consumers and mass production is a constant challenge for the industry. A common strategy is to use the same components across multiple brands and models, achieving economies of scale at least below the design surface. Holweg and Oliver (2016) investigated the factors that have the greatest influence on automakers to survive in times of crisis: Market reach is important for hedging against risks so that manufacturers do not depend on the economy cycle of few markets. In addition, the support of stakeholders from investors, suppliers, labor unions, banks and governments has historically played an important role in rescuing car companies in crisis.
Shared vehicles
Sharing vehicles is known only in a few cities, in which companies like Zipcar and Mercedes provide cars to share in the downtown spaces of the city. Customers can leave the vehicle where they want within the perimeters of the city. The concept of car sharing differs from independent services like Uber and Lyft. Car manufacturers could directly provide vehicles for both business models, making use of financial models such as leasing. Uber apparently received more than USD 9 billion (CrunchBase, 2016) in its financing and Lyft was able to attract a high-quality investor, GM. Other manufacturers, if they are not yet involved, must act very fast. Uber and Lyft are not going to stop growing, and similar companies, like Hailo, GetTaxi, as well as Sidecar or Ridejoy, are trying to offer alternatives. Due to the recent success of the shared mobility model, these companies can become the largest buyers (direct or indirect) of vehicles.
Autonomous vehicle should be the second focus of attention
The automotive industry needs to be involved in the development and manufacture of autonomous technology, and in fact it is already doing so. The “danger” of human decisions will be eliminated; It will also allow disabled people, children or other people without the ability to drive on their own to use the transportation services in a more cost-effective and comfortable way. However, more complex services may still require professional drivers, at least in the meantime.
Therefore, the strategy of automakers could be a two-step process. First, get involved in the shared transport and then, once available for commercial use, add vehicles without driver to the existing fleet. Again, both strategies are important to have an immediate market to launch new models. These scenarios are most likely to be part of the demand for transport services within the new dominant mobility design.
Reducing emissions
Electric vehicles seem to be the most promising approach. Seba (2015) made a list of nine arguments as to why electric vehicles will disrupt conventional combustion engines within a short period of time (hia prediction is that 100% of new sales will be electric by 2030). Some of the strongest arguments include that electric vehicles are much more energy efficient, “ten times cheaper” and “ten times cheaper to maintain”. Current car sales are dominated by Tesla followed by GM (Chevrolet Volt) and the type of customer seems to be people who are willing to pay more for an electric car. An electric car has superior features comparable to traditional cars. Therefore, at least for existing customers, the price difference could be a less important factor in the purchase decision. Estimates indicate that by 2022, electric vehicles will cost the same as internal combustion cars, providing the take-off point for massive sales of electric vehicles. Sooner or later, combustion vehicles can no longer compete with electric vehicles. Strategic implications for car manufacturers would be to participate in the production of competitive electric vehicles, the construction of a corresponding network of suppliers and the adaptation of distribution channels.
Curiously, in a survey conducted by Consumer Reports (2014), it was reported that many authorized car dealerships that could actually offer electric cars discourage customers from buying one. One of the reasons could be that electric vehicles create the dilemma of much less after-sales revenue that accounts for about 10% of revenues and an even greater percentage of the total profits of the car dealership. This is an important issue to resolve for manufacturers who wish to improve sales of electric cars.
Zones of zero emissions
Low emission areas are already implemented in hundreds of cities in Europe. The Mayor of London announced the implementation of an “ultra low” emission zone; However, information from a city with a zero emission zone is not available. This could be exactly the opportunity.
Strategic implications for car manufacturers
Given the importance of driver and fuel costs in the transport value chain, car manufacturers should be actively involved in eliminating, or at least minimizing, these cost factors. Successful development, manufacturing and distribution of technologies related to the participation in an innovative mobility design could give car manufacturers a strong market share and competitive advantage.
