“There will be winners, and losers.” That phrase sums up the opportunities and threats represented by advanced mobility brought on by ubiquitous connectivity both inside and outside of the car and how it relates to the automotive industry. KPMG has released a thoughtful and informative study that explains the massive disruption happening right now to automakers as they work toward adapting to new realities on how people acquire and use vehicles as part of their connected lifestyles.
“At this moment every aspect of the automotive business is changing: from how cars are designed, produced and built, to how they are marketed and sold, to the underlying economics,” said Gary Silberg, national automotive industry leader for KPMG LLP and author of the report. “Not since the first automotive revolution has there been such massive innovation and displacement of the status quo, where we will see new players surge forth, some old players reinvent themselves and others totally left behind.”
Of the many findings in the study, a few stand out to us. The growing popularity of on-demand mobility, particularly in urban areas with car- and ride-sharing, is making a vehicle purchase an unwise investment. Automakers need to update their economic models and include revenue gained through connected services and strategic alliances with service providers to offset lower vehicle sales volumes.
One other key finding is somewhat intuitive but vital: Get your in-car electronics and software to operate to the expectations of your customer. That means it needs to work with all nomadic devices that are brought into the car. And embedded features need to be easy to learn and use, without complexity. The value of a car now resides in software and electronics and how well they work together, according to the study.
How to win in this environment? The study identifies numerous opportunities, including the development of strategic alliances across industries and the creation of adaptable organizations that will likely result in massive change in corporate culture. We believe a crucial opportunity is for automakers to use the data generated by their vehicles to understand every aspect of the customer experience from when they first learn about a car, to dealership interactions and throughout the vehicle-usage life cycle. Tesla has already taken these steps through the in-house development of enterprise software that collects and analyzes this data rather than allowing tech companies such as Google to collect and eventually monetize it.
The winners in this race will be those companies who anticipate the market, deliver compelling user experiences and make the strategic investments needed to compete in the new world of advanced mobility. The losers will be those that fail to grasp the significance of shifting consumer preferences and behaviors or move too slowly in their response to the market. Or both.