The titans of old are no longer the dominant players in their own industry. They must adapt or die.
For example, Uber, the ride-hailing behemoth, is reportedly looking for a $100 billion valuation ahead of its planned IPO sometime this year. To put this into perspective, GM has a market cap of just $56 billion.
The future looks even grimmer for traditional OEMs. By 2035, Boston Consulting Group expects that new car sales, the current lifeblood of automakers, will largely stagnate. So – what is the new business model? Leasing, lending programs like Porsche, supplying for Uber?
The Ubers of the world will have much to be happy about. New profit pools that drive the industry forward will largely come from areas startups are heavily invested in by 2035. Emergent profit centers such as autonomous vehicle components, data, and connectivity services and on-demand mobility will dominate the automotive landscape.
The bottom line? Traditional OEMs do not have a bright future unless they adapt to these rapidly changing market dynamics. They are being forced to look toward partnering with Silicon Valley tech companies to survive while capitalizing on their expertise in making the physical vehicles.
Will technology drive the auto industry forward from here on out? Is Tesla the new model where it is more of a tech company than a car company?
A common practice among these established automotive players is forming an alliance with a tech giant. By pooling resources (such as manufacturing and marketing know-how from Detroit and state-of-the-art tech from Silicon Valley), established OEMs hope to avoid extinction.
For example, Ford just announced a $500 million investment in electric pickup maker Rivian.
Joining the X’s and O’s will determine the winner
The key differentiator in this hyper-competitive market is the user experience. The mobile consumer of today has been trained to expect on-demand services that simply work without too much hassle. A self-driving vehicle must arrive at their doorstep within a few minutes because this is their expectation after years of using the iPhone and Uber. Will buying a car become as simple as placing an order with Amazon on your phone? Will virtual reality destroy the need for dealerships completely?
And how do OEMs and their tech partners figure out just what the customer wants? The answer is marrying operational data (O-data) and experience data (X-data). O-data — hard numbers like costs, accounting, and sales — have been used by automotive executives to inform their business decisions for decades. That picture isn’t complete anymore. Now, experience touch points such as brand management, customer satisfaction, and the like paint a true image of consumer desires and wishes.
Taken together, connecting the X’s and O’s provides a true path forward for automotive players to build consumer-centric mobile solutions.
The stakes have never been higher
The automotive industry is undergoing more disruption now than it has in the past fifty years. The struggle for victory is not easy. New players are hungry. They innovate and expand with a ferocity that seems almost alien to traditional automotive OEMs. Why wouldn’t these startups fight with everything they have to seize a commanding position in an automotive sector that is expected to generate $380 billion in profit by 2035?
The first one to the finish line wins. This is the urgency that is driving digital transformation in the automotive sector. The differentiator is finding out exactly what the consumer wants and optimizing a suite of mobility services to ensure that the mobile experience is seamless in a truly meaningful way.
Unsure of how to do this? Don’t fret – SAPPHIRE NOW provides an immense opportunity to learn from SAP and industry experts. Follow @SAPAutomotive to get the scoop on everything automotive at SAPPHIRE. We look forward to seeing you in Orlando!