The introduction of CASE (Connected, Autonomous, Shared, Electrified) technologies has created a new set of choices for automotive companies. Each company — regardless of their origins as a Silicon Valley start-up or an iconic Detroit stalwart — needs to determine which set of capabilities it will need to be successful in its quest to get closer to the customer. And with customer sentiments moving from owning vehicles to consuming vehicles based on subscription models (allowing greater choice of vehicle, time, and use options), automotive companies are putting bets on where to play, with whom to partner, and how to go about doing so.
In my work, I find that a number of roles are emerging to consider what business model — and resulting capabilities would be needed — to win in the new automotive world. While many companies (particularly startups) have predefined growth and exit strategies, many companies are still trying to forge ahead in the brave new world. Some have figured out their initial direction and some are still working on it with the help of partners.
In one recent meeting, I was asked what did we do in the connected vehicle space. My answer at the end of the day is a flip question: What does an automotive company want to do in terms of brand, operating companies, partnerships, and technologies to get closer to the new automotive customer?
From my perch, I see four ways CASE is already leading to the disintermediation of the automotive industry. It’s a heady time, and companies are trying to understand where they fall into the new roles and strategies based on past and future roles that automotive companies can — and should — play.
- Traditional automakers. These are the traditional brands that build cars, for both traditional personal consumer use as well as enabled with CASE technologies which may look (and drive) a lot differently. In this case, an automaker may elect to build cars for a fleet operator, like Fiat-Chrysler, which builds a lot of Pacifica minivans for the Google Waymo fleet of robo-taxis. In this model, traditional OEM capabilities continue to be important, with a focus on revenue, margin, and operational excellence. Captive finance options — the ability to upsell and outsell to customers within the brand ecosystem — is very important.
- Platform makers. These may be new startups and growth companies like Zoox or traditional companies like Honda that are creating new platforms or designing products around very well-defined CASE components (such as BEV and other electrified propulsion and power systems). Platform makers may or may not opt to actually build cars. Interior design and instrumentation company IDEO is a good example, defining the elements which are distinct in a platform and working with traditional automakers like Ford to express and build the platform. When and if platform makers commit to actually build a vehicle, there can be a steep learning curve (as in the case of Tesla, which literally had to learn to build vehicles at scale after designing and building successful low-volume platforms). Low cost, a startup mentality, often pre-revenue or early revenue often drives behavior and capabilities needs. This can also include high-touch, 1:1 configurations for fleet operators as well as personal vehicle owners (a good example of this is uber-lux maker Karma Automotive).
- Fleet operators. While this may sound not as bourgeois as the makers, fleet operators are closest to the customer, which makes them the kings of the ecosystem. Fleet operators can certainly be brands within automakers (GM Maven is a great example) or customers/partners of platform makers (Google Waymo has already racked up millions of vehicle miles traveled — VMT — as part of their robo-taxi fleet). Fleet operators can offer subscription access to a variety of make and model vehicles in an automaker’s lineup or look more traditional, like the next-generation rental car company (think Zipcar). Asset management, high vehicle use maintenance (up to 90% over time), and predictive fleet MRO are all major operating concerns. Fleet operators also have a unique advantage to be able to harvest and manage both vehicle use data as well as customer use data while using fleet assets (as privacy allows). This means that Fleet Operators are also well positioned to be Information Brokers.
- Information brokers. While the expression might conjure images of rows of data servers in a large raised-floor room humming under dimming lights, one thing is certain: Data is the new oil. Information brokers (as privacy allows; don’t forget GDPR) can monetize vehicle use and occupant information for many lateral industries such as finance and insurance, transportation and logistics, smart city grids and vehicle-to-infrastructure (V2I) applications, and many other personal customer experience (CX) applications. Information brokers are very focused on Big Data operations (think petabytes weekly per origin of data), data analytics, and product creation based on intended audience(s). Tuck-in opportunities for third-party data sources to round out and enhance data already collected offer many commercial possibilities, as in the case of insurance companies tracking operator behavior and vehicle use.
There is, of course, the big wild card in all of this: What is the next business model that has not been created that we can’t forecast? The many roles automotive companies will take on as CASE technologies mature over the next 20 years are simply unimaginable. However, based on where we sit heading into 2019, automotive companies will choose one or more of the business models available today and craft their strategies to be successful in tomorrow’s market.
For more on the future of the automotive industry, see “Standardization: Reengineering The Automotive Industry’s Future One Part At A Time.”