Autonomous cars will be the order of the day and thus, will likely come the “end of the automotive era” as we know it. At least according to the former vice chairman of General Motors (GM) Bob Lutz.

But in a lighter and more practical note, what it means is that transportation might basically cross over to the service side and thrive on it, unshackling humans from the dreary duty of driving.

But wait.

While one might find it right to mourn the “good old times” and also get cautiously excited over the driverless driving, let us walk through how this scenario might come true and what the industry can do to persist.

Different Business Models                                  

In the coming decade, the industry might transition to service models or as-a-service business models as they evolve fully to suit the customers according to their needs. For example:

  1. Value-added services: It might include extended maintenance and warranty packages; connected services such as navigation and infotainment; vehicle upgrades through OTA; usage-based insurance; and smart payments.
  2. Mobility as a service: Uber is the best example of this model that dictates renting, sharing, and e-hailing. Uber’s popularity is growing by the day and there are many other companies who are already walking in its steps. As revolutionary as it was to the users when it first launched, its further expansion in the coming days into a more featured and personalised platform might completely disrupt the industry.
  3. Software as a service: Autonomous vehicles retain their data and use it to augment the next session and further improvements on it might continue in the years to come. The customers could expect over the air updates, security, and big data analytics.

Besides that, the industry might expand into models like hardware-as-a-service [where the client leases the hardware from a managed service provider (MSP) for cost-effectiveness] to make the system more nuanced and apt.

If these services can be followed through earnestly, then the forecast is that it can be the revenue stream that can increase the potential of automotive industry at a CAGR of 5.2% by 2030. It might mean the growth of service market by $1 trillion.

Sustainability

Branching upon new service models is a strategic imperative for the automotive industry. However, some companies like Ford provided iTunes for its cars to stall the change and buy some time. Concurrently, it is trying to develop smart mobility services and a digital workplace from a fleet of mass market autonomous vehicles.

Challenges

Of course this paradigm shift from vehicle ownership to usage is extreme. Increasingly, a car is turning into a place for the users’ personal activities. This is important for the service providers to take into account so that they come up with customised and personalised services to make their experience terrific.

With companies on the path to innovation, it is those who can heed every nuanced need and unforeseen problems of the consumers who might be able to stay on top of the game with unique solutions already at hand.

So maybe these auto business models could really mean the “end of the automotive era” like Lutz says. But it could also be the beginning of a new one.


Sachi Mulmi is a researcher with Frost & Sullivan. She can be reached at sachi.mulmi@frost.com


Sapan Agarwal drives content and marketing for Frost & Sullivan. Sapan is based out of Kuala Lumpur Malaysia and can be reached at sapan.agarwal@frost.com | +603 6204 5830