The global automotive industry is transforming rapidly and while automotive manufacturers (AMs) are still in the driving seat, tech-led innovators are increasingly challenging their market position by delivering the kind of functionality that modern motorists really want. To maintain market share, while making a play for new opportunities in areas such as automation, connectivity and electrification, AMs must be prepared to grab as much emerging tech as they can.
Toyota’s recent decision to sell its electric vehicle (EV) technology to the Chinese EV start-up, Singulato, is the latest example of AMs being prepared to trade their tech know-how for greater access to, and knowledge of, the Chinese marketplace. The move is typical of many global transactions taking place in the sector, as AMs seek to extend their reach into markets where sales of all-electric vehicles are far exceeding those in other parts of the world.
In addition to pursuing EV sales in China, other AM-led transactions and joint ventures are focused on acquiring an interest in some of the latest technological advances and facilitating their introduction in Europe and the US.
Much of this activity is driven by market expectations of growing demand for mobility services and fully-automated, self-driving cars. A recent study by Accenture has shown that by 2030, a significant portion of automotive industry profit is expected to come not from vehicle sales, but from other services focused on selling experiences and mobility. Other market research has speculated that the global mobility-as-a-service (MaaS) market could be worth approximately USD 253 billion by 2023.
To secure a slice of this market opportunity, AMs must be prepared to collaborate with a variety of tech innovators. In a recent small-scale example, tech start-up, RingGo, recently launched a new range of in-car mobility services to help drivers locate and pay for a parking space, with a demonstration involving a BMW 3 Series. For BMW, the move provided another opportunity to assert its position as a ‘premium mobility provider’; supporting the introduction of innovative mobility services.
Underpinning many of these service or experience-based collaborations is a fundamental change in consumer attitudes towards car ownership. Whereas once, many people chose to own cars as a status symbol, millennials are more inclined to buy mobility services that offer efficiency, value, and connected car experiences. With new car sales in decline and the cost of development increasing, many industry onlookers believe a further wave of consolidation is inevitable and AMs know they must prepare for this now.
Among their chief concerns is understanding where intellectual property ownership is likely to lie in the future. For example, if AMs are left solely responsible for building a chassis, their revenue-earning potential would be eroded significantly, and Tier One manufacturers would secure a greater share of the value chain. To avoid this scenario, many are choosing to explore the market and collaborate with a wide range of tech newcomers; hedging their bets until the leading tech platforms and their associated suppliers, become clear. Based on this knowledge, they can then swoop to acquire the right tech companies when the time is right.
Another potential area of risk for existing AMs in a rapidly-shifting marketplace, is the rise of the tech giants and their bold attempts to enter the world of mainstream car production. Once known as Google’s self-driving project, Waymo has recently announced plans to expand its autonomous-vehicle production capacity in the US, under the ownership of parent company, Alphabet. The new facility is expected to go into production in the second half of the year. At the same time, Apple’s much-rumoured Project Titan appears to be gathering momentum, having made some strategic hires from Tesla and some Apple followers believe a launch date is imminent.
For the supply chain, the current market changes are both an opportunity and a threat. A number of dominant architectures have already emerged in areas such as engine management, and body control and suppliers are clustering around these to ensure their compatibility. Once the leading architectures are established, they could potentially become acquisition targets.
Car makers are in a race to invest in technologies and adapt their business models, but with volumes falling sharply and the cost of development soaring, there are bound to be winners and losers. Managing costs and resources carefully, while taking an open approach to collaboration and innovation, is vital to securing their future.