MOBILITYMapping a route towards future successin the new automotive ecosystem

MOBILITYAS A SERVICEIS ACCELERATINGIN THE AUTOINDUSTRY.The automotive industry’s shift towards mobility as a service is accelerating.But how can Original Equipment Manufacturers (OEMs) make the most ofthe opportunities it offers? Accenture’s insights into the mobility as a servicemarket provide a road map for OEMs to win in this emerging space.2

Mobility as a service—digitally-enabled carsharing and ride-hailing—will be a key driverof growth and profitability in tomorrow’s automarkets, far outstripping the profitabilitypotential of traditional car making.Accenture research shows that by 2030,revenues from manufacturing and sellingvehicles (around 2 trillion) will be onlymarginally higher than they are today, and thatprofits from car sales will even shrink slightly(from approximately 126 billion to 122billion). By contrast, revenues from mobilityservices are projected to soar to almost 1.2trillion—with profits reaching as much as 220 billion.Fueled by constant improvements inautonomous vehicle technologies, globalmarkets for mobility as a service are set to growsignificantly over the next decade (see Fig. 1).By 2030, revenuesfrom mobilityservices areprojected to soar toalmost 1.2 trillionFIGURE 1The German mobiility as a service market will reach 20% of totalindividual car transport by 2027[%] Share of German individual automotive transportation volume1SDV LEVEL 1(Driver Assistance)SDV LEVEL 2(Partial Automation)Connected cars enablepeer to peer car-sharingSDV LEVEL 3(Conditional Automation)Artificialintelligenceenables moreadvancedmobility asConsumera serviceonline platformofferingsproviders offersolutionsSDV LEVEL 4(High Automation)SDV LEVEL 5(Full Automation)Widespreadunderstandingof the benefits ofmobility as a serviceSelf-drivingvehicles enhancemobility as aservice offeringsfurther2000 2005 2010 2011—2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2029 2030 2035 2040—2050SDV Self-driving vehiclesRides in non-shared vehicles1Mobility as a service ridesSource: Statista & Bundesumweltamt 2017 (Data until 2016, 2017 and after own Accenture Forecast)3

AREOEMSREADY?OEMs will need to address three criticalchallenges before they can seize allthe opportunities from the emerging“passenger economy”:They will need to meet customer’s increasinglydemanding expectations—shaped by the carsharing and ride-hailing services pioneered bynew entrants—and offer new services that areeven better.They will need to ensure the profitabilityof these new services. Many OEMs’ early,experimental car-sharing and ride-hailingservices are not earning money. This will haveto change.They will need to integrate their core “buildand-sell” business with their new offerings.Players in other industries—for example, Applein smartphones, Google in AI-enabled hardwaredevices—have shown how critical it is to builda business model that strikes the right balancebetween hardware, software, and ecosystem.OEMs should do the same.4

OEMs’ existing strengths position them well tomeet these challenges. They have the expertisein vehicle mass production and are thusvery likely to dominate the manufacturing ofautonomous vehicles that will turn mobility as aservice into a mass market. They still occupy thecritical interfaces between products and services,hardware and software. And their brands,powerful distribution networks, and customerfollowing can help build and sustain mobileservices at scale: the key to success.But they will also need bold new strategies tobring these strengths to bear. Auto executivesmust make smart choices about where and howto play, and anticipate what customers need andexpect from mobility services. They will also needto execute on these choices, and fast. Nimblenewcomers have been besieging the emergingmobility as a service space for some time, andthanks to their incursions, the changes thatwill eventually enable the mobility as a servicerevolution are already well underway (see Fig. 2).Auto executivesmust make smartchoices aboutwhere and how toplay, and anticipatewhat customersneed and expectfrom mobilityservicesFIGURE 2Fields of play: Mobility services OEMs could exploreCAR OWNINGBUYMOBILITY AS A RSHARINGRIDESHARINGDrive NowBla Bla M OWNING TO USINGSource: Accenture5

NEW COMPETITORS,NEW EXPECTATIONSThe disruptive business model pioneered bysuch ride-sharing services as Uber and Lyftnow has several imitators. Additionally, somelarge, data-driven platform players are currentlyvying with OEMs for control of the connectedvehicle customer interface and they aim toexpand their reach. Even traditional car-hire andpublic transport providers are leveraging theirproven competence as mobility providers (andconsiderable local clout) to grow their footprint,especially in urban areas. What’s more, thesealternative providers are meeting customerexpectations significantly more successfullythan OEMs (see Fig. 3).FIGURE 3Comparingservice availabilityby number of cities (per 800)OEMs, in fact, are struggling to keep up. True,Daimler’s Car2Go subsidiary is now said to bethe largest car-sharing company in the world1;While Volkswagen’s new Moia business aimsto launch a pioneering on-demand, all-electricshuttle bus service for the city of Hamburgin 2018, which will simulate the experience ofautonomous driving in every respect, exceptthat the driver, for now, is still in place2. Yetthese experiments, though impressive, arestill nowhere near as customer-friendly as theservices of established mobility players orstart-ups. They’re also almost always separateventures that aren’t truly integrated into OEMs’overall business. And they certainly are notprofitable.As mobility morphs into a market whoseeconomic value lies in the efficientmanagement of an all-encompassing systemlikely to attract the attention of regulators as itssocietal benefits become clearer, OEMs couldbe doing a whole lot more.SHAPING NEW STRATEGIESOEMs need to position themselvesappropriately along the emerging automotivevalue chain—a decision that will hinge, ofcourse, on each individual player’s purpose,vision, core competencies, and assessmentof the likely market advantages (see Fig. AR2GO25Source: Service Provider Websites6DRIVE NOW13Recent automotive sector investment activitysuggests that major players are alreadyanticipating significant shifts in the valuechain. Cases in point: General Motors plans todeploy self-driving electric cars in test fleets inpartnership with its ride-sharing affiliate, Lyft3;and Delphi recently announced an agreementto acquire nuTonomy4.

Even today, however, OEMs could be makingbetter use of their existing assets to boostefficiencies and increase their core mobilityrevenues. Experiences in other industriesdemonstrate the power of an approach thatcombines a premium product with a superior,platform-based ecosystem. Consider, forexample, how Apple has garnered 80 percentof total global smartphone profits with a marketshare of less than 15 percent5.basic product. They would utilize test-drivingfleets and boost subscription-based ownershipto meet the needs of customers waiting for anew vehicle. And by combining new mobilityservices with classic sales (which is crucial forshort-term growth), they would give customerswhat they really want: full flexibility.Offering digital add-on services, such as aconcierge/virtual assistant, park, charge andfuel, would create new revenue streams. OEMsIf OEMs were to combine complementary vehicle could also build significant new profit poolsfleets into a seamless, full scope, and switchableby monetizing both sensor and user data—service via a mobility platform (including allcombining their own with external data sources,car-sharing types, as well as ride-hailing andin partnership with third parties, such as travelrentals), they would maximize the use of theircompanies. Retailers will drive clients to their shopsHospitals will drive to patientsCars will be mobile hotel rooms or pubsEmployers bring employees to workPeople will buy mobility from companiesserving their primary needs The term car won’t be used anymore in 30 yearsFIGURE 4The new value chainAUTOMOTIVE MARKET REVENUE POOLS:(Indicative Size, OEM View)PRIMARY SERVICE LAYERPROVIDING MOBILITY AS STODAYAFTERSALESCARSALESDIGITAL ECONOMY2020ADD ON BUSINESS/PASSENGER ECONOMYBUSINESSADD ON BUSINESS/PASSENGER ECONOMYBUSINESSMOBILITYON CARSALESPASSENGER ECONOMY20302040Source: Accenture7

PARTNERINGTO BOLSTERSTRENGTHSMobility and digital markets require a muchmore customer-centric and open way ofworking. OEMs will have to put their futurecustomers’ needs around mobility, services,and experiences front and center. They will alsoneed to partner with other players to make themost of the platforms and ecosystems of thefuture.No OEM, even the largest and most prepared,will have all the required strengths to competeand win in the near future. Working withstrategic partners whose strengths complementtheir own will be essential. Case in point:Daimler’s mobility platform, Moovel, offersusers access to the modes of transportationbest suited to their routes, and was created incooperation with public transit and carrental companies6.Partnerships with digitally-savvysuppliers, start-ups or evenlarge digital corporates willoften be the best way tobuild capabilities in highlyspecialized areas such asartificial intelligence or ITsecurity. Furthermore, suchpartnerships will oftenbe the only way to scaleplatforms and serviceofferings quickly—a musthave in digital business,where size matters.8These new economies of scale will also requirepartnerships between OEMs that usuallycompete. Some signs of this are alreadyevident. For example, Daimler, Volkswagenand BMW are partnering with mobile telecomsequipment firms to collaborate on developingthe infrastructure required for self-driving cars7.But some partnerships will simply emergebecause they offer great opportunities. Jointventures between OEMs and digital mediaplatforms, for instance, will create new marketsaround in-vehicle music and video streaming.

ADOPTING NEW BUSINESS MODELSTo compete and win in these new markets,OEMs will have to adopt new business modelsthat enable them to strengthen their existingcapabilities, accommodate new ones, andleverage each group with the other.Five business model options presentthemselves, each of which could deliver aprofitability boost, depending on a player’sbusiness strategy and how effectively they applyit (see Fig. 5).OEMs will have toadopt new businessmodels that enablethem to strengthentheir existingcapabilitiesFIGURE 5Five major business models for the futureOEM OPTIONSCarIntelligenceBuildCarsRepair& MaintenanceFleetOperationLUXURY gatorMutli-ModalMobilityEco-SystemProviderOEM establishespremium/luxury brand,and manufactures,markets and sells carsof the highest qualityBUSINESS MODELSB2B ASSETPROVIDEROEM focuses onselling high qualityautonomous cars mainlyto B2B customersVEHICLE &FLEET OPERATOROEM owns andoperates vehicle fleetCAR MOBILITYSERVICE PROVIDEROEM offers its own carmobility service, or ridehailing servicesFULL MOBILITYPROVIDEROEM offers full mobilityas a service, combiningmultiple means oftransportationSource: AccentureFunction fulfilled by OEMFunction potentially fulfilled by OEM9

1: LUXURY VEHICLE MANUFACTURERCatering to the small, yet persistent market of customers who still wantto own a car. This pure-play model will likely require the capability toestablish a premium or even luxury brand, and to manufacture, market andsell cars of the highest quality.2: B2B ASSET PROVIDERBuilding, selling and servicing a new generation of “built-for-service”autonomous vehicles and delivering them to fleet providers; much asaircraft manufacturers build passenger planes for airlines. OEMs that takethis route will likely have to shed their brand marketing operations andramp up their flexible production capabilities.3: VEHICLE AND FLEET OPERATOROEMs would generate a circular economy effect that reduces waste andincreases revenue potential by making, owning and operating all-inclusivevehicle fleets designed for an optimal lifecycle. More efficient vehicle usewould reduce the costs of mobility services. And OEMs wouldn’t even needto own the services themselves to increase the lifetime efficiency of thevehicle; just all that stands behind them, end-to-end.4: CAR MOBILITY SERVICE PROVIDEREssentially a scalable version of classic car-sharing, which, by generatingmore frequent customer interaction, provides valuable customer datainsights. If OEMs were to monetize that data, leveraging strong partnersto provide additional, location-based services, they could generate newcar sales leads as well as improve the overall efficiency of vehicle use. Adesirable option, but one that requires substantial brand investment tomake it competitive.5: FULL MOBILITY PROVIDERBy offering full mobility as a service, combining multiple modes oftransportation, OEMs could act as mobility aggregators at the heart ofan inter-modal ecosystem, with partners including public transportationproviders fully integrated into their brand. They would significantly broadenthe scope of data and how it’s used, strengthening their grip on the userinterface. The drawback: there would only be room for one or two dominantplayers in each market.10

SCALING TOSUCCEEDThe competition to deliver mobility as aservice is tough—and set to get tougheras new entrants pile into the space andcontinue to raise their game. The battlefor control over customer data is likelyto be especially fierce. But if theyare determined to raise their ownmobility game, OEMs could winthe intensifying struggle for thecustomer.The key to long-term success isscale. And OEMs are in pole position toleverage it—so long as they can bolstertheir existing capabilities around creating andmanufacturing cars, and build new capabilitiesaround ideating, testing, and rolling outmobility and digital services.OEMs should act now to optimize the potentialfor strong growth at much higher margins byfocusing on developing mobility services fromthe user’s point of view. If they don’t, they riskfalling behind in a still-open race. Already in anexcellent starting position, OEMs can be amongthe winners if they wisely pivot their business model and transform at scale.ABOUT THIS REPORTAccenture Automotive works with the world’s largestcar makers and suppliers to help digitize their business.This report is based on insights from our work, as well asproprietary research on the mobility as a service market.To determine the progress of autonomous driving, weexamined how many “robo” taxi and bus projects wereactive as of November 6, 2017 (excluding projects thathad ended and new-trial announcements). Our principalsource for this data were newspaper articles (accessedthrough Factiva) and publicly available websites of the mainmanufacturers of robo taxis.To assess mobility as a service market development, weleveraged data up to and including 2016 from Statista,the Hamburg-based online statistics, market research andbusiness intelligence portal, and from the Bundesumweltamt(German Ministry of the Environment, 2017). Our forecastwas based on the future modal split model in the ShellPassenger Car Services for Germany to 2040 study, andour own market model based on a number of qualitativeassumptions about when current mobility as a servicebarriers will be overcome and what impact that will have onfuture market growth. These include: the new mindsets ofa new generation; the notion of the car as a status symboland enabler of individual freedom; service reliability; thecustomer-centricity of services; economic advantages;the regulatory environment; service access; technologydisruption; and new market entrants.11

CONTACTSABOUT ACCENTUREAxel [email protected] is a leading global professionalservices company, providing a broad range ofservices and solutions in strategy, consulting,digital, technology and operations. Combiningunmatched experience and specialized skillsacross more than 40 industries and all businessfunctions – underpinned by the world’s largestdelivery network – Accenture works at theintersection of business and technology to helpclients improve their performance and createsustainable value for their stakeholders. Withapproximately 435,000 people serving clientsin more than 120 countries, Accenture drivesinnovation to improve the way the world worksand lives. Visit us at [email protected]é Gerhardyandre.gerhardy petitor-2017-10?r US&IR ech-firms-form-5g-telecoms-group/7Copyright 2018 Accenture. All rights reserved. Accenture, its logo, andHigh Performance. Delivered. are trademarks of Accenture.This document is produced by consultants at Accenture as generalguidance. It is not intended to provide specific advice on yourcircumstances. If you require advice or further details on any mattersreferred to, please contact your Accenture representative.

a service offerings Widespread understanding of the benefits of mobility as a service Self-driving vehicles enhance mobility as a service offerings further [%] Share of German individual automotive transportation volume1 SDV LEVEL 1 (Driver Assistance) SDV LEVEL 5 (Full Automation) Rides in non-shared vehi