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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.