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“For me, it’s easier to not own a car than to own one.”
This U.S. millennial’s casual conclusion will, without a doubt, keep some car executives up at night. What does this mean for mobility?
“Mobility” has turned into a word of many meanings over the past few years.
The automotive industry’s entire business model has been built on the assumption that the products it offers are the preferred means to take people from point A to point B, and back again. Over the past few decades, what we drive and how we drive has evolved dramatically, but the fundamental notion of “mobility” (as a business) has remained constant: building, marketing, and then selling a car that gets consumers around.
What changed? Millennials. Gen Y. Generation We. However you label them, the way they define “mobility” is drastically different. Transportation is not entirely tied to a physical product, but revolves much more around “access.” For previous generations, getting your first car opened the door to mobility; for this generation, the important thing is to simply be mobile, which might have nothing to do with actually owning a car.
That’s a scary thought for a car manufacturer as it puts a brand’s very identity—and survival—at stake. If not selling cars, what’s your purpose? What do you offer, if not car ownership, what else can you offer? How else can you keep customers mobile? And how will you sustain revenue and profit, if a growing part of this large young demographic believes that mobility can come in forms other than car ownership?
What’s driving the great mobility shift?
Surely, as is almost always the case in business, there are opportunities amid these challenges. But, in order to think more creatively about those challenges, we first need to understand why the role of cars—and the definition of mobility—is changing. Here are three trends that are swiftly reshaping the automotive landscape:
According to the United Nations, 1.3 million people move into cities every week. By 2030, two-thirds of the population will be urban dwellers—and, by 2050, it is estimated that more than 70 percent of the world’s population will live in cities. At the same time, cities realize that increased density will require transport solutions that reduce congestion (and make cars superfluous in the process). Ideas on the table include improved mass commuter solutions, city bikes, investments in better infrastructure for subways and buses, etc.—all geared toward reducing the number of cars in the streets.
If you take a look at some of the most successful (and exciting) brands these days, you’ll quickly discover something many of them have in common: they break with the traditional concept of having to own a product in order to use it. Rent the Runway, for example, allows women to rent exclusive designer clothing for special events—and then return the rented items, no big purchase necessary. And NeighborGoods, a borrowing service, connects you to people in your area when you might need occasional use of power tools or yard equipment, but don’t actually want to buy these items.
Then there are car-sharing programs like Zipcar, Lyft, and Uber, which allow people to get around without owning a car. In fact, according to Forbes.com, 40 percent of millennials claim that losing their phone would be worse than losing their car (if they actually had one). Like it or not: collaborative consumption is here to stay—and sharing is the new shopping.
Along with less desire to actually own physical goods comes the desire to collect life-enriching experiences, instead. This trend goes hand-in-hand with the rise of social media and the perceived need to making one’s own life seem more exciting—and eagerly share it across all sorts of social networks in an attempt to impress or outshine others. Whether on account of vanity or in the name of authenticity, a recent JWT study revealed that 72 percent of millennials agree that they’d rather spend money on an experience than a material item.
So, where’s the opportunity?
To sum it all up: more and more people will be moving to the city, where they won’t need to (or don’t want to) own a car—plus, they would rather spend their disposable income on cool experiences.
Sounds like doomsday news for a car manufacturer! Well, perhaps it does—unless the industry begins to rethink the way it defines “mobility.”
The moment car brands accept this new reality as a playground for innovation, interesting opportunities will become apparent. These trends, for example, are already inspiring new thinking—and promise paths to profit in the years ahead:
Autonomous vehicles won’t always be in the experimental stage. Cars that drive themselves and are connected to their surroundings will surely appeal to new audiences. Cars that communicate with each other and move as tightly knit swarms through the morning commute can drastically reduce traffic congestion. Interestingly enough, companies like Google are emerging as potential future competitors for traditional car brands—all trying to get the first fully self-driving car on the road. That said, auto brands really have the expertise when it comes to driving—how can they come out ahead?
Car-sharing programs offer access to mobility without actually having to own a car. Manufacturers have already started to explore these alternate business models: Daimler’s Car2Go, BMW’s Drive Now, and VW’s Quicar are only a few examples. It will be interesting to observe how the industry scales this into a model that can deliver a regular stream of revenue by renting their cars by the hour, rather than selling them off the lot.
Connected and highly personalized technology can provide access to interesting experiences. Imagine a world in which a car taps into the cloud (and all the data it contains about you) to tailor your driving experience to your personal needs and preferences. This data-enabled technology could enrich the driving experience by, for example, suggesting a detour to your favorite historic site or recommending a scenic route that reminds you of a past vacation. The opportunities to make mobility more customized (and more of an experience) are practically endless—as are the business opportunities that come with it.
So, if you happen to work in the automotive industry and want to sleep soundly at night, answering these key questions will be essential:
· How do you redefine the value you deliver to a (changing) society?
· What do you actually sell in order to provide access to mobility?
· Which are the right (technology) partners that help you get there?
A new definition of “mobility” will lead to a new automotive business model. There is no doubt about it. And, while the changes at hand may seem daunting, facing them will open up a dialogue—and fresh possibilities—that will lead to new and thrilling experiences for individual drivers and society at large.
If you would like to discuss this article with Michel Gabriel or Dominik Prinz, please send an email to firstname.lastname@example.org.