AMS has had exclusive access to a recent global study of automotive executives’ opinions that offers a fascinating insight into how the world of personal mobility will change over the next decade, and how the industry needs to respond.

The automotive sector accounts for between eight and 12% of the gross domestic product of most car-producing countries. However, with more cars on the road, infrastructure becomes stressed and environmental problems multiply. These factors are changing the way people think about mobility. While consumers want to include vehicles in their mobility mix, automotive companies have an opportunity to stake their claim in a broader mobility ecosystem that requires optimization across transportation modes – without compromising their traditional role of automobile manufacturers.

To better understand the challenges and opportunities surrounding new mobility models, IBM recently interviewed more than 115 executives in 18 countries. The results of the study confirm that automakers must each secure their position amongst a growing set of new competitors, each eager to take the lead in developing and profiting from new mobility models. The survey also found that new perspectives on vehicle ownership, financing, access and optimization are shaping the mobility landscape. Over time, this will create a very different market structure to the current arrangement.

Alliances will be critical, as finance will play a major role in giving automotive companies a head start. Yet nearly onethird of the auto executives surveyed said their company was three to five years away from bringing new mobility solutions to the market. When the study asked executives from both traditional automotive businesses and ‘new mobility’ providers where they stood in developing these offerings, it found that new mobility companies such as energy providers and electric vehicle manufacturers were much more aggressive in launching new solutions.

Opportunities for automakers
The primary mission of automotive companies will remain vehicle production. Making a great vehicle that consumers want to buy is their entry point, as consumers will continue to include vehicles as part of their mobility mix. There are several ways automakers can develop new sources of revenue in the advanced mobility market: Change the product portfolio from conventional vehicles to electric vehicles (EVs); provide telematics solutions (driver assistance, safety and security, intelligent driving, transmodal connectivity, infotainment); and offer enhanced vehicle services (remote diagnostics, preventive maintenance and early warning systems), ultimately providing mobility as a larger service beyond the vehicle. The majority of executives favoured shifting their products to electrified vehicles. No great surprise, given that about half believed that annual sales of conventional vehicles will have begun to decline by 2020.

Electrified vehicles offer the chance to cut ties with unpredictable oil prices at the pump. Yet when executives were asked about the challenges associated with switching to these vehicles, the biggest issue by far was cost, including pricing-related factors. The economics of batteries remains a major roadblock. Also, if dealers expect to move these cars through their lots, they must answer consumer demands for the convenience and comforts they are accustomed to in conventional vehicles. As environmental sustainability becomes engrained in people’s daily lives, the gap between consumer expectations and vehicle capability will be closed over time.

Many automakers are aggressively exploring ways to make alternative vehicles more efficient and appealing to a broader set of consumers by integrating telematics communications for route planning; monitoring battery capacity; informing consumers about the location of fueling stations; recapturing energy from the actions of the vehicle; acquiring energy from additional sources (such as solar technology), and using new non-electrical materials to lower the drain on batteries.

Connectivity: The driving force
The majority of executives interviewed agreed that connectivity will be a driving force in the future equation of mobility, enabling vehicles to routinely communicate with each other, on a centralized traffic grid and between individual nodes. This speaks to the compelling opportunity that the automotive industry has in the new mobility ecosystem.

Thanks to telematics and information technology, consumers will soon be able to take advantage of numerous applications that make it easier, safer and more convenient to move about and connect from one place to another. However, there are two major caveats for automakers, determining what aspects of vehicle connectivity can be opened to third parties and deciding how best to control the revenue that is derived from those applications. Not all applications can or should be open, and some automakers will be more aggressive than others. Opening software for use in vehicles involves a risk, and requires a strong certification process to protect against liabilities. Core embedded systems, such as those related to emergency, safety and intelligent driving, will remain tightly controlled by OEMs. Systems related to payment or mobility commerce are the tipping point, and OEMs have the opportunity to control those applications. Collaboration, information services, traffic, navigation and multimedia are the areas where automobile companies will have to compete with others for revenue. The connected vehicle will become the ultimate enabler of new models for mobility.

Thinking outside the vehicle
Beyond the vehicle, automotive companies also need to decide whether they want to get into the business of mobility services. Sixty-one per cent of automotive executives interviewed saw mobility services as good potential business for auto companies to explore, while only 17% disagreed. Mobility solutions will be primarily targeted at urban areas, where the need to reduce vehicle impact is most pressing. In developing such solutions, automotive companies have natural advantages. OEMs can lead alliances and integrate partners, while established dealerships should already understand local requirements. Captive finance companies can control financial transactions and further finance necessary equipment.

Although these changes could add complexity for the providers, consumers are looking for the easiest and most cost-effective ways to move around. This type of integration can only be supported by IT solutions that permit automakers to offer solutions that extend outside the vehicle. Most of the executives interviewed believe that customers will demand more flexibility from their mobile solutions – a need that subscription-based mobility services could provide. Under this model, consumers would give up their vehicle altogether, or supplement day-to-day vehicles with a subscription for ‘as-needed’ vehicles. Further, once a subscription base of customers is established, mobility providers can also offer peer-to-peer transactions that enable the sharing of vehicles, rides, or parking among subscribers – without requiring additional capital or space in vehicles.

Learning how to lead and manage alliances will become the competitive differentiator in the new mobility sector. Automotive can take advantage of these relationships, but unless they take a more proactive stance - and with many other industries partners looking to compete for the same customers - they risk becoming suppliers supporting other mobile solutions.

The full study will be available from 10 November at: