OEMs gear up for mobility as a service
Image credit: Audi
Car manufacturers must prepare for the likely takeover of future mobility solutions as they begin to infiltrate more transportation services.
Mobility-as-a-Service is coming to the car sector, which means digitally enabled car-sharing and ride-hailing is set to overtake the traditional model of manufacture and sale of cars – and manufacturers need to be ready.
Accenture research shows that by 2030 revenues from mobility services are projected to soar to almost €1.2tn – with profits reaching as much as €220bn. The study also says that by 2030, revenues from manufacturing and selling vehicles will be only marginally higher than they are today, and that profits from car sales will even shrink slightly (from €126bn to €122bn).
Clearly the opportunities offered by Mobility-as-a-Service (MaaS) represent both a threat and an opportunity for OEMs (original equipment manufacturers). A McKinsey report says: “Value is likely to shift toward new, disruptive business models, with shared mobility and connectivity solutions potentially accounting for up to 25 per cent of total automotive revenue in 2030. It is these areas the OEMs are looking to get excited about.”
It is no surprise, then, that automotive manufacturers have generally responded to this evolution and are actively working to develop mobility services.
In practical terms, what is Mobility-as-a-Service? How does it affect the everyday person? Within the car industry there are a few options: autonomous or driverless driving, where the car can guide itself to a defined point, is one; shared mobility, where a car is hailed much like a taxi but is driven by the individual, is another. Electric cars are a key player, and, finally, connected cars with internet access and the ability to connect with devices inside and outside of the car to provide contextual information.
When combined, the forces can help drivers and passengers get from A to B more smoothly – either by finding and avoiding traffic jams or being able to instantly hail or share a driverless car. The idea is that the car becomes a service and, as with all services, there must be a value-add to be successful.
Fiona Falcone, head of automotive UK at Accenture, says: “The wider picture is how to get from A to B and the car part is an important facet of that. OEMs are all giving thought to how they can best exploit their part of the value chain.”
Shared mobility is perhaps the easiest nut to crack, with very strong growth potential in terms of ease of acceptance and entry to the market in the first place. According to a McKinsey report on the future of mobility, in 2017 less than 1 per cent of passenger miles travelled were carried out using shared-mobility services, but US customers expect usage of shared mobility to increase by around 80 per cent once robo-taxis are available. Furthermore, the report states at least $32bn had been invested in ridesharing start-ups alone.
“There is strong growth potential: there is a lower cost to entry for new mobility business models, such as building a shared-mobility service in a specific region or developing a connectivity platform for in-vehicle services and advertising,” the study says.
Judging by the amount of activity in developing autonomous cars, manufacturers agree that it provides opportunity for growth in making autonomous vehicles a reality.
Audi for one has been looking at this issue and undertook a research project in Ingolstadt, Germany, its home town. The study found that if computers could maintain the necessary distance to other vehicles, not allow the cars to drive too fast, and obey all traffic signals, then journey times could be cut by a quarter in a model using only autonomous cars.
The study also found that the incorporation of fully autonomous vehicles could repurpose one traffic lane in a four-lane network and dedicate this new space to pedestrians or bicycles instead of vehicles. Accordingly, it has invested in its self-driving car, the Audi Aicon, with the expectation that need and demand will eventually create a monetised marketplace.
Daimler is also involved in this market, with the development of an autonomous-driving prototype: the Mercedes-Benz F 015 Luxury in Motion. The company thinks that seeing a car as “a private retreat where people can use their time on the move as they wish” will drive demand for its service.
Daimler’s report, ‘Ushering in a new world’, says: “Autonomous mobility will bring about major changes and involve many different parties. Psychological barriers must be overcome in the same way that social acceptance must be gained. This requires a sound legal basis across country borders that regulates autonomous traffic and covers questions of liability in the event of a collision.”
BMW and Audi have both entered this market. BMW is active in China with a Shanghai-based electric car-sharing company and in Chengdu with a premium car-sharing service. Audi has introduced its flexible ‘Premium’ mobility service, with ‘Audi on-demand’ available throughout the UK, and has also introduced the idea that the dealers act as the point of contact. This is a prestige service where customers can choose their model, their location and book online or from their smartphone.
They can also use a concierge service to have their ordered cars delivered to and picked up from locations within 30 minutes of the Audi centre.
Following in the footsteps of BMW and Audi, American automaker Ford is in on the act with its ride-sharing solution, Chariot, which was initially launched in the US but is being rolled out globally.
Johann Jungwirth, Volkswagen expert on Mobility-as-a-Service, says: “Mobility-as-a-Service started with ride-hailing services and has now reached massive adoption and acceptance. Last year, on average, 44 million rides took place per day using mobility services, 16 billion in total, all with human drivers. The next quantum leap will be with MaaS using self-driving vehicles. This will be a real disruption within the market and a powerful force for change.”
Indeed, autonomous driving is perhaps the most vaunted aspect of MaaS within the car industry. The report by McKinsey describes autonomous driving as a game changer. “In 2016, only about 1 per cent of vehicles sold were equipped with basic partial-autonomous-driving technology. Today, 80 per cent of the top ten OEMs have announced plans for highly autonomous technology to be ready for the road by 2025,” it says.
The demand for such a service is obvious: population size and density means that self-driving cars could be positioned to allow for customer demand and, in doing so, could reduce congestion. Different fleets could be deployed, according to local need and appetite, to provide a level of differentiation and value-add.
Shared mobility may well be an easier nut to crack but, like autonomous vehicles, it will rely on having the right infrastructure available to make it workable and thus make for demand via a value-add and an enhanced experience.
‘E-hailing and autonomous cars both have a few important dynamics but the key to them being successful is having a platform that the user can hail the car on. It needs to be better than a bus and cheaper than calling an Uber.’
Daimler, which owns Mercedes-Benz and Smart, says that although the technical conditions for autonomous driving are already well established, the question no longer revolves around whether the technology will deliver on its promise, but whether people want what the technology can deliver. Also, whether society and legislators are ready for this ‘revolution in auto mobility’.
Volkswagen’s Jungwirth describes this as business layers. He explains: “Future Mobility-as-a-Service is built on five business layers. Layer one is the self-driving system, technology-wise the most sophisticated part. Layer two is the vehicles, different models and interiors for different use-cases including transportation of goods. Layer three contains the fleet operations and fleet intelligence centre. Layer four is the mobility platform and services for ride hailing, ride pooling, ride sharing, but also goods-delivery services. And layer five is the content and advertisement.”
However, for OEMs, the crux of the matter is the cars themselves – this is where things like connected cars and electric cars come in. Here, the aim is to provide a better user experience. The McKinsey report says that currently just 12 per cent of cars are equipped with embedded connectivity solutions, and monetisation is still weak (less than $1.5bn in revenue). But this is set to change.
“The percentage of consumers ready and willing to change car brands for better connectivity has doubled over the past two years,” the report says. “In the premium segment, many OEMs have already installed fully connected infotainment systems (broadcasting material that is intended both to entertain and to inform) in 100 per cent of their new vehicles. These systems are used to provide a diverse range of in-vehicle services to drivers and diverse data sets to third parties.”
The same principle applies to electric cars in that they will be successful once a tipping point of demand is reached and that has been translated into a workable solution with ample charging points to make operations realistic and feasible.
Beyond the car itself, and beyond the user experience to build critical mass, the OEMs also need to look at more practical aspects such as day-to-day logistics and operations. This is outside of their current remit and needs close thought as to whether they should tackle these aspects themselves or seek to partner or collaborate with those whose core business is more able to effectively tackle such issues.
Accenture’s Falcone says: “E-hailing and autonomous cars both have a few important dynamics but the key to them being successful is having a platform that the user can hail the car on. It needs to be better than a bus and cheaper than calling an Uber.”
Making things easy and thus creating demand forms a key part of a broader infrastructure issue. Audi, for example, is working with Traffic Technology Services and launched Traffic Light Information in Las Vegas in 2016. With the addition of Phoenix and Kansas City, 10 cities and more than 2,250 intersections across the US now use this service. The other enabled cities are: Dallas, Houston, Palo Alto & Arcadia, Portland (Oregon), Denver, Las Vegas and Washington DC.
The question for OEMs on the commercial front is whether they want to provide just the hardware or also the means to use it. Falcone explains this well: “If an OEM wants to just provide the hardware then it needs to have added-value components that make them stand out from similar offerings, in a similar way to how ‘Apple everything’ has become desirable. So, they would need to have the very best electric car. Or the car would need superior connectivity to give out accurate information about parking spaces, or be small enough to park within an urban area or very clean in terms of a shared vehicle.
“This sort of thing moves the focus from the car manufacturer churning out standard vehicles to actually creating something that the customer can respond to and desire – much like a luxury item.”
The other model, she says, is more customer-centric and involves the whole value chain from the front-end platform to access the car right down beyond the journey to the maintenance and the broader connectivity.
“End-to-end mobility seen from a customer-centric point of view has the most value, and being the front for that – the platform – for the customer to plan the journey is where the value-add is,” Falcone says.
She also explains that the clever play is providing the hardware but differentiating on the technological infrastructure to allow the customer to access each component part of the journey. “The danger is that the hardware becomes commoditised and there is little opportunity to differentiate. The value that a digital platform would add to the market to help in a true MaaS end-to-end play is currently undervalued by most players within the market,” Falcone adds.
Something else lacking is the consideration of the MaaS market as a whole, which involves more than one kind of transport. This will depend not only on the hardware and the data analytics to give insight, but also on the ability to broaden the addressable market and create demand. The infrastructure also needs to be right. Here, the price point as well as the capability to deliver consistently would need careful consideration to ensure demand.
Ford Smart Mobility
Ford is looking to deliver digital services to personal, fleet and city customers. Its mobility team will deliver on the company’s commitment of 100 per cent connectivity of new vehicles in the USA by 2019 and push toward its goal of 90 per cent connectivity globally by 2020.
Jon Scott, project lead at City Data Solutions at Ford Smart Mobility, says: “Smart mobility is all about collaboration and thinking beyond what is currently available. It’s harnessing the data that comes off a car and looking at the art of the possible.”
Ford’s City Data Solutions project did just that. It looked at data coming from 160 vehicles to discover how and where road accidents occurred as well as how to prevent them. The company logged highly detailed driving data from driving events such as braking, the severity of that braking, and even where hazard warning lights were applied. This helped to identify ‘near-misses’. This information was then cross-referenced against existing accident reports to build an algorithm showing the likelihood of where future incidents might occur.
“Even very small changes could make a big difference – maybe cutting back a tree that has obscured a road sign – whether in terms of traffic flow, road safety or efficiency,” says Scott. “It’s about identifying what is possible and what we can do with the data that is actually useful.”
Ford is exploring this. Its mobility strategy is to deliver a broad suite of products and services that enhance all layers of the transportation system, infrastructure, connectivity and digital services. Its aim is to alleviate transport challenges in cities and help people move freely. Last year Ford acquired Autonomic, a Palo Alto business whose Transportation Mobility Cloud provides a connectivity platform for vehicles, infrastructure, fleet managers and other elements of mobility.
Daimler and BMW are jointly creating a service hub in Berlin. Its vision is to create seamless and intelligent connected-mobility services with an ecosystem approach that efficiently connects the various components.
Clearly opportunities exist for OEMs in terms of both the cars and hardware as well as being the service provider as part of a broader ecosystem. But the path is not clear and strategy needs careful consideration.
Ford’s Scott summarises: “The whole MaaS play revolves around exploring broader opportunities within the transport mobility cloud. It needs more coordination between the various modes of transport as well as the infrastructure to find out what is possible and where the value lies.”
The IET published its report, ‘Could Mobility as a Service solve our transport problems?’, in March 2019.
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