Remodeling for mobility: will new mobility mean the end of “old” automotive?

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External trends threaten the status quo

A number of external trends are fundamentally changing the way people view car ownership, meet their mobility needs and, ultimately, go about their daily lives. Collectively, these trends threaten the automakers’ slow-and-steady, product-centric status quo.

Presently, the trends most impacting automotive include:

  • Urbanization
  • Sharing of assets
  • Rapid advancements in artificial intelligence (AI)
  • Mobile and sensor technologies

In the future, even further disruption is likely as new technologies become mainstream, including:

  • Blockchain
  • Implantable devices
  • Internet of things (IoT)
  • Drones
  • Fog computing

The strategic dilemma

Automakers have been innovators and disruptors. But as the industry thrived and matured, automakers began to benefit from high barriers to entry, most significantly:

  • Expertise in vehicle design and manufacturing
  • Well-organized supply chains
  • Vast dealership networks
  • Massive economies of scale
EY – Old business models thrive

Over their decades of success, automakers developed an entrenched mindset that combines an unshakable faith in how they operate (i.e., the old) with a corresponding resistance to change (i.e., the new).

But as the new mobility industry takes shape, these same barriers to entry will become barriers to exit: automakers must overcome them to transition to the necessary open-architecture model of the future.

New mobility: five key challenges for automakers

  • 1. Innovation: new ways are the way to go

    Creating new business models requires innovation that stresses more diversity of thought and speed of design, and embraces risk and failure.

    Our experience indicates that few automakers have a solid approach for developing a large portfolio of ideas, evaluating their value, designing sound in-market experiments, learning from failures and understanding when to scale.

  • 2. Connecting with consumers: essential to success

    Automakers need to view consumers as individuals for whom experiences, products and services must be personalized.

    This is especially critical as millennials and generation Z, who have grown up with mobile and on-demand everything, and who prioritize experiences and personalization, become a major portion of the consumer population.

    These consumers pay for what they value, but they are increasingly opting out of relationships with service providers if they don’t get what they consider a fair value exchange.

  • 3. External collaboration: sharing required

    For automakers, many supplier relationships have been defined by formal closed contracts, tense negotiations and a rigid tier structure — a useful interaction model for purchasing parts.

    But the new mobility industry requires working closely with a broader set of ecosystem partners. While there have been success stories of cities and automakers working together, an effective model for collaboration in this ecosystem hasn’t yet materialized.

  • 4. The war for talent: new strategies for battle

    The automotive industry has always employed highly talented engineers and technologists, but few of the best AI engineers and data scientists.

    Traditional organizational constructs, compensation models and incentives prevent the automotive industry from attracting and retaining the talent required to innovate and sustain a disruptive mobility business.

    Technology companies and start-ups draw the best technologists and data scientists looking to disrupt the auto industry through software. Automakers must adapt to access and develop talent in unconventional ways or else a shortage of talent in these disciplines will put automakers at a distinct competitive disadvantage.

  • 5. Outdated operating models: time for something new

    As incumbents with significant legacy operations, automakers strongly prefer to leverage their old processes and systems versus creating new ones. However, multiple challenges relating to governance, innovation, partnerships, talent and back-office services arise from overreliance on the core business operating model.

    If automakers set up new business units to compete in the new mobility industry they must design new operating models for these units. Leveraging relevant capabilities from the core business must not come at the expense of remaining tied to the old ways of operating.

Hacking paths to the future of mobility

In early 2016, EY spearheaded a series of hacks where a diverse set of participants co-developed visions and prototypes for future mobility scenarios. Through these rigorous, collaborative and provocative sessions, fundamental differences among stakeholders emerged and critical questions were surfaced.

EY - Hacking paths to the future of mobility

Hack results: three visions of the future

The question: The future of mobility represents tremendous changes and many opportunities. How will you succeed?

  1. Automakers

    Transformation to a new type of OEM: “Original Experience Maker”

    The vision: Delivering unique mobility experiences to customers, while extending and leveraging core business strengths.

  2. Disruptor

    “INSTINCT”: an intuitive mobility platform — your co-pilot for an enriched fulfilling life

    The vision: The ultimate “mobility-as-a-platform” transforms consumers’ mobility experiences. With the ability to predict and plan journeys at the moment of intent, it requires no conscious intervention by the user, becoming a seamless part of consumers’ lives.

  3. Collaborative ecosystem

    “TA:DA”: harnessing the power of shared data to benefit all — the perfect marriage of business, entrepreneurs, citizens and technology for social good

    The vision: An open trading platform for mobility data to generate benefit for all ecosystem stakeholders. Achieved by breaking down barriers to collaboration through aligning incentives creating recognizable value that benefits all.