Connected vehicles in the sharing economy
The traditional car purchase could soon be a thing of the past. According to the consultancy firm PwC, by 2030, shared or autonomous vehicles will be responsible for up to 37 per cent of mileage driven globally. The era of cars on demand is here, and manufacturers must respond now.
In the last two years, luxury car manufacturer BMW has dramatically broken with tradition in an effort to reduce reliance on vehicle sales. The German company has been growing ReachNow, a program described as ‘Airbnb for cars’, which allows people to rent BMW vehicles from owners without all the typical costs. Rentals are made on demand via a peer‐to‐peer app. Ford and General Motors have created similar services.
The car manufacturers are not alone in their changes: several startups without an automotive background are also making waves. They include Turo and GetAround in the US, both of which promise car owners the potential to earn thousands of dollars a year renting out their vehicles. In Europe, Drivy has a strong presence with over two million users.
80 per cent drop in American car ownership in just over a decade due to existing car‐sharing models and eventually to on‐demand autonomous cars
— Source RethinkX
These car sharing services are only possible because of a range of technology: mobile apps that link sharing services and owners with drivers; security that ensures only those allowed can access vehicles and that their data is protected; mobile networking technology that allows vehicle tracking and full broadband service, as well as personalization that provides customized services for individual drivers.
New consumer habits are also accelerating the change as evidenced by the adoption of services such as Uber, which provides affordable car transport on demand via an app to locate passengers and connect them to their nearest driver. By now, the process of using a smartphone to hail an Uber is commonplace, and it is a natural step for people to request a car via an app when they want to drive themselves.
However, it is behind these customer adoption enablers that the true driving forces are found: cost and convenience. City‐dwelling consumers now have the option to ditch all servicing costs and road and environmental taxes associated with owning cars. They no longer need to shell out huge sums on a new vehicle, they can simply pay for usage and insurance when they want to drive. In addition, they no longer have the problem of a lack of space to park vehicles overnight.
True success will come when cars are an extension of people’s digital life, rather than simply a form of transport
“As car‐sharing systems are implemented in large urban areas in particular, we’ll see ownership decline steadily,” says Todd Thibodeaux, president of the technology industry association CompTIA.
Young drivers, who may never have owned a car and haven’t developed any aspiration to do so, are in part leading the changes. “The nature of ownership is starting to shift from owning a vehicle to drive to participating in the mobility‐as‐a‐service economy,” explains IDC research manager Matt Arcaro. “A key factor will be the price point, especially with mobility‐on‐demand being positioned as an affordable alternative.”
As the changes gain momentum, the pressure is increasing on manufacturers to react. PwC, in its 2018 Strategy & Digital Auto report, states that this year “might be the last opportunity for traditional players to define their target position in mobility, in order to gain traction with new customer channels and expand their core technology platform in 2019”. According to thinktank RethinkX, in just over a decade American car ownership could drop by as much as 80 per cent—due to existing car sharing models and eventually to on‐demand autonomous cars.
Most manufacturers are now acutely aware of this pressure. Around the time of BMW’s ReachNow launch, board member Peter Schwarzenbauer declared it would be “ignorant” to turn a blind eye to the new mobility preferences, adding: “Our customers rightly expect uncomplicated and fast solutions to their individual mobility needs, especially in metropolitan regions.”
GM president Dan Ammann took a similar position. In an interview with the Financial Times, he said buying cars does not suit many people in cities “because you buy this asset, it depreciates fairly rapidly, you use it three per cent of the time, and you pay a vast amount of money to park it for the other 97 per cent of the time.”
Personalization and connectivity will become essential as cars use more embedded technology
— Matt Arcaro, research manager IDC
Knowing how to make the change is the key challenge. Simply attempting to enter car sharing and promote it well is not enough—the quality of services, apps and technology underpinning these services will be essential to creating a scalable model. Convenience and security are critical to the success of these systems, whether run by manufacturers or startups. Typically sharing services rely on a smartphone app that informs users of available cars parked close by, and that enables them to prove their identity, unlock the vehicle, drive it and show where they leave it.
Among the technology firms innovating in this context is Giesecke+Devrient Mobile Security. Companies want to protect and future‐proof their brand, and this means having the highest standards of security in connections to and from their vehicle, with convenient experiences for drivers wherever they are.
Car makers are calling for end‐to‐end security for connections ranging from the car itself to wearables and digital keys, coupled with strong authentication to identify drivers before they open a vehicle. Manufacturers need consistent and robust software updates, as well as technology that will work with evolving smart city systems and the wider supply ecosystem. G+D Mobile Security is working closely with the industry as part of global standards development.
True success will come when cars are an extension of people’s digital life, rather than simply a form of transport. Seamless user experience technology can enable drivers to hire any car in a sharing ecosystem, get in and be delivered with personalized settings including driving position and temperature, as well as the normal communication, business and entertainment apps the individual drivers are accustomed to.
This will be ever more important with self‐driving cars. “Personalization and connectivity will become essential as cars use more embedded technology,” says Mr. Arcaro. Autonomous cars promise even better experiences, because when ‘drivers’ no longer have to drive, they can consume proper communication and media‐rich experiences along the way.
“I think with the next recession‐like event, it will be difficult for the manufacturers to sell a $30,000 car,” says futurist Geoff Nesnow, a professor at the Hult International Business School. “There are more economic options for the car industry with self‐driving vehicles. They could be specifically built for on‐demand mobility and run all the time. There is also the opportunity for businesses such as restaurants to own vehicles and offer mobility as part of their service, autonomously driving people to and from their meal.”
With these changes, some 47 per cent of European consumers would consider giving up their car in favor of widely available self‐driving mobility services, according to the PwC report, which predicts that by 2030, the global mobility‐as‐a‐service ecosystem will grow to $1.4 trillion. But such a development is contingent upon national regulation, it states: “Governments have much to lose in the West (from fuel taxes and manufacturing jobs to transportation system control) and lots to win in the East (reduction of smog, battery technology leadership). Autonomous regulation is most favorable in the US, with the EU following slowly because of different legal frameworks in member states.”
In spite of potentially varying timeframes by nation, car sharing is seemingly inevitable. Faced with the growth of different forms of mobility as a service, traditional car manufacturers must clearly decide whether to partner with sharing startups and tech giants, compete with them, or attempt to do both. The smartest solution is surely collaboration: manufacturers and technology firms’ different knowledge and business foundation will be essential to both of them deriving growth.
Car manufacturers “have all the legacy knowledge to build and maintain individual cars and fleets, and the dealer networks to sell,” Mr. Thibodeaux concludes. “The marketing know how, and the partnerships and investments they’re forming, show they know where their future lies.”
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