Netflix, Spotify – Autonomous Driving?
New business models will revolutionize mobility. Some experts even predict that owning a car will become obsolete – as car sharing systems similar to online streaming services conquer the market. One of those experts is Peter Fuß.
It was the status symbol of the 20th century: the ownership of a car. Generations of adolescents longed for the day they reached legal driving age. Owning a vehicle symbolized freedom and autonomy. Your friends all had one – and you wanted one too.
But will it continue to be like this?
Today, the future of car ownership is in dispute among experts. While some predict the “own car” to prevail, others believe it will become a thing of the past, especially in urban areas. More and more city dwellers, they say, will forego owning a vehicle. For Peter Fuß, this is part of a bigger trend. The Senior Advisory Partner Automotive at consulting firm Ernst & Young asks somewhat provocatively: “Why should I buy a car? 93 percent of any given day, it is parked and therefore useless for the owner. It rusts, it wears out and it costs money.”
In Fuß’ opinion, shared cars will move us into the future. With the advent of driverless vehicles on the horizon, he expects the rise of radically new business models that render car ownership obsolete. Those business models could revolutionize mobility. The changes would be even more disruptive than the technological ones. “Car ownership will just not fit into our society anymore,” says Fuß. “The smartphone has the potential to replace it.”
Mobility on demand: A Netflix for cars?
Looking a couple of years ahead, mobility in the age of driverless cars will differ substantially from what we are used to today. “Mobility on demand will be the key,” says Fuß. A likely scenario: when you need a ride, you use an app on your smartphone to send for a driverless car. Within minutes, the vehicle will wait outside your door to pick you up and transport you to your selected destination – choosing the fastest route. If it is your day-to-day route, you could program a daily pick-up. You will no longer have to pay for car maintenance or parking fees. You will just have to pay per ride. Or even better: you subscribe to a flatrate model, like Netflix and others offer for movies. You pay a monthly fee – and let yourself be chauffeured whenever and wherever you want.
The huge transformation this holds in store for OEMs is comparable to the radical change another sector has recently undergone: the music industry. Around the turn of the millennium, the emergence of digital technology and downloads started to make physical delivery mechanisms like CDs gradually obsolete. “The product itself has not changed”, says Fuß. “Music still exists. But the distribution channel has changed.” Streaming services like Spotify are now available all over the world and at all times. Cars could go down a similar road.
A driverless car sharing fleet by 2030?
That is why car makers face a similar challenge: they need to evolve from simple hardware producers to mobility providers. “The requirements for mobility have changed: The customer simply wants to get from A to B the most convenient way,” Fuß says. OEMs have to adapt to these changes – or they might not survive, he predicts.
Meanwhile, new players are entering the field or are already right in the middle of it. Ride-hailing service Uber is aggressively forcing its way onto the taxi market. The investors’ darling has recognized the potential of autonomous cars. Uber CEO Travis Kalanick recently indicated that consumers can expect a driverless Uber fleet by 2030: “The reason Uber could be expensive is because you’re not just paying for the car—you’re paying for the other dude in the car. When there’s no other dude in the car, the cost of taking an Uber anywhere becomes cheaper than owning a vehicle.”
How should OEMs react to this threat? See it as a chance, Peter Fuß suggests. In the end, they will still sell cars – it just might be to fleet operators like Uber rather than to the end consumer. Fuß advises car makers to seek cooperation with the IT industry. In fact, this is what consumers demand as well. A recent survey in ten different countries showed that a majority wants traditional automakers to produce self-driving cars, with IT companies contributing their expertise to the process.
This could result in a win-win situation. “Apple, Google and Uber do not want to build cars. They want to be inside the cars to make business,” says Fuß.
Data privacy: How we’ll pay the mobility bill
These new businesses all evolve around the former car driver becoming a mobility client. “There are so many options once you start thinking about it. Cars could drive to the grocery store autonomously for instance. Someone needs to organize all those services.” Aftermarket services and fleet management businesses will grow substantially. Not to forget, people will have more time for on-board entertainment the moment they do not have to steer their vehicle anymore. “Driving will no longer be disruptive. People can work, shop and organize their lives while sitting in their autonomous car.” The car: your new living room.
But how much will this living room cost the customer? Does the decline of personal car ownership correspond with declining mobility costs?
Well, it depends.
“Mobility will probably cost less money than today”, says Fuß. But customers might end up footing the bill in other ways. “The user will pay with his personal data.” This could mean for instance that the user receives customized advertisement while being chauffeured.
It remains to be seen how reluctant consumers will be to accept this new model. Peter Fuß sees no reason why the public should reject it. After all, it is a model that internet users know all too well. “Google is for free because they get to know my preferences in return. We all accept this trade-off, so why should it be different with automated cars?”
About our expert:
Peter Fuß is Senior Advisory Partner Automotive at consultancy firm Ernst & Young. He draws on years of experience in the strategic and operational advice to globally active car manufacturers and suppliers. He was co-author of the 2015 study “Who’s in the driving seat? - How the rise of autonomous vehicles will transform the relationship between man and car.”
Your data in exchange for affordable mobility: what do you think of this business model? Let us know in the comments!