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Beyond Uberization – auto industry turning into services business?

Beyond Uberization – auto industry turning into services business?

carI step out of my house to find my driver-less car from the ride-sharing service waiting for me, with my ride-sharing partners already seated and working. The indicator on my coffee mug tells me I have enough for the drive to the office – I fire up the console in front of me and log into my Office 365 account to finish up a sales proposal during the drive.

On the way back from the office, this cycle is repeated, except now the car has transmitted my arrival information to my home – to have it at the right temperature when I arrive with the lights on – and I have enough time to order groceries and shop for a gift on the car’s “marketplace”.

Too futuristic for you? If you have been following the developments in the auto industry, you would know that almost all of this is available today…

It was only about four months ago that I wrote about Uberization in auto sales – idea being that Tesla is leading the charge into changing the paradigm around auto sales to improve customer loyalty and satisfaction.

A couple of weeks ago at the CES trade show, the auto industry was again at the forefront of change – with announcements ranging from enabling people to access their Microsoft Office suite in the car from Microsoft and Harman, to “mobility services” from Ford.

“Ford’s rollout of mobility services, mostly under the “FordPass” brand name, resulted from 18 months of evaluation into building an end-to-end customer experience around the new offerings. FordPass, which launches in April, will be free, whether or not users own a Ford vehicle. FordHubs, the name for its storefront centers—which bear resemblance to Tesla’s retail locations—will open later this year in New York, San Francisco, London, and Shanghai. In February, Ford plans to launch a shared-lease program in Austin, Texas, that will allow up to six friends or neighbors to share a single vehicle. And soon FordPass members can speak directly to a human being, from a team dubbed FordGuides, to book a space at a local parking garage or receive other services”.

Add to that GM’s recent $500 million investment in ride-sharing company Lyft and purchase of SideCar‘s assets (SideCar was a ride sharing service which shut down last December) – the auto industry is truly thinking ahead, maybe because of necessity.

There are many factors leading to that thinking, but primarily, it is the increasing global realization that owning a car for everyday use may not be the most attractive option (of course, the purchase of a car for ego purposes cannot be discounted just yet). Even in the U.S., the number of households without a car grew from 8.7% in 2007 to 9.2% in 2012.

Consider this prediction from 2014:

The world will reach “Peak Car” — a point at which annual global sales growth will top out — in the next decade, several auto-industry analysts predict.

Researcher IHS Automotive, for one, sees annual sales cresting at 100 million within that time. Peak Car is at odds with the ambitious expansion plans of global automakers, which IHS says are gearing up to produce more than 120 million vehicles by 2016 — almost 50 percent more than last year’s worldwide sales mark of 82 million

So what is a major auto manufacturer (and its ecosystem of parts suppliers) to do?

An interesting article in MIT Technology Review talks about how auto manufacturers are taking tentative steps to become services businesses. In this age of “Everything as a Service”, a new term comes to mind for this – Mobility as a Service”.

Indeed, the article offers a prescient quote: “Uber showed the world that it can help people get where they want to go.”…(On another note, people following this thread maybe interested in a recent article in The New Yorker around how Uber and it’s Dubai-based competitor, Careem, have changed the lives of women in Saudi Arabia – which restricts driving by women)

The tune of the analysts has also changed in less than two years:

In November, Gartner, a technology market research firm, predicted that by 2020, 10 percent of today’s vehicle owners in urban markets will replace vehicle ownership with on-demand vehicle access. Thilo Koslowski, vice president and automotive practice leader at Gartner, believes companies like Uber and Lyft have an early-mover advantage in the short-term—but in the long run car companies could become legitimate players in mobility services made possible through car connectivity. He says their success won’t strictly be a matter of investment, but developing a culture and mind-set that extends beyond products.

So to answer the question above, in the short-term, companies like BMW are hoping to gain competitive advantage by impressing the ride-sharing users with the benefits of owning a BMW, but in the longer run, the Mobility as a Service and related offerings may become the primary way to financial success.

For more thoughts, follow me @RajBhandariDFW

Uberization’s new frontier: Auto Sales?

Uberization’s new frontier: Auto Sales?

teslaDisclaimer: I don’t own a Tesla (yet!).

Much has been written about the disruptive business models by companies like Uber and AirBnB. Having used their solutions successfully in three continents, I am a big fan of their services. (Apparently others are too, as we see new terms like “Uberization”, “Sharing economy” and “Peer to peer economy” on a daily basis…)

In fact, there was a recent article about Uberization of air travel, but that is a much more complex undertaking, at least at this point…

I came across an interesting article by Marion Manekar on what the Uberization of the economy is about. The 5 word summary of the article is described in a tweet – “To Uberize, remove the middleman”…

As Maneker puts it, “I don’t think of Uber as a force that dis-intermediates—as we olds used to say—transportation, but one that creates value for itself, its drivers, and its users, by developing a new layer that integrates them all with maximum utility… To me, uberizing meant trapping a series of innovative processes—phone-enabled geo-location, payments and driver management and distribution—into an app-accessible service...”

If you break down the above thesis, the key points are innovative processes riding on existing and new infrastructure, glued together by ever-updating software. In the case of Uber it means using technology like geo-location and smartphone apps, existing government rules around taxis, and financial incentives, coupled with convenience for drivers and riders.

The same software-led revolution is disrupting other industries too – good examples being Apple Pay, Nest and Sonos. All these are taking advantage of our increasing reliance on our smartphones, and their constant connection to the cloud to put less focus on the supporting hardware – resulting in most hardware manufacturers focusing more on software enablement.

Amidst all this comes a new experimental disruption by Tesla – itself a pioneer in the software-enabled car – around auto sales: “Tesla is launching a referral program, where current Tesla owners can create a referral link to share with their friends. Anyone who buys a Tesla via a friend’s link will receive a $1,000 discount on a new Model S. (Used models are not included in the program.) On the flip side, those doing the referring will get a $1,000 credit applied to their account, which could be used to buy service, accessories or put toward any future car purchase.

It goes a bit further. If you manage to sell five Model S sedans, you’ll get an invite to the opening party at the Gigafactory in Nevada, which is sure to be a good time. Sell 10, and you will have the option of purchasing a Founders Series Model X…”

Tesla’s founder Elon Musk calls it a guerrilla battle against auto trading associations – since Tesla is not allowed to sell in every State, they can have their owners “refer” friends, thereby totally bypassing the traditional auto sales channel. But just like Uber, they can use the existing governmental checks and balances in the auto trade transaction to their advantage.

It is yet to be seen how successful this experiment is, but if it is successful, it could be a pre-cursor to tremendous change in every facet of our daily lives.