The Mobility Revolution and the Auto Industry

We are at a tipping point in the evolution of the automobile industry – a point of no return where a combination of external factors will within the next 10 years have changed the automobile industry much more toward a ‘mobility tool supplier’ model. I have dubbed this "The Mobility Revolution" and its significance is as great as the Industrial and Internet Revolutions.

Automobile manufacturers are in the midst of a perfect storm of externalities:

• a raft of well-financed attackers, not previously seen as competitors: simply put, having 100 years of experience in the "old" game (selling internal-combusiton cars) makes no difference if the rules of the sport have changed. Today's new game is selling electric vehicles and providing mobility solutions. The new players are Tesla, Apple, Google, Uber, Lyft, ZipCar, BYD... as well as (former) first-tier suppliers.
• rapidly changing consumer demographics and demand, driven by urbanisation: global demand for non-electric vehicles is stagnating, and the number of people in cities that are bothering to attain driving licenses is falling. Over 70% of people in North America and Europe already live in cities. Many are simply opting not to be bound by ownership and the additional cost of cars (especially of the internal-combustion variety). Zero Emissions, Zero Ownership car-sharing models (such as Bolloré) will gradually begin to dominate in cities, only to be replaced by Zero Accident, fully autonomous transport models in another 10 years onward.
• shifting governmental support (and incentives) away from traditional automakers and toward new and ‘green’ technologies and business models (with a clear aim toward making our inner cities more livable).

It’s also a perfect storm of internal factors for automobile manufacturers, with:

• an urgent need to create multiple new business models to address the new competitors (car sharing, electric vehicle companies etc)
• shortening product cycles for the bread-and-butter, cash-cow models (from every eight years toward three-year and even online updates)
• disillusioned or departing staff (more eager to go to quickly-growing start-ups).

Long term, transformation and upheaval don't usually favour the incumbents. With some notable exceptions, I think this revolution will leave few of today's OEMs intact. Those that try to apply the ‘analyse first and react’ mentality of the past would stand to gain from studying the Industrial Revolution.

Only one hundred and twenty years ago, horses were replaced by cars in cities, demand for saddles and horseshoe-making dropped dramatically; countless companies were caught off guard and failed. Today's automobile manufacturer is at risk of becoming as redundant as the horseshoe-maker and motor-carriage manufacturer. This is even more pronounced when vehicle production can be easily outsourced or even 3D-printed (Local Motors exhibited its first drivable 3D-printed vehicle in September 2014 using $3,500-worth of material).

Given the significance of the automobile industry in several large economies, reimagination of the industry and innovation become political imperatives. For example, Germany’s automobile industry provides jobs to ca. 14% of its employable citizens, constitutes ca. 20% of total industrial R&D investment, and, rather worryingly, represents around 40% of total automotive revenue for the entire EU.

Getting it right is not just a theoretical exercise – it’s a national matter of economic depression or survival and growth for an industry that has defined previous generations.