Technology expected to reshape mobility trends
With its emerging "Industry 4.0" and "Internet+" concepts, China's manufacturing industry is on the threshold of industrial revolution.
"Automotive 4.0" is more than just a buzzword as it has many implications along the value chain beyond manufacturing, including electrification, car sharing, connectivity, digitalization of the sales process and autonomous driving.
In China this is further driven by growing concern about air pollution, high demand for connectivity (as can be seen from tremendous iPhone 6 demand) and faster execution of the "Internet of Things", together with e-commerce and logistics.
New players, including tech giants, tech start-ups and even start-up original equipment manufacturers, such as Alibaba, Baidu, LeTV and Didi, have been rushing into the automotive value chain with innovative business models and game-changing technologies. The entry of these players is enabled by the introduction of new technologies including connected cars, automated cars, new propulsion systems and new materials.
A complete online to offline auto e-commerce ecosystem has gradually begun to take shape and companies such as Autohome and Cheyian have tapped into the automotive O2O market. Furthermore, Didi, after transforming the taxi service industry, is also paying attention to the car pooling/sharing market, and to the Car2Go service launched by Daimler.
Newcomers, especially from the IT industry, are more flexible to lead changes in the industry. OEMs, such as BMW, recently started to set up separate teams for IT in both R&D and production departments to manage software release decoupled from the longer cycle R&D process.
In China, we already see automotive OEMs investing heavily in new technologies and business model transformation. SAIC Motor joined forces with e-commerce giant Alibaba Group to invest 1 billion yuan ($160 million) in a fund to develop Internet-connected cars. Other OEMs, such as BAIC, Geely and Cheery, are also initiating "connected car" and other innovation projects.
To realize the future blueprint of Automotive 4.0, there are more than a dozen major trends currently developing and helping shape the industry. While some might change just a small portion of the automotive value chain, others (alone or together) could have a much broader impact.
We identified 14 of the most prominent trends surrounding the global automotive industry. Most of the major trends, even though they would impact the industry, are not disruptive.
The automotive retail process is being transformed significantly. One example is solutions offered by salesforce.com providing a cloud based CRM sales tool. The Audi City showroom is a good example of the digitalization of the sales process. Especially in China, we can expect major changes, combined with an already challenging retail profit situation at most dealerships.
Shared mobility, automated driving and connectivity are the key trends that will change both technology and the value chain dramatically. Whereas China may follow overseas technology to introduce automated driving, shared mobility and connectivity may be employed faster.
Shared auto world
Considering China's status quo, shared mobility is most promising in the foreseeable future and has the power to reshape the entire automotive industry and the concepts of automotive ownership and mobility as we know them .
Companies such as Didi, Uber and PP allow consumers to use shared vehicles and to share rides.
This trend will be greatly accelerated through automated driving as it removes the driver, thereby dramatically reducing the cost of using shared mobility. However, great uncertainty remains around the rate of adoption and usage of mobility-on-demand services, and the regulation environment.
Looking forward on the industry evolution roadmap, today's world with limited penetration of shared mobility and automated driving is only likely to remain so in the short-term.
The "shared world" and "automated world" are alternative potential midterm states based on the development of the technologies and business models.
However, the long-term reality is most likely to be Automotive 4.0, resulting from the convergence of high penetration and technological sophistication of both shared mobility and automated driving, all enabled by wide-scale connectivity.
The long-term future state of Automotive 4.0 will see the rise of shared mobility that can deliver mobility-on-demand. However, individually owned vehicles are still likely to lead in sales during the next chapter of the industry. The impact on the industry, major players and consumers will be wide reaching.
Automotive 4.0 and the digital evolution integrating the "Internet of Things" combines opportunities and risks for automotive OEMs and suppliers. As has been seen with consumer goods, higher demand for customization (build-toorder), shorter product lifecycles and decoupled software development are challenging for production.
Digitalization and utilization of customer data can significantly improve retail performance, but creates other challenges for dealer networks.
On the other hand, Automotive 4.0 extends the value chain OEMs can participate in by providing mobility-on-demand services.
The mobility-related services market within the auto industry is defined as transportation needs that are met with non-individually owned light vehicles.
Today's mobility market, comprised of taxis, limos, rental cars and car-sharing services, is likely to be substituted to a large extent with mobility-on-demand services.
Automotive 4.0 will transform the way we think about the production, ownership and usage of vehicles.
In the face of the biggest disruption the automotive industry has ever seen, the race is on to capture future customers and profits－but winners and losers in Automotive 4.0 will be separated by their readiness to adapt and their ability to transform their business models.
The authors Zhang Junyi is partner at Roland Berger Strategy Consultants, Marc Winterhoff is Partner at Roland Berger Strategy Consultants, Stephan Bueb is project manager at Roland Berger Strategy Consultants, and Wu Zhao is Senior Consultant at Roland Berger Strategy Consultants.
