For the early part of the 21st century, China has been the growth engine of the global automotive industry.
Despite a recent slowdown, China will surpass 25 million units in annual car sales in 2016 and has become the battleground for dominance of the global auto industry.
Several driving forces, which are particularly evident China, are disrupting the status quo of the automotive industry
• The unique context of China’s urban transportation challenge, the high rate of adoption of mobile device connectivity, combined with the rapid and aggressive introduction of alternative mobility solutions.
• Disruptive new entrants into the mobility solutions competitive landscape, who draw insights about customers based on their online behaviors and mobility habits in order to offer a diverse pool of new revenue-generating solutions.
The confluence of these forces are changing the landscape of how mobility needs can be served in a rather fundamental way, touching off a wave of experimentation among both traditional automotive and new mobility solutions providers.
The Origins of Disruption
Disruptive business models typically originate from outside the core set of industry players. Traditional Original Equipment Manufacturer (OEM) business models rely on selling products through an established business-to-consumer (B2C) channel, often through an intermediary sales partner that is either owned or franchised to represent the OEM brands in the marketplace. Consumers pay to own the asset outright.
The entry point for disruption is through the “pay-per-use” service-based business model. While this channel has existed for some time in the form of services managed through centralized professionally managed fleets (rental car companies, taxi and chauffeur services), digitally disruptive companies such as Uber, and China’s Yidao Yongche and Didi-Chuxing (created from a merger between rival mobility services from Alibaba and Tencent) have gained rapid and widespread market acceptance.
Once an entry point is established, these services-centric Information and Communications Technology (ICT) disruptors are able to leverage their big data and analytics capabilities to gain insight on consumers and their mobility patterns and behaviors. Essentially, these disruptors view connected mobility services as a natural extension of their ecosystem platform and are viewing the traditional services and perhaps even the OEM hardware business as a way of expanding their ecosystem. Serving the “Mobility on Demand” market is merely the point of entry for an entire suite of Internet-based mobile connectivity services which may include navigation, route planning, e-commerce, vehicle repair and maintenance, usage based insurance, and other very lucrative “owner services” which are very important to today’s OEM business.
ICT disruptors are leveraging connected mobility services as a means to disintermediate the value chain of the automotive industry and capture a profitable services ecosystem. OEMs are at risk of their business model being relegated to a high-risk, asset-intensive, commoditized, business-to-business (B2B) channel for delivering hardware to the profitable ecosystem of the mobility services providers.
Read more of the original article in Forbes.
