What will commoditisation mean for the automotive industry?

At Claro Partners, we’ve been travelling around the globe to understand the needs and aspirations of mobility service users. In this first blogpost, we share some thoughts and findings that we believe OEM’s should keep in mind when designing the commoditised services of the future.

As mobility becomes a utility, how can an OEM, rental or car-sharing company win in the ‘volume game’ of immediate access anywhere, anytime? Do they embrace change and recognise volume as the core opportunity, accepting it as the new space the organisation plays in? Or do they try to avoid commoditisation and create a premium offer? At Claro, we believe there is opportunity for both — the important thing is the delivery of the most appropriate experience.

In the future it’s highly likely that in order to survive, a large number of traditional OEMs will have to aggressively turn themselves into mobility service providers (services that offer multiple mobility solutions that enable people to move more efficiently). As individual car ownership across metropolitan cities drops lower and lower, we are already seeing that people are less willing to buy a car at full price only to use it for one or two hours a day. Consumers can already see the real cost of car ownership in comparison to new mobility alternatives. 

The car manufacturers who recognise this trend early will shift their focus from selling to the traditional end-consumer, to becoming fleet-based mobility services. This will allow them to sell services directly to a much more diverse set of customers than previous business models allowed them to do.  If they can’t do this, they may be relegated to the role of contract manufactures for other fleet operators. 

However, this drastic change in business operations will not be easy. In order to be successful, OEMs will have to combine their existing ability to produce fleets cheaply and quickly with new capabilities, such as fleet management and ride-hailing services. These additional competencies are needed to create the seamless experiences that customers will demand. OEMs can do this by investing in and acquiring new capabilities, which in turn enable customers to fulfil any mobility need — from ride-hailing to car-pooling to longer-term car rentals.

However, thats not all. In the future, consumers will expect more than just the ability to fulfil basic mobility needs. They will also expect support for varied transport scenarios. Consumers looking for a non-premium service will be focused on flexibility and functionality within the design of the cars they use. We will likely see a wide range of vehicle types and configurations, from micro city cars to premium, larger models for longer trips. 

OEMs that create experiences that provide quick and reliable configuration and access to the right vehicle for the moment will see a new form of customer loyalty. As consumers experience these new service models, its less likely they will do so as owners. This means the manufacturer brand will lose some of its importance and impact on decision making compared to quality of the overall experiences. 

As existing OEMS and rental providers begin to tackle this huge disruption, it’s clear that maintaining the direct relationship with consumers via the delivery of exceptional experiences is key. This will allow companies to win in this new volume game where consumers are looking for exactly what they need right now, not committing to the purchase of a single vehicle for multiple years.

If this topic is important for your company, or you would like to know more about our insights and perspective on the future of mobility, please contact us at: hello@claropartners.com

January 24th, 2019