The Automotive Transformation

If there was ever any doubt that the automotive industry is undergoing a profound change, a change that is on par with the transformation that occurred in transportation and infrastructure at the start of the 20th century, when horses and trams gave way to cars and trucks, when things like traffic lights and paved roadways had to come to be, then what happened this past January should put paid to that doubt.

First of all, there was Mark Fields at CES in Las Vegas, when he emphasized how Ford is not only working hard on creating mobility solutions that even go to the point of Ford-supported car-sharing programs, but working to connect the car to the home and vice versa by working with companies like Amazon. Consider this scenario, on that most people have undoubtedly experienced at one point or another: You go on a trip and you don’t remember if you closed your garage door (and you don’t want to go home to check, but . . .). By using SYNC and connecting to Amazon Alexa, you can simply “ask” the system to check the status of the door. And you can go in the other direction, too, as in having Alexa querying your car about how much fuel it has.

Then a few days later, General Motors announced that it was investing $500-million in the ride-share company Lyft. Lyft, if you’re not familiar with it, is an operation that is competitive with the more widely known Uber. (Uber’s market value is on the order of $70-billion, which is actually greater than that of GM.) According to GM, the plan is to work with Lyft on helping advance development of autonomous technology. GM president Dan Ammann stated, “We see the future of personal mobility as connected, seamless and autonomous. With GM and Lyft working together, we believe we can successfully implement this vision more rapidly.”

Indexing back to the whole notion of ride sharing—with humans behind the wheel—it should be noted that BMW has established Drive Now and Daimler has Car2Go. What’s more, a couple weeks after GM made the investment in Lyft, it bought assets of and licensed tech from Sidecar, a ride-sharing service that closed in December. In short order, in a period of time that might otherwise seem that required to determine the schedule for meetings, GM announced mere days after the Sidecar arrangement Maven, its ride-sharing service.

Also in January, McKinsey & Company released a global study, “Automotive Revolution—perspective towards 2030.” One of the findings is that “The automotive revenue pool will significantly increase and diversify toward on-demand mobility services and data-driven services. This could create up to ~USD 1.5 trillion (or 30 percent more) in additional revenue potential in 2030, compared to ~5.2 trillion from traditional car sales and aftermarket products/services (up from ~USD 3.5 trillion in 2015).”

Clearly, they are not predicting the collapse of the auto industry by any extent, but do perceive how things are changing toward a situation where people are going to be sharing cars more or, in cases of urban settings, simply driving less, and using a multimodal transportation network to get where they are going. It also seems as if while there will be modest growth in unit sales in developed countries, driven, in part, by demographics, there will be stronger sales by percentage in developing countries. So were it not for those developing countries, arguably the real growth in the industry would have more to do with services and software than straight-up sales.

January also saw the production version of the Chevy Bolt electric vehicle, introduced first in Las Vegas by GM CEO Mary Barra (know that CEOs generally don’t do car intros, so it underscores the fundamental importance of the Bolt to the corporation as a whole in a way that a Malibu doesn’t, even though there are going to be a whole lot more Malibus sold in the coming months than there will be Bolts.

The McKinsey researchers identified “four disruptive technology-driven trends: diverse mobility, autonomous driving, electrification, and connectivity.” And we can see just in the few weeks in January that GM and Ford are placing their bets on each of these, and they’re not the only ones.

Any doubt about the profound transformation that’s happening in transportation?