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The Internet of Things will usher in new opportunities for the automotive industry, but according to one industry executive, the manufacturers have to rethink their revenue and business models to stay competitive, and look beyond simply connected services.<\/p>\n
Brendan O\u2019Brien is the chief innovation officer and co-founder of cloud-billing provider Aria Systems, and told IoT Hub<\/em> that the current business model of vehicle purchase and establishment of loyalty such that the next vehicle will be purchased from the same manufacturer has to evolve to ensure \u201clasting brand affinity\u201d.<\/p>\n \u201cInstead of building the car, [vehicle manufacturers] need to build the brand and the relationship with the customer. It can no longer be a point-of-sale relationship; it has to be constantly nurtured to develop a permanence [and] that is going to take a direct line of sight to the customer that cannot be maintained with the current dealer-driven sales structure,\u201d he said.<\/p>\n He said that while brands that sold luxury and work vehicles would find this transition easier to make due to existing brand loyalty, the risk will be more apparent for low to mid-market passenger vehicle manufacturers.<\/p>\n \u201cThey risk being commoditised. In these cases, the consumer\u2019s affinity and relationship are far more likely to reside with the provider of the service that puts them behind the wheel rather than the manufacturer of the vehicle itself,\u201d he added.<\/p>\n A number of manufacturers have already started on this journey of \u2018transport-as-a-service\u2019, and are moving away from their established revenue streams.<\/p>\n Is it already happening?<\/strong><\/p>\n Audi in the United States offer two different types of \u2018lifestyle access\u2019 programs which include on-demand cars and pooled usage.<\/p>\n Ford\u2019s efforts in the autonomous vehicle space will initially be sold to customers as a commercial mobility service, rather than for traditional purchase.<\/p>\n General Motors is also working with its partner Lyft to provide autonomous vehicle services in five years, and has itself created its own car sharing service called Maven.<\/p>\n \u201cPreviously, automakers were content with a very hands-off fleet sales model where rental companies and then ridesharing and car sharing companies like Uber and Zipcar were sold vehicles at volume discounts or provided with special offers for exclusivity,\u201d O\u2019Brien explained.<\/p>\n \u201cBut it seems they see the writing on the wall when it comes to the changing tastes of millennial consumers \u2013 they are less likely to participate in traditional purchases and more likely to buy \u2018experiences\u2019.<\/p>\n \u201cAutomakers are not about to be left out, though it is a massive culture-shocking change from measuring success from margin-at-sale to long-term annuity and recurring revenue from services.\u201d<\/p>\n Benefits beyond the car manufacturers<\/strong><\/p>\n Other industries will seek to benefit from the rise of the connected car, and O\u2019Brien sees the data that stems from them to be the catalyst.<\/p>\n \u201cAs the world becomes more connected and the Internet of Things becomes more of a part of everyday life, the car will literally be the link that connects it all,\u201d he said.<\/p>\n \u201cEverything that happens between home, work, the store \u2013 wherever people go \u2013 there will be a bevy of potential providers of services intertwined with connected cars.<\/p>\n \u201cWe\u2019re talking mobile service providers, insurance companies, retail establishments, government entities, anyone who is interested in data for marketing and advertising, [and] the possibilities widen exponentially as cities, cars, homes, and people become more connected.\u201d<\/p>\n O\u2019Brien added that the automotive aftermarket industry will experience a boom as well, as drivers of older vehicles will seek to retrofit their cars with connected technologies to obtain the benefits they provide.<\/p>\n Preparing for the connected car rush<\/strong><\/p>\n Automakers will have to prepare for the massive cultural change from dealer networks and wholesale models which are built on long-standing traditions and agreements, to the consumer-centric self-service model where customers demand certain capabilities and the manufacturers have no choice but to accommodate their needs, according to O\u2019Brien.<\/p>\n \u201cTesla is proving that the current dealership model could virtually be a thing of the past if the industry can break down its own bureaucracy,\u201d he said.<\/p>\n \u201cWhile it won\u2019t disappear entirely, the current dealer-centric model is a dead man walking, [becoming] more like an Apple Store, where the purchase is made online, the transaction handoff, value adds, and continuing service happens in the store, and tech upgrades happen over the air.<\/p>\n \u201cThe dealership then becomes a part of the relationship, not the entire relationship.\u201d<\/p>\n Manufacturers will also have to look beyond their dealerships to provide the selling, bulling and provisioning services, and make financial changes such that monetisation occurs via recurring revenue and customer lifetime value models.<\/p>\n \u201cThey need to prepare their billing and accounting systems and practices today, [and] internal evangelism for this shift needs to start in the finance office, with the CFO on board,\u201d O\u2019Brien explained.<\/p>\n \u201cRecognising growth and revenue is going to change, and margin models cannot be counted on for much longer.<\/p>\n \u201cThe best path to getting this new thinking socialised for many OEMs is more likely to be through their in-house financing divisions, as concepts like \u2018annuity-based returns\u2019 are less likely to feel foreign, which is why much of the exploration of non-traditional \u2018transportation as a service\u2019 ideas are originating from such divisions.\u201d<\/p>\n By Peter Gutierrez<\/a><\/p>\n
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