Imagine this scenario. You are driving to the airport, and although your car has sent you an alert to tell you when you need to leave, you are late. You hit heavy traffic. As you try to relax and the car drives itself, it automatically bids to the cars around it to be allowed to pass first. You make an instant micropayment to the surrounding drivers, and you are on your way. The cost is not a concern. You know you will earn that money back with the digital skin on your car, advertising local goods and services as you pass through various neighborhoods.
“The expansion of possibilities digital will enable is enormous," – Rohit Talwar, Global Futurist
This is not something out of the imagination of sci-fi writer Philip K. Dick, but a piece of code that Ford already has a patent for.
“The expansion of possibilities is enormous," said futurist Rohit Talwar, CEO of Fast Future. “We need to get our heads around that and start thinking about what these business models could look like."
While car ownership steadily climbed for many years, times are changing. Young people are already less likely to want to own a car and are open to alternatives. Car-sharing and ride-sharing are gaining momentum. The EV revolution and the gradual rise of automation are changing the face of the automotive industry, and that change is happening now.
At the same time, the unpredictable nature of today's world is forcing people to adopt different habits.
“There is so much volatility and shift happening in the economy," Talwar said. “With energy prices going up, the cost of the fuel you put in your car is also a growing consideration."
Along with supply chain snarls, that has caused a boom in second-hand car sales in many regions. Talwar said that this does not necessarily mean we have reached "peak car" just yet.
“The underlying pattern will be that while car sales overall will increase, the majority of that will be in developing countries," he said. “There is still a strong cultural factor in some regions that having a car is a sign of 'making it'."
Automakers are still making money. But what seems clear is that they will need to develop new business models.
Talwar suggests three possible business approaches that may emerge. Firstly, manufacturers could focus on cheap, utility vehicles as people's incomes drop in the next few years. While this would work for many OEMs, it might not suit luxury automotive brands.
Another option is to follow the lead of pharmaceutical companies. Car manufacturers could take something that has gone through the early stages with a start-up and use their large networks to scale up. This could work particularly well with new types of transportation such as electric and autonomous vehicles that are evolving quickly but which can be more expensive and slower to develop inside larger and more traditional auto manufacturers.
The third model would be for automakers to sell their designs to other companies as a franchise. People could license ready-made designs, buy the components and set up their own automotive company, meaning they would be responsible for the local manufacture and distribution channels.
“Car manufacturers are at different places in the spectrum of understanding these changes," Talwar said. “They are still being run by engineers and accountants, but we could see a growing number being run by creative business visionaries."
It has been said many times in the business world that data is the new oil. In the case of the car industry, this is literally true. As vehicles become giant data centers, there are new ways to make money out of them.
OEMs can deliver constantly updated entertainment content to the car and charge for that. This can include retail options so that passengers can buy what they see on the screen, particularly if they are in a driverless vehicle so do not need to pay attention to the road in the same way. Other additional data services can be made available at a small charge.
Flat panels on the side of the car could in the future be used for advertisements. They could even include a QR code that would take people to a site to make a purchase. Automakers will become more like IT companies, managing, aggregating and reselling the data generated by their vehicles.
Even if younger people are not interested in buying a vehicle in the future, that might not be the end of the story. “A lot of kids may never own a car, but they love playing Grand Theft Auto," Talwar said. “They could have the experience of driving an open-top car but in the metaverse."
A single vehicle model could then be owned by 20 or 30 million people rather than one million. They would all make micropayments to use it in the metaverse.
He pointed to recent lucrative and inventive excursions into alternative worlds. For example, Miller Lite created a virtual bar during the Super Bowl where people could hang out during the breaks and halftime. 15 million people visited this space.
American singer Ariana Grande performed a concert in Fortnite, an online video game, last year and made an estimated US$20 million — not from selling tickets, but from digital merchandise sales alone. Perhaps it is no surprise that car manufacturers are getting in on the act: Hyundai is one of those to provide a "metaverse experience".
Electric vehicle sales increased by 108% between 2020 and 2021 and are growing further thanks to the fuel crisis. Most automakers have ambitious plans for electric ranges or to switch to manufacturing ever greater numbers of them.
But Talwar said some challenges must be overcome first. “The problem with electric vehicles is the charging station will probably never make money," he said. There is not much incentive for companies to provide them, even when there is government funding.
Innovations that could tackle this challenge include, intriguingly, self-charging vehicles. “We are already hearing about self-charging hybrids, converting the kinetic energy of the car on the road to the energy that powers the car or solar roadways, that power the car," he said.
New energy solutions are intrinsically tied to the success of EVs, and could in turn drive new business models. “Some clever players might start to offer integrated solutions," Talwar said. “They could sell a total energy solution that includes powering your home with renewables and the vehicle you use, or taking extra energy from the grid and using the earnings from that to provide you with the vehicle."
At the same time as the uptick in EV sales, renewable energy technologies are improving. “Now there are rooftop solutions combining wind and solar that are more efficient. As more countries move towards renewables, there will be a much more controllable energy price. These things will all move together," he summed up.
As for autonomous vehicles, Talwar said there is still some way to go before they are a common sight.
“It is going to take some education about science and AI for people to understand why you might trust the tech. My gut feel is you'll start to see them commercially on the road within probably two to five years in some parts of the world."
The impact of these great transformations will be felt well beyond the automotive industry too. Talwar points out that some countries economies are based on vehicle manufacturing. A significant period of adjustment will be needed, and there will be winners and losers.
“It probably won't happen as fast as we think. But I think it will happen over the next five years. You'll see a lot of upheavals, maybe companies failing, merging, evolving into more of a tech play than an auto play," he explained.
With new business models, banks will no longer set the rules about how money moves around, be it in the form of equity investments in companies or loans to consumers.
“As more micropayments move around between the crypto platforms and the exchanges, and the banks and credit card companies don't get as involved – what will be their role in all this?" he asked.
While no one knows exactly how the future will pan out, one thing seems certain: huge changes lie ahead.
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