December 03, 2021
These are exciting times for players in the mobility business. The industry has established a stable value chain, clearly defining the individual role of various players, organized primarily around OEMs, who are the industry’s dominant stakeholders. However, going forward, the central focus of the mobility business will be on moving people and goods, instead of selling vehicles. The challenge for current and future marketing functions is how to enable a mindset transformation that will adapt existing processes, systems, and business models to the changing reality of new mobility. Identifying lucrative opportunities will help marketers to reposition their organizations in the new marketplace and take advantage of opportunities for new revenue streams for both new and traditional players in the industry.
Recurring revenue over a vehicle lifecycle through value-added services is going to dominate traditional revenue stream i.e., one-time revenue via vehicle sales. OEMs and other industry players are already experimenting with business models designed to monetize opportunities offered by connected, electrified, personalized, shared, and autonomous mobility (PACE, CASE or ACES as usually referred). As the global economy recovers post-pandemic, the investment in new mobility solutions will likely increase to match the urgency of developing safe, secure, and convenient mobility solutions that can address the challenges of today. Flexible cellular 5G infrastructure, coupled with new developments in connected IoT sensors, electrified powertrains, efficient batteries, and related technology will spur developers to push the envelope further than ever before and offer new revenue models for enterprising organizations.
Let us explore a few monetization opportunities that are expected to materialize in next few years.
The most important driver of the new mobility transformation is vehicle’s connection to the internet. Connected vehicles have unlocked huge potential for revenue generation in safety, security, convenience, and lifestyle services. Connected solutions have transformed vehicles into data centers-on-wheels. Hitherto unseen business possibilities in the area of data analysis have come to fore due to vehicles’ exponential increase in computing power, as well as real-time online connectivity established between vehicles and backends. The pervasive use of smartphones along with connected sensors in vehicles has allowed an immense amount of real time data that can be analyzed and bundled to provide extremely valuable interventions to the customers. Connected vehicles will allow innovations ripe for monetization. They can be roughly grouped together into the following dimensions:
Safety - WHO estimates that about 1.3m lives are lost every year due to road traffic crashes. Real-time collision detection can be coupled with roadside assistance services, mitigating the aftermath of an accident, especially in the first hour (referred to as “Golder Hour”) of the emergency event. Many mobility players are now offering eCall services that include automatic detection of an emergency event and subsequent initiation of emergency response apparatus.
Security - An important challenge is data security of vehicles and customers. As the degree of vehicle connectivity has increased, so has their susceptibility to malicious attacks. There have been high profile cases in which moving vehicles were hacked. Vehicles and the related apps are accumulating a lot of critical data including personal data, financial data, location tracking data, and a host of others, that make this infrastructure highly lucrative for data hackers. It will be critical to chart a safe path to connected mobility. This will provide monetization opportunities for suppliers offering specialized cybersecurity consulting services, vehicle Security Operations for Connected (SOC) as a Service, and IT/OT players offering cybersecurity components and backend solutions.
Convenience - Whether the vehicle is owned, shared, rented, or leased, mobility experience can be tangibly enhanced by leveraging the connected aspect of the vehicles. In dense cities where parking is a significant challenge, there is an opportunity to offer connected car parks and provide parking spot information directly into the vehicle’s infotainment systems. Connected data can enable location-based advertising. MSPs can curate their entertainment offerings such as music and video streaming, based on the profiles of the end users.
Moreover, while problems such as traffic congestion and air pollution are running rampant in urban areas, there are few solutions in the market that use data collected from vehicles to offer actionable insights that can be used for urban traffic planning. As the pressure on governments to tackle these problems will increase, so will the need for technologies like air quality monitoring and mitigation.
Electrified vehicles are gaining ground and the advent of this new technology offers multiple lifecycle monetization opportunities.
For an EV, the biggest cost element is the EV battery. Apart from the technological innovations that are already ongoing within battery chemistry and manufacturing, there is a need in the market for innovative business models that can reduce the capex for the EV user. Battery rental, leasing, aging management, range prediction, and second life management, along with route management and charging booking services, are just some of the business areas with high recurring revenue potential but few existing offerings.
Charging Infrastructure outside the vehicle is another lucrative field. For years, one of the major obstacles in mass adoption of EVs was the scarcity of charging stations. Solutions developers already have offerings in the market that provide convenience services such as analyzing the location data to suggest nearest accessible charging stations and enabling drivers to control the charging process with their smartphones. Additionally, the charging infrastructure provides market opportunities for both established players and new entrants in hardware, software, and platform businesses.
Digital twinning of electric motor, EV battery and hydrogen fuel cells are under development which will likely result in revenue opportunities for the right solutions. All these exciting developments geared towards providing convenience to the end user will provide opportunities to niche players serving specific infrastructure needs and to mass players establishing the infrastructure itself.
Autonomous Driving and Driving Assistance Solutions:
Although the idea of autonomous driving has been around for decades, the recent developments in tech areas such as AI, connected and electrified cars, and machine learning are accelerating its development. Addressing issues such as low vehicle utilization, safety and driver shortage, autonomous vehicles will redefine the way the industry thinks about mobility.
Autonomous driving will require vehicles to SENSE, THINK, and ACT in ways that will exceed human capabilities. An autonomous vehicle will perceive and interpret its surroundings and its interior via sensors, and exchange of information with other vehicles and traffic infrastructure. The collected information will be processed and then used to plan the driving strategy. Finally, the vehicle will use its powertrain, steering, and braking power to execute the planned strategy. While we have seen significant developments in all three areas, there is still a lot that needs to be accomplished before the technology is available for mass market roll out.
Eventually, Vehicle-to-everything (V2X) communications will be the bedrock on which autonomous mobility will be built. However, the mobility business is likely to go through several intermediate steps that will provide opportunities for enterprises to monetize their innovations. One such step is the introduction of automated valet parking, a solution that allows the vehicle to park itself. Automated parking will be an integral part of the autonomous driving ecosystem, and it is already being rolled out as a standalone solution in the market. Similar technology is now being tested and used in restricted areas or on fixed routes such as in warehouses, ports, or airports.
Additionally, advanced driver assistance systems (ADAS) are quickly becoming ubiquitous in the market. ADAS augments the human driving experience and aids with routine driving tasks. Front automatic braking, adaptive cruise control, blind spot detection, wrong way driving, road condition monitoring, and intelligent speed assistance are just some of the driving assistance solutions that can bring immediate value to vehicle users. A lot of these features are software-dependent and can be enhanced, updated, or unlocked through Over-the-Air software updates. Some OEMs are already using it for recurring revenue opportunities. A good example is a leading EV OEM, whose valuation is highly influenced by these innovations.
Monetizing either through embedded product differentiation or standalone add-ons, innovators will find that the new mobility marketplace has a lot of appetite for solutions that assist drivers today and contribute towards the realization of the autonomous future.
Personalized / Shared Solutions:
Mobility-as-a-Service (MaaS) is successfully encroaching on the more traditional business models, and the central focus of new mobility players is on moving people and goods rather than on selling vehicles. As the world is beginning to grapple with the short- and long-term impact of COVID-19, the importance of logistics and last-mile delivery has come under acute spotlight. Local and global supply chains facing severe capacity pressures are experiencing unprecedented surge in demand for food and grocery delivery. Mobility and logistics service providers are adapting their offerings and operations to provide efficient and safe movement of goods and people. For example, currently there is an OEM player that plans to offer commercial vehicle leases that are based on cost per mile, including maintenance, tires, and fuel itself. Business innovations like these will lower initial cost of ownership, introduce predictability to monthly costs for operators, and drive new technology adoption.
Additionally, MaaS players collect an immense amount of data about the vehicles, drivers, and their customers. Pattern prediction services can drive high driver availability and reduce vehicle downtime, resulting in a positive impact on both the topline and bottom line of MaaS players. Data analysis enables solutions that offer predictive diagnostics at a vehicle-specific level, decreasing the uncertainty around vehicle operation. Moreover, information collected about operation of a vehicle allows for accurate estimates of the vehicle health, mitigating risks associated with leasing, renting, and sharing of vehicles. Companies that are willing to monetize these analytical solutions will fuel the rise of ride hailing, car sharing, ride sharing, and micro mobility services.
Ongoing innovations in hardware (IoT sensors), software, and systems infrastructure generate data that can be captured, analyzed, and bundled into a useful product for the end user. Vehicle data gathered through connected vehicles can also be used to generate insights into real-time traffic conditions, to alert drivers about road hazard, and to suggest alternative routes. Recent years have seen the emergence of vehicle data specialists. This burgeoning data ecosystem will likely result in overlay of creative solutions on top of publicly available traffic and weather information.
Role of Marketing in new era of Mobility
Mobility transformation has shifted the focus of the industry from vehicle-centric to a more user-centric approach. Marketing and sales functions, typically closest to the users, customers, and the market, will be the key to identify the pain areas and potential solutions which in turn will be the revenue drivers for the future of mobility.
Changes in the mobility industry have also raised the profile of digital marketing. Smartphone ecosystem allows for the device to have incremental upgrades and has business models which allow users to pay for or subscribe to a specific solution or service based on their current needs. OEMs and mobility players are already envisaging t marketing their vehicles and solutions in the same vein. Future vehicles will no longer be distinguished only by classic characteristics such as engine displacement, transmission, or braking distance, but much more by software and digital features which can be updated on an ongoing basis. On-the-air updates will offer opportunities for integration and introduction of new services into an existing vehicle ecosystem that enhance utility, safety and create customer delight.
We are currently talking about a mindset change for the mobility users, intermediaries, and OEMs/Tiers. Mobility players have opportunities to differentiate themselves by offering unique consumer experiences and upgradable software. They need to compliment these technical differentiations via business model innovations by offering service subscription models, or subsidizing the offered features via advertising, data collection, and other avenues. This will create a robust recurring revenue stream. Marketing, by leading the transformation and educating each stakeholder about the benefits of the change, marketing has to play a very important role in creating the right and positive environment for new mobility to fully realize its promise.
Anuj Jain is an IoT specialist and new mobility solutions expert, deeply engaged in realizing the unlimited possibilities that lie at the intersection of smart sensors, connected assets, advanced visualization technologies, and insightful analytics.
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