We are at the early stages of transformational change in the transport and automotive industries. A number of factors are driving this tectonic shift.

Rising Urbanization & Shifts in Personal Transport

The increase in the urban population is a major factor. According to World Health Organization’s Global Health Observatory data, the urban population stood at 54% of the global population and is estimated to be 66% of world population by 2050. Given global population growth during that time, this represents an incremental 2.2 billion people who will be vying for transport of some sort in already congested cities.

Added to this is a move away from car ownership among millennials in a number of western markets where the cost-benefit relationship is seen as untenable. Where available, consumers are opting for alternatives like ride-hailing, ride-sharing and car-sharing services.

Tech Giants Entering $1.6 Trillion Automotive Ecosystem

Tech giants and start-ups like Google, Tesla and Uber have entered the scene as they see the potential for technology to provide sustainable solutions for these issues. They also recognize that a substantial part of the $1.6 trillion automotive manufacturing revenue is potentially accessible to them.

At this time, conventional automakers are trying to find out their position in the future personal transportation business. Key players like Ford, General Motors, Audi, Mercedes are re-positioning themselves and experimenting in different domains to stay relevant in the upcoming years. It is not about just making cars now. The risk is that by trying to protect a legacy manufacturing and sales model they could find their traditional business model undermined by new entrants from the technology sector.

Incumbents Repositioning Themselves

Ford is now calling itself a “mobility company” as it transitions in to the future of personal transport. It introduced an app called Ford Credit Link where consumers can lease a Ford vehicle on a shared basis. The scheme is aimed at consumers who don’t want a vehicle full-time and lack sufficient funds to own a car, but still have mobility needs. The application will allow consumers to buy/lease a car in partnership with friends, family or neighbors. It allows scheme participants to book drive-time, communicate with each other, keep a tab on maintenance and make vehicle payments.

Another service that Ford is starting is FordPass. It incorporates different sub-systems FordGuides, FordPay and FlightCar. Users can call for roadside assistance, find and pay for parking, and other daily chores of a typical car owner. Users can also book restaurants and solve transportation issues; essentially a personal mobility concierge. In future Ford will add ride-sharing and car-sharing options. Ford is not going to charge anything for access to the service and it is open to non-Ford owners.

With this application, Ford is aiming to kill two birds with one stone. First it will get direct feedback from a greater number of users, helping it improve its customer service experience. Second, it allows Ford to build a relationship with customers that may not have considered Ford cars for purchase previously.

For example: Ford’s latest ad campaign in the UK focuses on the idea of ‘unlearning’. It is aiming to get UK-based consumers to think about Ford from new perspectives – both in terms of Ford’s vehicle products but it also leads into what Ford can offer in terms of services.

General Motors by contrast, has been on a spending spree, investing-in and buying-out companies that it sees has having potential to transform transport. The Detroit giant invested heavily ($500 million) in Lyft – a ride sharing service and the biggest Uber competitor in the USA. GM has been loud and clear that this is not just an investment for returns, it’s a partnership between the two firms to realize the vision of a self-driving fleet of taxis that users can call upon as needed.

While a fleet of self-driving taxis is a distant future for now, in the short-term GM is getting access to Lyft’s data. Lyft has a large customer base which gives GM the possibility to conduct deep market analysis. In addition, GM gets the chance to work with a number of other services that Lyft has agreements with, including Ola in India, Didi Kuaidi in China, Grab Taxi in South East Asia.

The partnership with Lyft gives GM a lot of opportunities. It agreed to provide Lyft drivers vehicles on preferential rental rates through various hubs in US cities, to drive revenue through renting. We may see this idea expanding in other markets like India, China and other Asian countries that have immense growth potential.

GM also acquired SideCar, an ailing competitor of Uber. The purchase will allow GM to use SideCar’s technology to improve its recently introduced car sharing service called Maven.

Car sharing services, in which consumers pay a subscription to have access to vehicles on an as-needed basis but without the drawbacks of full car ownership, represent an opportunity for automakers to reach consumers that may not otherwise use a car at all. Global car sharing services revenue is expected to grow more than fivefold from $1.1 billion in 2015 to $6.5 billion in 2024. Ford has a longstanding relationship with ZipCar, BMW is behind the DriveNow program, and Daimler provides vehicles to Car2Go – all are car sharing services. And now GM is in the game with Maven.

Finally, the Tectonic Shift Beckons

The main revenue drivers in the future will be customer-centric mobility services. Consumers will likely opt for solutions customized for their personal needs rather than going for an expensive personal vehicle. People who travel little may rely on ride hailing services. Those with more regular car use will likely opt for car sharing services. Others will continue to own cars, but the relative share of different transport access services will likely rebalance over time away from conventional car ownership.

There is a sense of responsibility in automakers as they have the benefit of the 2008/9 financial crash fresh in their corporate memories. That drove many to the brink of bankruptcy. This means they don’t feel invincible. The startling rise of companies like Uber, which is more a competitor for the car companies than taxi companies, means automakers seem willing to challenge their own legacy business models. This is healthy and sensible and will guide their strategies heading into what is bound to be tumultuous period for the industry.