Untangling the future of mobility
In the first of a series of blogs on mobility, Nick Filler, Upstart Head of Mobility, shows how the switch to electric vehicles (EVs) is causing rapid, permanent disruption.
No going back. Electric vehicles are here to stay
Last year Volkswagen stopped producing internal combustion engines (ICEs) at its Zwickau plant in Germany and switched the factory entirely to electric vehicle production. Renault has announced plans to switch over to electric at three of its plants in northern France, creating the largest electric vehicle manufacturing hub in Europe. Meanwhile, Nissan has announced a £1bn investment in the UK to step up the production of both batteries and electric vehicles.
The reason these companies are now marching in time to the electric drum is simple. The internal combustion engine is dead. The EU will ban the sale of new cars powered by combustion engines in 2035. The UK has announced an even earlier deadline, 2030. In the space of a decade, the technology that kept us moving for more than a century will be extinct.
As if the cost of repurposing factories wasn’t enough, the mass manufacture of electric vehicles has wider repercussions for the mobility sector, shattering long-term partnerships, disrupting the supply chain, opening up the market to new players, and reinventing business models.
“The complexities are mind-blowing. Playing in the automotive sector right now feels more like three-dimensional chess with pieces large and small moving rapidly from one square to another. ”
— Nick Filler, Upstart Head of Mobility
New alliances, new directions
Electrification will open up the automotive space to new entrants. As the car becomes a platform, software is effectively turning vehicles into smartphones on wheels. This, in turn, collapses the barriers to entry for start-ups and other software businesses.
A spate of new alliances between manufacturers and related businesses give some indication of the direction of travel.
During the summer, Volkswagen confirmed the acquisition of Europcar, a rental business that it has owned before. There’s more to this than simply buying a stake in the car hire sector. Volkswagen has ambitious goals to become a “software-driven mobility company” by 2030 as it attempts to escape its traditional business model of just selling cars. The acquisition gives it valuable data insights into rental customers as part of this journey.
Something similar is happening in the US, where Ford has partnered with Walmart and autonomous driving company Argo AI to deliver groceries to customers using driverless vehicles. Ford and Argo AI have been working for some time on autonomous vehicles, but the alliance with Walmart enables the car manufacturer to scale up a service that will ingest massive volumes of useful data. Ford is also looking to reinvent itself not just as an autonomous vehicle manufacturer, but as a software business. Data, once more, is central to this strategy.
Back in Germany, car rental giant Sixt has struck an agreement with Mobileye, an Intel subsidiary, to trial autonomous robotaxis in Munich next year. Customers will be able to order a ride via Sixt’s well established ONE app, which already has millions of users. Mercedes-Benz, BMW and others are also jockeying for position in this space.
Skateboarding into the future
It's not just global brands that are experiencing digital disruption. Across the entire supply chain, thousands of businesses are preparing for new competitors and vehicle technologies. Continental, Europe’s largest car parts manufacturer, recently announced that it was pivoting away from ICE drive trains to electric ‘skateboard’ style platforms that have roughly one percent of the moving parts of an ICE equivalent.
No wonder, when UK startups such as Arrival and Watt Electric Vehicle Company can storm the electric vehicle market with brand new drive trains in the space of just a few years. Arrival has already sealed a huge deal to supply UPS with vans, while Watt is grabbing headlines for commercial vehicles and a stylish coupé influenced by Porsche. Indeed any part manufacturer that relies heavily on the ICE platform has only a few years to reinvent itself for the post-fossil fuel age - or end up on the scrap heap.
Electrification is not purely digital in nature. But the change from ICE to EV opens the door to new business models, emphasises the role of software and data, and permanently opens up automotive to other players. The speed and the scale of this digital disruption is breathtaking.
We recommend that you monitor the market closely and remain open and alert to strategies that can flex in response to inevitable change. This includes the disruption triggered by electric drive trains and the ability of relatively small organizations to design and build commercial vehicles in a fraction of the time it takes long-established players. This ability to ‘accelerate from 0 to 60’ at breakneck pace is what separates the winners and losers in this sector.
We also recommend learning from other industries, including media, financial services and health where digital disruption has been a fact of life for many years. Having worked in these sectors we also believe that many of the skills and solutions are equally applicable to the mobility sector.
In the next article we’ll look in more detail at the impact of software and data on the driver and passenger experience, especially the rise of autonomous, connected vehicles (V2X). In the meantime, if your business needs the advice of an expert to adjust to the realities of the mobility sector, get in touch with Upstart today.
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