Will automotive service providers be driven off the road?
Oct 08, 2018
Tremors of a new era in transport are strengthening, threatening major change. For the service providers of the automotive industry - roadside assistance, repair companies and auto insurers - it’s a call to arms.
“It’s 2-10x cheaper to use ‘transport as service’ rather than owning a vehicle”
Gone are the days when owning a car was a rite of passage, or an envious status symbol. Rates of car ownership are declining - most notably in urban areas with the number of miles driven by car in London falling by a third since 1995 . As urbanisation increases, car ownership for today’s young people has become an unnecessary and unaffordable burden. ‘Generation rent’ has extended beyond house ownership, as Millennials demand more convenient, cheap and sustainable transportation – sewing a switch towards cycling, public transport, and ride sharing services.
The ageing model of single car ownership is at odds with increased environmental pressures and resource scarcity. New transportation options are more likely to find governmental and societal support if they can save space in densely populated cities, and mitigate against illegal pollution levels. Technological advances, with the potential emergence of substitutes such as mega drones and Hyperloop, will see this shift away from vehicle ownership continue.
The UK motor insurance industry is expected to contract by 21% by 2040
These scenarios pose a significant threat for automotive service providers. Traditional business opportunities will further shrink as vehicle reliability improves - as a combination of decreasing vehicle and human error. For example predictive maintenance will help users to become “safer drivers”, and give warnings of impending car faults. One industry leader, AA, has even suggested that a third of all breakdowns in the UK could be avoided after a successful year-long trial of their new telematics product. Accident rates are also set to decline with improved connectivity of vehicles to their surroundings, and the emergence of autonomous vehicles.
Winners in the new transportation landscape will adapt to transform challenges into opportunities
To protect your business for the future you need to act fast. A two-pronged approach is necessary; short-term ‘quick wins’ to get off the line, coupled with more radical business model adaptations to win the race:
- Quick Wins. Emerging markets continue to see increases in car ownership , in part due to a reliance on vehicles for transporting goods. Leveraging current capabilities, this presents an opportunity for automotive service providers to seize new customers and begin brand building in a different geography. Coupled with other expansions of existing operations, for example service differentiation, this offers short-term fixes - but more transformative change will be needed to stay on the map.
- Transformative Change. Adopting a proactive approach to vehicle maintenance, through service innovations that cater to the unique needs of autonomous electric vehicles (AEVs), will be essential to future competitiveness. Moreover, the transition from individually owned, private vehicles to mass-transit and shared transport models need not render automotive services redundant. Automotive service providers could carve themselves a space in the market by embracing the new customer journey - and perhaps a new customer altogether. Catering to the evolving needs of public transport providers, the owners of shared AEVs, or the emerging e-commerce transportation market, just might be the answer.
The automotive industry is changing at an unprecedented rate. An unrecognisable transport ecosystem lies just around the corner, a future which renders the traditional automotive service models obsolete. But the race is far from over. A changing landscape opens up new opportunities, and you must be ready to embrace these to prosper in the new transportation age. Find out how we can help you look disruption in the eye.