KPMG’s new report, Me, My Car, My Life, suggests that the era of ubiquitous connectivity - the moment when you, your car and your life are one - has arrived. This will change the basic notions about mobility and revolutionize the way we think about and use our cars. A car is no longer just a way to get from point A to point B. It’s a control center for our mobile lives. As a result, the automotive industry is in the midst of a massive evolution.
In fact, the argument for owning a car gets weaker by the moment. Spending approximately €25K for an asset that loses 11 percent of its value the minute you drive it off the lot and then sits idle more than 90 percent of the time isn’t the most rational economic decision. Mobility-on-demand companies like Uber and Zipcar now provide compelling alternatives to ownership, especially in urban areas. With the potential shift in ownership demand, OEMs better update their economic models.
Mature markets are becoming saturated, while new markets are emerging. History teaches that when people make it into the middle class, they go shopping for cars. In China, India and sub-Saharan Africa, millions, if not billions of new buyers are reaching that threshold. But the future won’t look like the past, because just as these new buyers get ready to open their wallets, new alternatives to ownership are popping up and gaining traction.
Some high-end cars now have more lines of code than fighter jets, and the complexity is wreaking havoc production costs and new product launches. Vehicle recalls are at a record high, and customers are complaining vociferously about the design and usability of in-vehicle infotainment. The value of a car now resides in software and electronics - and how well they work together. Get it right or lose your customers.
In fact, there isn’t going to be a pyramid any more. The structure of the automotive ecosystem is changing fast. Designing and producing new vehicles have become far too complex and expensive for any one company to manage all on its own, and in the future, horsepower may matter less than processing power. The winning companies will be nimble, future-oriented – and prepared to invest in new technologies, new talent and new strategic alliances. This confluence of factors will forever change the way automakers view product development, the traditional automotive supply chain models, their customer sales and service models, and even their organizational structures.