A new model will arrive at car dealerships, and it is not a car.

How will new trends transform the automotive industry? (4 min, 6 takeaways)

Hello everybody! here is a post I wrote for you and Blue Mobility Ventures, then you can follow with the business as a usual section. Enjoy!

The traditional business model is to distribute OEM’s vehicle brands and provide maintenance and financing services, which is where the highest margin is typically found. They also accept a used vehicle as part of the payment for a new one.

Some OEMs or manufacturers have direct distribution in some countries and work with importers in others. Whatever the case, there are some disruptors pushing new business models, in addition to strategic changes by some brands. Here is a list of some and their impact, ordered by their proximity in the future.

Electromobility: There are strong incentives and public policies to accelerate adoption. An electric vehicle (EV) has about 2,000 fewer parts and components than a combustion or hybrid vehicle. This has a direct impact on the sale of spare parts and components. Similarly, EVs require very little preventive maintenance, which translates into fewer visits to workshops, fewer service hours, and fewer sales for dealers. Selling an EV requires more consultive sales, especially until EVs become more common in the market, so it is necessary to train not only technicians but also sales staff, particularly in commercial units. Financial institutions that are not familiar with the secondary market for this new product will also need to make an effort. Insurance companies will also need to adapt.

The economic value generated per unit sold will be lower than before. The current infrastructure of branches, warehouses, and workshops will become oversized if it is not given another use.

Doing more with less: Car manufacturing has declined in many parts of the world, but the industry is achieving higher returns. Fewer units are sold at better margins.

Online sales: Despite an estimated 80% of consumers browsing and searching for cars online, cars as a consumer good still have a low participation rate in online sales. Consumers expect more personalized experiences, and it is possible that dealerships will have a role more associated with delivery and distribution than with the sale of in-person units in the future. Global annual growth of 12.4% (CAGR) is estimated for online car sales.

Changes in ownership models: Subscription models, renting, car sharing, rental, and ride-hailing fleets are beginning to gain volume in demand for cars. This replaces the traditional buyer who is seeking new shared and more affordable solutions. Automakers have an opportunity to adapt and sell units in this new trend.

Millions of connected cars: Safety concerns, coupled with increasingly common technologies such as ADAS, entertainment systems, and roadside assistance, are driving the connection of cars to cellular networks. Another boost will come with the deployment of 5G. Manufacturers include eCall services in the event of an accident, and other aftermarket solutions incorporate these solutions as a retrofit.

Autonomous driving without a driver: Uber and Tesla's predictions have not been met to date. However, this does not rule out the possibility that they may happen in the future. It seems that the most likely use case for adoption in urban areas will be fleets of robotaxis or MaaS services. Mobileye (with Moovit), Cruise, Waymo, and others are deploying more and more fleets in more cities. While autonomous vehicles are more expensive, removing the cost of the driver 24/7 is only a matter of operational time to become more profitable. Another likely use case is long-haul or intercity trucking, where drivers have hubs on the outskirts of the city where they hand over the cargo to an autonomous truck, which is then received by another driver upon entering the other city. Who will sell these fleets? Who will buy them? Who will operate them? It will surely depend on each city's regulations or market. What is clear is that there is a shortage of more than 2.6 million drivers worldwide. All the sensors, cameras, and hardware do not maintain or clean themselves. The risks associated with not being in operating conditions imply frequent maintenance and cleaning that can only be done locally.

Whether this new business model reaches automakers and dealers will depend on those who dare to experiment with these trends and opportunities. They will no longer compete only among automakers; now they will compete with the same manufacturers or with new actors.

Business as usual

Events:

I was invited to speak at a digital transformation class from Universidad de Chile about corporate innovation in the automotive industry and the success case of AWTO.

Deals open in mobility, transportation, and logistics:

If you are interested in any of these early-stage startups or need more info or an expert opinion just contact me.

Ualabee, MaaS
MOBI, MaaS
Clipp, MaaS
UpGirl, Ride-Hailing
Motoonline, Marketplace
Urgentito, Marketplace
Perfekto, Last mile delivery

If you are a founder submit your company deal here:

Tips:

Do you know when makes sense (financially) to change your private ICE car for an EV? Try this calculator

Some industry news:

Lime becomes the first shared electric vehicle company to achieve a full profitable year (It took them 6 years) they hit an adjusted EBITDA of  $15M and this prepares them for a future IPO (and exit) once the market dynamics improve. 

Transportation startup VIA raised $110M at a $3.5B valuation, then they announced the 

Citymapper acquisition (50 million users) and the strategy is more clear.

I’m more used to seeing startups disrupting big organizations. How about a state-disrupting ride-hailing startup in Sao Pablo? They have their own app MobizapSP to compete with Uber and Didi with lower commissions.

Chile recently implemented a subsidy for EV lowering their taxes following a trend in many markets. E-bike subsidies might be more cost-effective

Can you believe that by 2027 there will be 367 million vehicles connected to the internet? 

Waze is making it easier for EV owners to find compatible charging points. This is a feature for a very small (but growing) user base, but there are many startups trying to solve the same problem.