Market value will be enormous for the global mobility industry – about $5 trillion over the next decade, an industry executive said.
Andreas Mai, who recently served as the director of smart connected vehicles at Cisco Systems, estimated that $5 trillion will come from autonomous vehicles, ride-sharing networks, and connectivity. Maj spoke Thursday during the World Mobility Leadership Forum in Romulus, Mich.
Mai sees the additional value of mobility being created from the transfer of the market from one stakeholder to another.
“Some people will lose,” Mai said during the conference.
Automakers are trying out new business models to build alternative revenue streams and technologies. Mobility services and technologies is a fast-changing landscape for automakers as they compete with technology giants and startups.
Ford Motor Co. recently acquired shuttle service Chariot and forged a partnership with bike-share program Motivate. The automaker sees the importance of tapping the market value by turning to low-fixed cost and less capital revenue streams like Chariot and Motivate, said Ford executive chairman Bill Ford.
“This addressable market out here is three times our traditional addressable market,” Ford said. “If we do nothing … we would be a low-margin assembler of other people’s technologies.”
Earlier this month, Ford executives told investors it intends to generate a 20 percent return on its new mobility services. That would be more than twice the profit margin from its traditional business, according to Detroit Free-Press.
Executive chairman Ford offered his observations on how that can happen when no one yet knows how much people are willing to pay for these new mobility options. Over time, these business ventures will be less capital intensive with revenue streams that aren’t tied heavily into fixed costs. He also cautioned that not all of these new mobility ventures will be panning out, reported Detroit Free-Press.
Volvo sees it a bit differently through its partnership with technology supplier Autoliv to develop self-driving software available to car buyers for an additional $10,000.
“We believe it is a product we can sell commercially,” Volvo CEO Hakan Samuelsson said during the conference. “We feel that this is something that makes a premium car very attractive, and it makes a premium car more profitable.”
Automakers are making strategic partnerships with technology companies for automated and advanced systems, along with building their own new departments in Silicon Valley. There are still many issues to address, including regulation, ethics, and how long it will take for adoption of the new technologies to take hold, Ford said.
“We have to be incredibly open-minded, incredibly nimble and not presume to know anything,” Ford said. “It’ll be like the early days of the auto industry. Business models will spring up, many will fail … there will be lots of reforming of ideas, and eventually, collectively, we’ll get to the answer.”