May | 2020
Today’s world is dynamically changing, triggered by development in emerging markets, the proliferation of new technologies, and evolving consumer demographics. Digitalization, increasing automation, and new business models are disrupting all industries, and the automotive industry is no exception.
Recent trends have led OEMs to form partnerships and invest in developing technologies around Connected, Autonomous, Shared, and Electric vehicles (CASE). The changing vehicle ownership aspirations and the availability of new mobility choices together urge automakers to explore service-oriented business models to tap new auto mobility-related markets.
New Automotive Business Models
Focusing purely on R&D, production, and sales and service of vehicles is no longer enough. In private- and shared-vehicle usage models, consumers are no longer just direct buyers of vehicles; they’re users of all products and services. Therefore, manufacturers and suppliers need to realign their business models to meet the changes in the industry. The automotive value chain no longer ends at the plant door; it expands across the entire lifetime of the vehicle.
The image below shows potential growth among OEM segments within each of the business lines.
Automotive OEMs have a plethora of services and related products to offer to consumers; however, identifying customer preferences at a granular level is essential to becoming a preferred brand in the marketplace.
Automotive OEM Market Development
Traditionally, automakers have catered to the needs and desires of consumers within geographical markets, so much so that countries are known by the vehicles that people own. For example, SUVs and muscle cars are associated with the US, saloon cars are associated with the EU, and Kei cars are famous in Japan.
Strong geographical associations provide many cues to OEMs planning a market’s next vehicle. However, a large portion of the automotive industry soon will be driven by a younger and more technically savvy generation. Potentially, geographical associations may not hold true going forward as usage becomes uniquely personalised.
New Approach for New Users
Analysing where opportunities lie requires a more granular view of markets. Automotive OEMs should focus on the following to unlock new micro segments.
Granular segmentation
Automotive OEMs should break larger geographies into smaller segments based primarily on population density, economic and infrastructure development, and disposable incomes. Across these micro segments, and consumer preferences, the viability and feasibility of new business models will strongly differ.
In megacities, such as Mumbai and London, car ownership is already becoming a burden for many due to congestion, lack of parking, and traffic jams. Contrastingly, in rural areas, such as Utah or Nevada in the United States, private-car usage is the preferred means of transportation. Such granular segments will become the markers for mobility behaviour, overtaking the market’s traditional, larger geographic perspective.
Persona-based market development
Automotive OEMs should define personas based on users’ attitudes, openness to various mobility options, and their ability to use them. In addition to geographical segmentation, personas (or user groups) should include such distinguishing features as age and environmental settings.
Users could be mapped into one of the following groups:
The percentage of people in each user group will differentiate within each granular segment. However, the ratio will trend toward Digital Natives with the passage of time.
Conclusion
To manage disruptors within a changing world, the automotive industry needs a clearer market vision. A granular, persona-based business model is vital for automakers designing strategies that fit the unique characteristics of a market’s geography and its consumers.
Prateek Chowdhry
Senior Consultant – Manufacturing Digital Practice
Prateek is an MBA graduate, with more than 6 years’ experience in automotive product development and business development for digital solutions. He is passionate in taking compelling propositions to the market by connecting the dots between technology solutions and customer business.
He was recognized for his special contribution towards Digital Practice Building for the Manufacturing BU. Prior to Wipro, Prateek has worked in R&D of connected cars and augmented/virtual reality products, with various automotive Tier 1 suppliers. You can connect with him at www.linkedin.com/in/prateek-chowdhry-a578344a.
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