Jun 2, 2016

The Auto Industry is Shifting from Making Cars to Providing Mobility

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By HV

By looking for more revenues from ride-hailing apps, Volkswagen and General Motors are the prime examples of how the auto industry is trying to revitalize itself to stay relevant.

GM

May hated GM. Figuratively, of course, as the company’s auto sales in the U.S. during the month dropped 18%, which can be explicated in many different ways. It could be due to the short sales month. It could be due to the company’s continued cutback of sales to rental fleets. It could be due to the production disruption at many of its plants. Or, more alarming, it could be due to the demand for cars and trucks in the U.S. having reached a plateau.

vow

May wasn’t kind to Volkswagen, either. Its May U.S. sales fell 17%, marking May the seventh consecutive monthly decline and the steepest decline in sales since November. Recently, the automaker reported a 86% drop in first-quarter profit.

It’s of the utmost importance for GM and Volkswagen to shift their business strategies to find new sources of profit in a world where ride-hailing services invalidate every reason to own a car. And when people stop buying cars will be the day the tradition automakers will be rendered obsolete.

Luckily, they do realize that. GM said it has plans to develop ride-sharing businesses, autonomous vehicles and services that will place it in a comfortable position when the big disruption comes along.

And so does Volkswagen. Having realized the significance of ride-hailing services, the German company turns to them as one of the primary sources of revenues. Its latest cooperation with Gett is its effort to secure a revenue stream from the services. The ride-hailing market in Europe is one of the fastest growing markets in the world with expectations of €10 billion of sales by 2025 and 30% in growth annually.

And many more automakers are doing the same thing with investments in ride-hailing services and autonomous vehicles. The auto industry is going through a phase of change, and it can be quite subtle. What it offers is the same, the mobility, the means to get from Point A to Point B. What will change is how that mobility takes shape.

As of now, the mobility is actualized as cars. But in the near future, it will change into services.

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