Outside-In Perspective Of The Drive Ahead For Auto Industry
To tide through the bumpy road of adversity, Auto Sector needs to quickly transform business models to survive.
Photo Credit : Reuters
“Change happens when the pain of holding on becomes greater than the fear of letting go. ― Spencer Johnson”
For 10 straight months now, Auto Industry has had de-growth. Millions of blue and white collared employees are going to lose jobs from the Sector.
Industry experts have attributed several reasons for the unabated fall and the measures to revive the sector.
Interestingly, most experts seem to agree that a combination of the below is the reason for the current situation:
1. Regulatory policies – mandatory introduction of BS VI from April 1 2020 and upon introduction of which, the fate of vehicles BS IV compliant.
2. Uptick of the cost of vehicles because of the mandatory addition of Airbags, ABS, reverse sensors
3. Cultural shift – Aspiration to own the MUVs over hatch backs and entry level cars pushing down the sales volumes of these models.
4. Stricter and extra vigilant lenders making obtaining loans tougher. Add to it, the cost of Increased Vehicle Insurance.
5. Job insecurity and turbulent times making people push the investment further.
6. Increased adoption of ride hailing platforms like Uber/Ola and Lease/Self-drive service providers like Zoom car and Myles
7. High taxation. At 28%, may feel that the tax is a significant deterrent in buying cars.
8. Adoption of Electric mobility. All the emphasis in electric mobility could be making potential car buyers to be waiting for the launch of electric vehicles
Add to these, the perennial issues of bad roads, insufficient parking and other infrastructure issues in the maze to complete what is plaguing the Auto Industry.
So what’s the way out?
Exploring the potential solution brought me to an interesting model that holds the key. It is called Polarity Thinking and Polarity Mapping.
“Polarity Thinking is a supplement to either/or problem-solving thinking – not a replacement.”
Barry Johnson, PhD
Like yin and yang, polarities are interdependent values that support each other.
Polarities are interdependent pairs that need each other over time to maintain and gain performance. Since polarities are unavoidable, they are present in every individual, team, organization and nation.
Because polarities are interdependent, they need each other and neither is sufficient alone. Each side is accurate but incomplete without the other. Polarity thinking is about “both-and” and invites a move away from “you are wrong and I am right” thinking to “we are both right.” This kind of thinking supplements our traditional problem solving (either-or) thinking and acting.
That there is a tectonic in consumer behaviour is evident beyond any doubt. Therefore merely adopting Traditional remedy of reduction of GST and or easing environmental/statutory compliance norms alone might at best offer a short term relief for the sector.
What the sector needs to look at a Transformational approach that re-defines the business models.
- Cab Hailing: Marginal investments into Cab hailing should transform into Core business. Auto manufacturers could look at creating or buying controlling stake into cab hailing companies. This offers multiple benefits to an auto manufacturer, starting from enrolling drivers on lease-purchase schemes to creating sustainable upgradation of models. Today an individual is supposed to “buy” a cab and enrol oneself on one of the platforms. If an auto manufacturer were to own a cab hailing service, it can create employment, which it might control basis it’s own criterion and extend loans to individuals.
- Self-drive business: What Hertz created 90 years back, is still a relevant business model for auto manufacturers. They can morph the existing dealer network to rental partners. About time that a country of the size of India has cars that people can drive and pay as per their need and convenience. One might call this a forward integration in the traditional parlance but this might be an approach that could go a long way in creating a sustainable business model
- Delivery services – The entry level cars could be a great mode of commute for the delivery staff of large e-com sites. Over half a million people are employed handling deliveries in just in the top 3 e-com players in India.
- Aggregation of Sales and Service facilities: While at the manufacturing end, auto companies have used others’ facilities, it is about time that auto sales and service outlets become multi branded. Multi branded retail outlets to sell multiple cars would make the business more viable to the franchisees.
- On-demand services: With a huge surge in demand to for connected cars, there is a lot of emphasis in fast tracking connected cars. Counterpoint Research expects 4G LTE to account for nearly 90 per cent of connected passenger cars with embedded connectivity by 2022. 5G connectivity is likely to start in 2020, but penetration will remain low until beyond 2022.
Auto Majors internationally are attempting parts of what have been mentioned above. Some of them are listed below for reference:
- BMW is working with start-up DOVU to pilot blockchain to track mileage in leased vehicles;
- Jaguar Land Rover (JLR) is supplying 20,000 electric vehicles to Google’s self-driving car spin-off
- Waymo; and BMW is collaborating with its direct competitor Daimler AG on car-sharing services.
- Toyota has gone one step further and unveiled an electric concept vehicle, dubbed e-palette, partnering with Pizza Hut, Amazon, Mazda, Uber and Chinese ride-hailing giant Didi Chuxing. The concept goes beyond robo-taxis, as Toyota envisages that e-palette could be a mobile pizza parlor, shoe shop or office
But to tide through the bumpy road of adversity, Auto Sector needs to quickly transform business models to survive.
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