i3 - September/October 2016 - 21

th e

SHARING

ECONOMY

tran s f or ms

AUTOMAKERS
by ROBERT E. CA L EM // illustrations by HARRY CAMPBELL

emographic, cultural and tech trends are
converging to drive automakers to reassess their business models. The result is a
fast-growing paradigm shift called "Cars as
a Service" (CaaS). Based on the SaaS or Software as a Service template used by companies
like Apple, CaaS is already in car sharing
services like Daimler AG's car2go, and in experimental projects
and investments by Ford Motor Co. and General Motors Corp.
What's more, it's only beginning. Greater changes will come to
automakers' business models with the advent of self-driving cars
next decade. But not everyone is bullish on the trend.

From Driverless Cars to CaaS
"Software as a Service is an established paradigm that is
spreading to other industries, and automotive is one example
of that," says Dominique Bonte, managing director for global
automotive and IoT (Internet of Things) market research at
ABI Research in Brussels, Belgium.
Automakers inspired by Uber's success are anticipating when
driverless cars become mainstream. They imagine when driverless car sharing threatens both ridesharing and the personal car
ownership model their businesses are based on today, Bonte
says. "The car industry realizes that at some point their business
model will change from direct-to-consumer towards a businessto-business model, not selling cars to end users but selling them
to fleets or running their own fleet of shared cars," Bonte says. "A
C TA . t e c h / i 3

couple of years ago they would have laughed it away."
This explains why GM invested $500 million in Lyft, Bonte
adds. The investment gives the automaker a firsthand view of
Lyft's inner workings, insight into new business dynamics, and
enables it to formulate a long-term strategic vision. Even the
integration of real-time transit information in vehicle infotainment systems, such as BMW's, demonstrates the auto industry's realization that its business is not just about cars anymore.
However, selling cars to individuals is profitable, and so
automakers fear diminishing it. They are not fully committed to a new services-oriented business model yet, Bonte says.
"Ridesharing like Uber and Lyft and car sharing will converge
soon into the same thing, which we call Cars as a Service or
an autonomous on-demand network of cars," says Colin Bird,
senior analyst at IHS in Southfield, MI. Automakers are interested in pursuing this convergence because it will directly use
driverless cars without involving labor like ridesharing does.
IHS forecasts that the autonomous CaaS market will emerge
in the early 2020s, and accelerate in 2025. By 2030, as much
as 1.9 percent of the world's urban population, or 101 million
people, will use these services, which will comprise 10 million
vehicles. "There's a big potential for it and the reason automakers are interested is they're always looking for ways to flatten
out their revenue curves," Bird says.

Products and Services are Symbiotic
"The opportunity is in the product service ecosystem," says

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SEPTEMBER/OCTOBER 2016

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i3 - September/October 2016

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