Smarter transportation through mobility services

The year 2010 has been a booming one for the Indian auto sector. After a lull in the previous two years, sales were up by more than 30 percent in 2010 – the second largest growth rate globally. The year also witnessed the introduction of a variety of cars across segments – from hatchbacks to super luxury vehicles.

While the future seemingly looks exciting, Indian auto companies need to take cognizance of factors that may have a strong impact on the sector in the near future. With the government de-regulating petrol prices in a landmark decision last June, prices have already had six upward revisions. The current financial budget also provides no relief on excise duty for imported petrol and diesel. With 70 percent of oil being imported there are little chances of respite in oil prices, in cue to the global rise.

In addition, interest rates are rising for financing and so are material costs for manufacturing. Also, increasing traffic congestion and rise in pollution levels in urban areas are also a matter of concern.

In sum, purchasing, owning and driving a car is getting costlier and more difficult for Indian consumers. Recent initiatives and investments by urban transport authorities in improving public transport -- such as the bus rapid transit system in Ahmedabad, the metro in Delhi, the Volvo bus and directional bus service in Bangalore -- have shown that consumers are ready to leave their cars at home for less expensive and hassle-free modes of mobility.

While people will continue buying and using personal vehicles, they are also actively seeking supplemental solutions to their mobility needs. Automakers in India and other emerging markets must recognize these changes and be prepared to offer mobility solutions and services beyond selling cars.

According to research in a new IBM Institute for Business Value study, Advancing Mobility: The New Frontier of Smarter Transportation, a number of visionaries in the transportation field are looking to meet this nascent demand by pioneering the concept of comprehensive “mobility services”.

Focusing on urban areas, these subscription-based “mobility services” provide innovative transportation alternatives that can either replace, enhance or extend consumers’ use of their personal vehicle, and also focus on giving travelers advice on how best to move around. Examples on the horizon include:

Improved access to public and other transportation modes. Technology advances in recent years – including roadway sensors and predictive analytics – are enabling transportation planners to ponder the creation of a holistic transportation system. Such a system will tie together all modes of transportation – private vehicles, buses, trains, and so on -- enabling individuals to quickly determine the best way to get from point A to point B. For example, software on your smartphone will instantly tell you the optimum mobility mix – based on your preferences – to use for a trip to the other part of city. Services for the entire trip might include public transportation, a temporary-use car, and a reserved parking spot at your destination. Peering further into the future one can envision a pre-paid or post-paid subscription service combining all transport modes along with parking and toll charges. Vinci, a major French road infrastructure provider, is successfully running such a mobility service integrating all modes and parking on a single access card. Transaction-based, peer-to-peer ride sharing. Using smartphone and Internet based applications, it is now possible to easily connect travelers on the same route to share a ride or taxi. Algorithms work to match routes and time schedules and are particularly efficient for rides to or from an airport or train station. RideInSync, a start-up based in Hyderabad has a smart and safe taxi-sharing service running to and from the airport.

“Occasional-use” vehicles. Several companies are starting to experiment with services that let consumers access a portfolio of temporary use vehicles by the hour on a subscription service – a small car for running errands in the city, a SUV when you’re taking a weekend road trip with the family or a luxury ride for that special anniversary dinner. Access to vehicles is becoming more important than owning vehicles for many consumer segments especially true for the younger generation. Zipcar, initially started its car sharing service in university towns in the US, but popularity has spread quickly with more than 500,000 registered subscribers across the US.

Many auto companies, especially those in Europe, indicated plans and pilots of such mobility services to supplement vehicle sales. For example, some automakers have already rolled out programs for car and ride sharing (Car2Go and Car2Together by Daimler) and subscription based services for by-the-hour access to a wide portfolio of vehicles from electric bikes to SUVs (Mu by Peugeot). BMW has gone a step further and launched a sub-brand BMWi operating under an entirely new business model with mobility services at its core.

In contrast, automakers in India seem to have little or no plans to move towards offering mobility services and diversifying their revenue streams (foreign subsidiaries are also waiting for parent companies to pilot and drive new initiatives). Telematics and smartphone driven applications, subscription-based on-demand mobility services, partnerships with urban transport authorities all offer opportunities of moving from just selling products to selling mobility services.

With the emergence of these mobility services, travelers will be better off as transportation becomes far more flexible, efficient and faster. For auto companies, it presents a large whitespace opportunity and first movers can derive great benefits by staking their claim to new revenue models.