Alberto Torrijos
Partner and Consultant
Deloitte Consulting Group

Apps and Carmakers: Stronger Together

Fri, 09/01/2017 - 11:58

INEGI says the millennial generation now consists of approximately 30 million people. These individuals are changing the purchasing paradigm, leaving ownership on a second plane. In a study carried out by Deloitte regarding millennials and their mobility preferences, 85 percent of the interviewees planned to buy a car within the next five years. But Alberto Torrijos, Partner and Consultant at Deloitte Consulting Group, says “young people usually do not have the economic means to buy a car. But they still have mobility needs, which has made solutions like Uber and Cabify extremely attractive.”

Sustainability is a contributing factor to the rise in popularity of shared mobility platforms. Paris, Madrid, Athens and Mexico City have now announced their commitment to eliminate diesel vehicles by 2025. Furthermore, the Mexican government was the first emerging economy to present its environmental objectives to the UN, including a goal of reducing carbon emissions by 51 percent and greenhouse gases by 22 percent by 2030. This could potentially boost early adoption of alternative mobility solutions and limit the use of private vehicles in the city’s central areas.

The truth is, however, that cars will not disappear. Strong and continuous investments in Mexican roads and car-oriented infrastructure will make sure of that, at least in the medium term. During the current administration’s term since 2012, the government has invested approximately US$4.7 billion in road infrastructure, aiming to complete 52 new highways by the end of 2018. According to the OECD, while Mexico’s metropolitan area (ZMVM) is now considered the largest urban agglomeration in the world with over 25 million people, it still suffers from a significant infrastructure deficit.

There will likely be a revolution in terms of mobility that will challenge all automakers to adapt. OEMs are realizing that a business model focused on producing cars is not enough. Ford is leading the much-needed transformation announcing it will become a mobility company instead of a car manufacturer. Other companies have followed suit including the best-selling brand in Mexico, Nissan. Through its new Intelligent Mobility concept, Mayra González, President and Director General of Nissan Mexicana, says “[Nissan’s] new mission is to revolutionize mobility globally.” But after years of solely building cars, no company can go through this process alone. Mark Fields, CEO of Ford, has stated that the company would invest in 25 mobility initiatives as part of its new strategy. Other leading automakers are following the same trend and investing, partnering or even acquiring mobility companies around the world.

Although Uber has been the face of global mobility efforts, especially in Mexico, many other companies have started to emerge and even to lead mobility transformation in certain countries. The biggest example is Didi in China. The company was Uber’s biggest competitor in the region and acquired Uber’s Chinese division after a two-year battle. Other examples include Cabify in Spain, BlaBlaCar in France, MyTaxi in Germany, Lyft in the US and Gett in Israel. Many of these players are attracting the attention of large automakers looking for the perfect partner to help them gain ground in the mobility race

General Motors invested in Uber’s competitor Lyft, Volkswagen boosted Gett, while Ford, Toyota, FCA and Volvo decided to target Uber. BMW and Daimler are also riding the trend. The former is investing in ride-sharing and carpooling services like Skift and Scoop, while the latter moved resources to Hailo and MyTaxi, which will now merge to become one of Europe’s main car-hailing companies. Car-sharing and micro-transit services are also attracting resources with flagship cases like ZipCar and Chariot with Ford and Car2Go with Daimler. The momentum remains strong and companies keep looking for new mobility solutions to invest in. According to Visiongain, by the end of 2016 the automotive on-demand mobility market will generate more than US$5 billion in revenue. Uber alone has more than 8 million users who request approximately 1 million rides per day