Driven by rapid urbanization, economic prosperity, and a rising population, mobility needs in Asian countries have increased for people and goods. While passenger transport is expected to rise, vehicle ownership remains low. This imbalance has created an enormous opportunity for mobility service providers to capture the Asia-Pacific (APAC) market, primarily dominated by a young population. With their high spending power and interest in value for money, they want to better utilize the time spent on the wheel and monetize their assets such as the vehicle they own. This paper highlights the specific characteristics of APAC automotive trends and how automakers can benefit by building purpose-driven business models.
Challenges and opportunities in the APAC automotive market
The automotive industry is witnessing disruption, as car owners increasingly question the value of money spent on purchasing an automobile. For a small population in Asia, owning a car may be a matter of pride, but a large proportion looks for a car’s utility. This trend has resulted in reduced car sales and profitability, overcapacity, consolidation, layoffs, and more. It has also affected the supplier ecosystem. To tackle the challenge head-on, car manufacturers in the APAC region are experimenting with a series of new product launches, smart features, connected services, immersive car buying experiences, and new market expansion programs. However, as the results are not too impressive, there is a need to revisit the fundamentals of the current business model with a focus on mobility.
Going back to basics requires automotive firms to answer some fundamental questions:
What needs to be moved – people or goods – from point A to B?
How will the asset be designed and what is the end purpose?
If there is movement today, what problem needs to be solved?
Is vehicle ownership necessary?
Let us look at how the automotive industry in Asia is addressing these questions.
Driven by purpose
There are three kinds of players in the APAC automotive market:
Traditional car companies continue to focus on a product-selling-based business model. They either sell cars for individual ownership (B2C) or to fleet owners (B2B). Few have tried participating in the service-led business model by launching shared mobility platforms but with limited success. For example, in China, automotive manufacturer SAIC Motor has launched EvCard, an electric self-service rental platform, while Geely-owned Cao Cao Mobility now offers new energy cars.
New-generation electric vehicle (EV) companies like Nio, Xpeng Motors, and Byton have shown initial success due to their smart tech-savvy products and connected services. The environment-friendly products have been better accepted among younger buyers and a conscious consumer base. But mostly, these firms have followed a product-based business model.
The third category of car companies is technology firms like Apple, Huawei, and Sony that want to engage their customers for extended periods. Their primary objective is to retain users on their platforms and ecosystems for as long as possible. More customer retention means more consumption of services. These companies focus on aggregating demands for mobility and are trying to make full use of the time spent on the wheel by selling more services.