The urban transport landscape has changed significantly with the advent of digital mobility services. Ride-hailing and ridesharing offer convenience to urban residents, help address issues around sustainability in ever-expanding megacities, and use resources better. Demand for such mobility services is robust and steadily growing. Chinese company Didi Chuxing’s number of daily fulfilled orders surged from around 1 million in 2016 to nearly 27 million in early 2018.

Despite tightening regulation, mobility start-ups raised more than $28 billion during 2017, suggesting strong market confidence. Besides tech companies, automakers and governments have started to play active roles in this mobility revolution. Toyota has invested $1 billion in the ride-hailing firm Grab. China is nurturing 100 pilot smart cities, in which smart travel is a core element. The rise of mobility services is a powerful trend, generating competition among tech companies, automakers and government authorities that will have a profound impact.

Automakers and city leaders need to understand and embrace the opportunities and challenges in this shifting landscape. Car companies may find their sales are curbed, as customers get used to more convenient alternatives to car ownership. More importantly, automakers will likely lose customer touchpoints to mobility service providers (MSPs), which now stand between automakers and customers. As MSPs gain ever-growing bargaining power and more direct customer touchpoints, what role should automakers play?

City leaders face tough challenges too. They must determine how to assess the impact of MSPs on public infrastructure; how they should allocate resources accordingly; and how they can work with the private sector to reduce congestion and improve sustainability.

By dissecting and analysing the mobility service value chain and customer journey, the Boston Consulting Group (BCG) has identified three strategic moves that automakers and government bodies can make in the rise of mobility services:

Build mobility platforms to offer seamless end-to-end mobility solutions directly to customers

This requires integrating various service modules along the customer journey into one single platform, and creating a user-friendly and engaging customer experience. Customers will benefit tremendously from a convenient one-stop solution for all mobility-related demands. A few leading automakers are already gaining a holistic view of the mobility service value chain by acquiring stakes or gaining control of various MSPs in car-sharing, taxi-hailing and public parking. Yet even with a relatively comprehensive mobility service portfolio, there is still a long way to go to achieve scale and optimize integration to remain competitive. As supposedly unbiased and less profit-motivated players, government bodies can also expect to play significant roles in building platforms where different service modules, including public transport, converge.

Offer carefree vehicle packages to MSPs

This involves providing flexible payment models (eg rental or pay-per-use), comprehensive service packages (including insurance, maintenance and cleaning) and customized specs (eg optional AV software) to MSPs, as well as potentially forming strategic alliances with MSPs to help them grow. Asset-light MSPs will benefit greatly by minimizing their efforts in vehicle lifecycle management. Several automakers are already experimenting with bundled vehicle solutions for select MSPs in small pilot phases. Yet to ensure successful scale-ups, detailed execution planning, tiered pricing systems and risk-hedging strategies, among many other elements, are needed.

Develop innovative infrastructure and policies to shape and optimize the backbone of future mobility ecosystems

Urban mobility pain points can be alleviated or eradicated by building innovative infrastructure and introducing forward-looking policies that private users, MSPs and public transport operators can all benefit from. As described in its Go Boston 2030 initiative, Boston is building mobility microHUBs, where car-sharing, ride-hailing, bike-parking and EV-charging become available and accessible in one place. Additionally, BCG helped Boston build a complex simulation system to study the impact of AV on urban mobility and formulate relevant policies to unlock the potential of breakthrough technology. How governmental bodies and private sectors work together and leverage each other’s strengths will determine the success of future attempts in improving city sustainability and liveability.

Compared to tech players, automakers and governmental authorities are late to the mobility service party. They need to come up with a strategy that addresses short-term concerns and also aligns with a long-term vision. To choose the proper strategic play, they should not only examine their internal capabilities, but also understand the required factors for different moves.

Key requirements for building mobility platforms include scalability at local level, highly efficient operations and seamless service integration. For offering vehicle solutions, key success factors include (but are not limited to) optimized production and supply chains, advanced analytics for cost containment and wide geographic presence. For innovating public infrastructure and policy, a holistic perspective, strong partnership management and an ability to secure buy-in from the public and other stakeholders are critical.