New mobility services key for car industry | Business| Economy and finance news from a German perspective | DW | 03.10.2014
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New mobility services key for car industry

More and more people are deciding not to own a car. Young drivers, especially, plan their journeys on their smartphones. What do these developments mean for the car industry?

Martin Winterkorn is nearing the high point of his career - by 2018 the chief executive of Germany's Volkswagen (VW) wants to make the brand the world's No. 1 carmaker. Some experts believe he could even reach that goal this year.

But all is not well at VW - despite record sales, the carmaker is grappling with profit margins. Winterkorn says that the industry faced "massive upheaval." In a recent speech to around 1,000 executives, he specifically mentioned the growing importance of car-sharing and Web-based services for the auto industry.

There has been a shift in people's attitudes to cars.

"It's the people who have been brought up with the Internet, the digital natives, who are driving this. They are also the main group being targeted by car-sharing services. They use their smartphones to plan their journeys," Stefan Bratzel, a car expert at the Polytechnic University in the western German town of Bergisch-Gladbach.

Bratzel thinks the phenomenon will spread quickly in the next few years. Peter Fuss from Ernst & Young, who has been advising companies in the automotive sector for 25 years, agrees.

"It's a paradigm shift similar to what we've seen in the music industry, away from records to CDs and now iTunes," he told DW.

The entire business model in the industry will have to change, he said.

"Gone are the days of just being a hardware - i.e. a car - provider. Companies will have to offer premium mobility services," he said.

No need for your own motor

The modern customer does not need his own four wheels anymore. He or she just wants to get from A to B quickly and safely using their smartphones.

A Porsche at the Paris Auto Show

Who needs status symbols?

Platforms like Daimler's Moovel, the Berlin start-up Waymate or Hamburg's Comove show customers the cheapest or quickest options, be it on public transport, by coach, train or electric bicycle or by using car-sharing or private car services.

There are also taxi apps or chauffeur services like Uber, which has met a lot of resistance in Germany recently, or car-sharing services like BMW's DriveNow, Flinkster, or Flinc, which specialize in connecting people who are looking to share a ride on social media sites.

The car as a status symbol is on its way out - the vehicle is destined to become a mere cog in the wheel of mobility.

Intermodal mobility

"The car industry knows that, of course, and has already started to adapt. Car-sharing platforms, operated by the big carmakers, are a good example," Bratzel says.

So far, German carmakers Daimler, VW and BMW are all working on new, so-called "intermodal" mobility services. They don't make an awful lot of money on those services yet. Daimler's Car2Go, Moovel and mytaxi are set to make a combined 100 million euros ($126 million) in 2014. Daimler's total revenues are expected to come in at 120 billion euros.

High growth rates

But it's the rate at which these services grow that are important. A study by Roland Berger quoted in German daily FAZ says car-sharing, bicycle-sharing, taxi and ride-sharing services as well as services around parking were set to grow by 35 percent every year, which would translate into a 15-billion euro industry by 2020.

Another study, by German high-tech association Bitkom, confirms the trend. It says that in Germany, 4 million people use car-sharing services today - more than twice as many as 18 months ago.

Official statistics for Germany also confirm that more and more young people in particular are happy not to own a car. In 2008, 69 percent of households in the 25-to-35-year age group had a car. In 2004, the figure was 79 percent. Among those aged 25 or under, the share of those who own a car has dropped from 64 to 56 percent between 2005 and 2011.

Opportunity for Internet giants?

As all these services are facilitated by the Internet, it could also be big business for Web household names like Google, Apple and Amazon.

"The direct contact with the end-customer plays a central role in the mobility sector, too," Bartzel told DW.

If the likes of Google manage to offer mobility services and control every step of the process, they would be serious rivals for the big carmakers.

"That would pose a huge threat to the carmakers," Bartzel believes.

Google has already has already presented the self-driving Concept Car, a two-seater without a steering wheel. Although German carmakers have made goof progress on the mobility front, the competition is by no means asleep at the wheel.

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