Marrying the automotive industry and smart transportation: what does it take to build the bridge?

Evgeny Klochikhin
Aug 26, 2019 · 4 min read

Smart transportation is here, and consumers are poised to benefit. According to some estimates, smart mobility could save the average American consumer around $5,000 per year. There are also significant social benefits. With smart transportation, we can reduce the number of fatalities in car accidents, eliminate congestion, and improve overall levels of stress. It’s even possible that smart transportation will reduce carbon emissions by 300 million tons per year.

If automakers want to stay relevant, they need to adapt to the coming smart transportation revolution. This is very possible — but it will require the auto industry to rethink long-standing habits.

What if my car could tell me when it is towed and give the exact location where to find it?

The challenge

In several ways, the auto industry hasn’t changed much from the days of Henry Ford. This is a serious problem for the industry going forward, despite the success that it has enjoyed for the past century.

Perhaps the biggest problem is that automakers don’t have a true B2C business model. After all, they don’t sell directly to consumers but to car dealerships. Maybe this business model made sense once, but in today’s world it’s just outdated. Without connecting directly with the consumer, automakers can’t adapt their products to a rapidly changing world.

Consider leading tech companies like Apple and Amazon. It’s not just that they sell directly to consumers (although they do), these companies also collect massive amounts of data about their users and how people use their products. Apple knows precisely how much time users spend on their iPhones, what features they use most often, and hundreds of other details about consumer behavior. All of this knowledge helps Apple to create products that keep people hooked.

Automakers seemingly have comparable data sets but do not use them with the same efficiency. Although consumer surveys can provide some information about driver behavior, that information is paltry in comparison to what the tech companies are working with.

Does it matter? Yes. When automakers don’t have reliable data insights about how consumers are using their products, they can’t adapt their products to make them more attractive for end customers. With such a lack of information, it’s not surprising that car sales haven’t increased much in North America over the past decade. Millennials tend to be particularly lukewarm about car ownership. Less than half of millennials who drive say that they enjoy their time in the car.

This problem is exacerbated by the auto industry’s failure to connect directly with consumers. After all, they’re not even directly selling the product. Automakers are relying on car dealerships to communicate with buyers. That’s an incredibly inefficient system for getting consumer feedback.

Automakers can take advantage of new opportunities — if they can update their business models and get in touch with real consumers.

Without intimately knowing what their end-users want, automakers are left in the dark when it comes to innovation. So it’s not surprising that many automakers pursue ineffective strategies. Over the past few decades, many automakers have emphasized horsepower and fancy gadgetry in developing their products (and marketing them). Yet evidence suggests that consumers aren’t paying any more attention to these features.

When we compare the auto industry against ridesharing services, the difference is stark. Uber and Lyft know exactly where users are going, when they’re traveling, how often they’re using the service, and what they’re willing to pay for it. Meanwhile, automakers are stuck in an antiquated model at the same time when our transportation system is poised to undergo major changes.

Right now, automakers are selling products. Going forward, this needs to change.

Building bridges between automakers and consumers

The situation might sound pretty hopeless for automakers, but it’s not. There are exciting opportunities for automakers in the era of smart transportation. But in order to take advantage of them, automakers need to become more like Apple. They need to know their consumers intimately and sell solutions to their needs.

So, how should automakers do this? It starts by working more directly with consumers. Automakers can’t just continue selling their cars to dealerships. They need to figure out what end-users really want, using advanced methods of data collection.

Once automakers are armed with real data, they can enhance their offerings selling cars as a service (much like Lyft and Uber). They can incorporate new features that directly address people’s needs, instead of just piling on gadgetry that people don’t really want. And they can build cars for the smart transportation systems of the future.

Smart cities will rely on cars. But those cars will need to be capable of integrating with smart infrastructure (like smart traffic lights and toll booths). In order to build compatible hardware, automakers need to work directly with cities and consumers to address common pain points. Continuing to rely on car dealerships alone just won’t work.

Smart cities will rely on cars. But those cars will need to be capable of integrating with smart infrastructure.

Automakers can take advantage of new opportunities — if they can update their business models and get in touch with real consumers.

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