'A car is just a couch on four wheels,' Geely chairman, Li Shufu, once famously said. While a tad oversimplified, this comment nevertheless highlights the fact that the car is becoming increasingly commoditized. Its value and importance are on a fast decline in some markets. Hence, original equipment manufacturers (OEMs) have to identify and explore new revenue streams that the global automotive industry so desperately needs.

1. - Dr. Martin Lockstrom
The State of the Global Automotive Industry:
A Tale of Two Gears
Insights

2. The Macro View
If the average car has five gears, the global
automotive industry has two. Of the major
global markets, the European Union (EU)
posted a disappointing drop of -8.2% for
2012, whereas the United States (US),
Japan and China showed growth of 9%,
26% and 4.3%, respectively. Why this stark
contrast between the EU and the rest of
the world? For starters, a comparison of
the EU and the US shows that the two have
embarked on distinctively different macro
economic paths. The US, fearing a repeat of
the mistakes from the Great Depression in
the 1930s, has used its unlimited money-
printing ability to launch massive fiscal
stimulus measures by injecting trillions of
dollars into the economy.
The EU, on the other hand, kneecapped
by a“one-size-fits-all”monetary approach
and limited by external lenders, has been
forced to adopt severe austerity measures
that stymie any tendency to growth. China
is growing at a more moderate pace in
the wake of the astronomic growth right
after the financial crisis in 2008-2009.
Japan, finally, is seeing a healthy rebound
in the wake of the Fukushima disaster and
the launch of a massive fiscal stimulus
program. In sum, we see a two-gear global
automotive market – the EU in reverse, and
the remaining key markets in top gear, if
not quite overdrive.
The Consumer View
From a consumer perspective, geographic
markets are less defined by country
borders and more by the developed-
developing dichotomy. In most developed
markets, there is a trend of change in the
traditional paradigm of“car ownership”–
which is now moving towards“car usage”.
Meanwhile, in many emerging markets,
the car represents one of the key symbols
of socioeconomic status. Furthermore, in
many urban areas, especially in developing
countries, congestion and pollution are
becoming increasingly serious, calling for
new solutions for consumer convenience
and safety. So, global Original Equipment
Manufacturers (OEMs) have to delicately
balance frugality, luxury and sustainability.
New Business Opportunities
Beyond the Car
This means that new business models have
to be developed in order to accommodate
changing consumer demand. For instance,
car customer value in the future will not
be so much about driving from point A
to point B, but rather about providing
the best travel experience, regardless of
whether it takes place entirely within the

3. car or in a multi-modal fashion involving
for instance, trains, aircraft etc. This
means that automotive OEMs have to
think beyond the driving seat about the
additional services they can deliver in a
single product in the shape of a car.
For instance, there is a whole lot to do
in terms of car entertainment; who said
that it shouldn’t be possible to provide
an app ecosystem for cars? As the share
of electronic content is continuously
increasing in cars, this is more imperative
than visionary idea. In addition, with
support from social media, a whole range
of potential new services can be created;
for instance, based on the demographic
background of the driver (or passengers),
intelligent context-sensitive information
about gas stations or restaurants can be
provided to the car even before the need
is felt.
Moreover, who says that the cars of the
future will need drivers? While driving a
car is usually a pleasurable experience,
navigating through rush hour traffic on
the daily commute, is not. Autonomous
driving is already a reality; for instance,
Google Car has logged thousands of miles
of autonomous driving. For safety and
regulatory reasons, this idea has yet to
become mainstream though. Also, who
said that cars have to behave like chaotic
individuals? With autonomous cars, the
ideal case would be one where cars not
only care about themselves, but also
make every decision, such as turning or
accelerating, by considering the behavior
of all other cars within a certain radius – as
part of a finely synchronized swarm.

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Author Profile
Dr. Martin Lockstrom
Principal Consultant, Building Tomorrow’s
Enterprise, Infosys Labs
Martin is a specialist in Supply Chain and
Operations Strategy, Outsourcing/Offshoring
and International Management. During a
six-year stint in China, he established the
research and education activities at the SCM,
Sustainability and Automotive academic centers
at China Europe International Business School,
Shanghai.
He established the first endowed chair
for Purchasing and SCM in China at Tongji
University, Shanghai, and was also responsible
for setting up Supply Chain Management
Institute China, an international network of SCM
research and education hubs.
Martin co-founded Procuris Solutions, an IT
company specializing in SCM-related solutions,
offering consulting services to companies like
Accenture, Ariba, BMW, Clariant, Dell, Dow,
Ernst & Young and Intel, among others.
He has a Ph.D. in Supply Chain Management
from European Business School, Germany, a
bachelor’s and master’s degree in Industrial
Engineering and Management, from Chalmers
University of Technology, Sweden. He speaks
Swedish, English, German and Chinese, has
published over 50 articles and papers and
presented at more than 60 conferences.
Summary and Conclusion
Geely Chairman Li Shufu once said
that“a car is just a couch on four
wheels.”While a tad oversimplified, this
comment nevertheless highlights the
fact that the car as such is becoming
increasingly commoditized and its
value and importance are on the
decline in some markets. Hence,
OEMs have to ask themselves what
customer value in the industry is all
about. Only by doing so, will the mind
be free to identify and explore new
revenue streams that the industry so
desperately needs.