Dash to digital powers Asia-Pacific start-ups
As one of the companies listed in the third annual FT Asia-Pacific High Growth Companies ranking, in 16th place, Carsome’s story is not unusual. Businesses that were already growing rapidly online have since been turbocharged by digitalisation during the global health crisis.
Add in the reported £6billion public offering plan of Cazoo, the online car retailer and you have a sign of the dash to digital in APAC and the West. Another catalyst to auto manufacturers to up their digital and AV strategies?
You can see an ecosystem play evolving at speed across the globe in which software, sensors, and AI are the differentiator. Gone are the core strength competitive advantages of the internal combustion engine champions Daimler, BMW, VW, Honda, Toyota and GM. In are the data, software and AI advantages of Google, Tesla and Huawei. Mix in the vital battery core technology and Tesla stands out.
Elon Musk is nothing if not a visionary and executor of disruptive strategies.
"Tesla is building up collision repair capability to help address the grief that you went through, but usually insurance companies make you go [to] their "approved" collision repair partners. Tesla Insurance will make it smooth sailing." - @elonmusk."
In Coverager 15th August.
What do the auto manufacturers do?
In the the West License Tesla's software platform, join the Google/Android bandwagon or try and develop their own? As the connected car becomes more than just a vehicle and more a communications and infotainment unit the power of the Tesla data ecosystem and the Google/Android app store and ecosystem become obvious.
In the East Chinese auto manufacturers and Huawei make a powerful and disruptive competitor in the EV and AV markets with Toyota and Honda vying for a leadership place.
Probably room for one or two of the auto OEMs to catch up and carve out a position. Ford/VW and Arity? Toyota and Mobility Services? Or global giants Daimler and Bosch? Or quite who? The digital tectonic plates of disruption are moving rapidly and there are bound to be casualties drowning as these forces collide.
And what about insurers and the auto markets?
It brings me back to Carsom and Cazoo. Online sales of used cars are booming and embedded insurance a natural opportunity. Online sales and leasing of new cars are likewise an unstoppable trend with the opportunities for embedded insurance. Both auto OEMS and insurers will circle each other to grab the lion's share of premiums.
But the focus should be the customer whether buying, leasing or hiring vehicles. This is a classic ecosystem play.
And you wonder if another force might not be in play here. One that could be an ecosystem catalyst and data aggregator. Not just for the data generated by the vehicle with the dominant ADAS and AV platform.
What about the total needs of a driver, passenger, and third party involved with vehicles? Not just when they buy, lease and hire vehicles but when they have them serviced, when they are involved in collisions and accidents, when stopped by the police in a foreign country and need the help of language translations, when they need to register claims, and when they need help in what to do and how to do it?
These are areas both auto manufacturers and insurers can address with concierge services and roadside assistance. But there is space for another entity to capture this space.
You could see the ambitions of GM with Onstar- sell/lease vehicles embedded with eCall and offer drivers a concierge and personal help via call centres in the US and Europe. Embed insurance at the point of sale and there grows an evolving ecosystem.
Pity that GM sold the European business to PSA which dropped the whole strategy and so it becomes purely a US/Canada play.
And customers/families are rarely one auto manufacturer centric. They have a mix of vehicles from new to old especially, as is more the case these days, that the kids stay at home longer.
There is a big global space for a major global player to be an "Ecosystem Automator" and "Data Aggregator" across the whole value chain. Insurers, auto manufacturers, used car sales companies, repair network chains would be members of these ecosystems but not necessarily leaders. And the ones that make economic returns on capital will only be in the top quintile. This top quintile will be those that anticipate disruption rather than follow.
I wonder who that global player could be. More on that in the future.
Eric Cheng, co-founder of south-east Asian online used-car platform Carsome, kicked off 2020 with big ambitions to expand his five-year-old business. Then Covid-19 hit, and he braced for the worst. But Carsome instead exceeded 2019’s revenue by more than 30 per cent to hit $400m, and expects to more than double that figure this year to $1bn after pushing deeper into its markets as demand exploded during the pandemic.