Rapid digital transformation, technological advances and evolving consumer demands are opening up new, dynamic and, importantly, continuous revenue streams across the automotive value chain. This contrasts with the revenue limitations associated with conventional one-time vehicle sales. Such seismic shifts in business models are linked to the transition of the automotive industry from hardware and products towards software and services. A flood of revenue opportunities—whether related to connectivity and autonomous technologies, powertrain electrification, mobility as a service (MaaS), or asset monetization— is emerging, paralleled by increasing competition from non-traditional companies.
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Four Key Areas for Monetization
Connectivity and autonomous vehicle technologies are highlighting revenue opportunities through connected vehicle data, in-vehicle features, connected apps, digital payment systems, and the upselling of autonomous capabilities. Here, the massive volumes of data generated by connected vehicles will allow automakers to design features that directly target customer needs. This will also create a range of cross-selling retail opportunities for automakers. Simultaneously, connected supply chains will support new revenue opportunities in prognostic maintenance services, even as connected apps generate revenue from subscriptions, premium features, and support services. For instance, automakers like Toyota and Ford are targeting the fleet business while generating revenues with connectivity-enabled subscription and software sales. Connected car data and a suite of in-vehicle and remote features supported by its OnStar service is creating strong monetization streams for General Motors.
Increasing vehicle electrification will produce revenue streams in electric vehicle (EV) charging, component and battery sales, and aftersales servicing. Co-development of scalable EV platforms with other automakers, commercialization of EV charging networks, and the provision of premium services at charging stations present additional business opportunities. Moreover, automakers are repurposing end-of-life (EOL) EV batteries for second life applications, including to supply the electricity needs of their facilities. For example, Mercedes me Charge and Stellantis’ Free2Move underline EV charging infrastructure as a growing revenue opportunity. Nissan’s partnership with Green Charge Network to build commercial energy storage systems in the US using EOL batteries from the Nissan Leaf, and Volkswagen’s Modular Electric Toolkit (MEB) platform sales to automakers like Mahindra & Mahindra, and Ford emphasize the monetization opportunities allied to vehicle electrification.
A plethora of business prospects are emerging from the MaaS segment, including traditional, peer-to-peer (P2P) car sharing, corporate car sharing, ride sharing, ride hailing, micromobility sharing, demand responsive transit (DRT), carpooling, and multimodal parking/charging. Purpose built vehicles for fleets and subscription-based sales also offer monetization potential. For instance, Mercedes-Benz and BMW’s partnership in MaaS spans FreeNOW, ChargeNOW and ShareNOW brands (subsequently sold to Stellantis) that underline the push for sustainable, multimodal, shared transport alternatives.
The rising popularity of e-commerce is underpinning an omnichannel approach characterized by a brick-and-click strategy. This is enabling more meaningful engagement between automakers and customers, while generating the prospect of additional revenue streams. Automakers are selling non-fungible tokens (NFTs), using social media platforms to publicize branded content and interact directly and more effectively with customers, leveraging online platforms to sell premium merchandise, and leveraging AR/VR tools for digital retail. Such asset monetization is strengthening brand value, reducing costs, and creating new revenue channels.
For instance, Tesla has close to 2.3 million subscribers on Youtube with a potential revenue opportunity of $700 per day, while Lamborghini has around 32 million followers on Instagram with an estimated earning potential of $803 per content creator post. Hyundai, Mahindra and Stellantis are launching Metaverse-based stores, providing customers with an immersive experience while saving on brand promotion events. NFTs have become popular: a design sketch by Porsche’s chief designer Peter Varga was auctioned for $90,000 using blockchain.
Among other aspects of asset monetization include contract manufacturing, as in the case of Sony Mobility’s partnership with Honda to develop EVs, where revenues are generated through leasing and partnering. In addition, the sale of carbon credits earned through low emission vehicle sales – Tesla earned an estimated $679 million in Q1, 2022 alone through the sale of carbon credits – represents another monetization opportunity. Multi-brand pre-owned vehicle business and allowing contract manufacturing in existing manufacturing facilities for smaller OEMs are other examples of asset monetization.
Balancing Risks vs Rewards
Today, every major automaker is actively exploring multiple revenue streams linked to the technology-driven connected, autonomous, shared, and electric (C.A.S.E.) revolution. This ranges from telematics insurance services (connected) to EV battery sales (electrification), online merchandise sales (asset monetization) to flexible leasing/corporate car sharing (MaaS).
However, monetization through new business models comes with its own set of challenges. For a start, focusing on supplementary revenue generating areas might weaken the core competency of automakers which is vehicle building. Moreover, in several cases, significant investments will be required to build in-house competencies and unlock additional revenue streams. The rapid pace of technological change and evolving customer expectations will pressurize OEMs to continually revise their business models and strategies. Such challenges will be compounded by a nascent regulatory framework for digital technologies in the automotive space.
Such challenges notwithstanding, the automotive industry stands at the cusp of dramatic transformation where digitally-driven trends are incubating new revenue streams and business models.
With inputs from Amrita Shetty, Senior Manager – Communications & Content, Mobility
