The Future of the Automotive Industry

!
!
!
,-#./0(*)1*/)22.3)%.0'&$*/)4("-#0')4*)4*
!
0%.5'0')4.2*'45"(0%'$(+*(/$4.%')(*1)%*06$************
!
!
7"%)#$.4*/.%*'45"(0%8* !
!
!! ! ! ! !!!!!!!!!!!!!!!!"#$%&'$(%#)#'*+',"-).'/012345!
!
!
!
!
!
!
!
!
!
!!!"#$%&'%! ()*'+&,+-*.!/&0%*1!2!3$%*1$&%+#$&,!41#5*'%!/&$&6*7*$%!8!
!!!!!9&:+.!";&)<+0! ",&00!#=!>?@>!
!!!!!!!!!!!!AB?CDDE@E@EF?EF! !"#$%&'()%*+!/1!G,+:+*1!9HIJKL9M!9#'%#1!+$!(#'+&,!('+*$'*0!
.&;N';&)<+0O67&+,N'#7! &$.!)1#=*00#1!&%!H("4!H<1#)*!

Acknowledgements

With thanks to Olivier Delbard, Lauren Anderson, Antonin Leonard, Paulin Dementhon,
Gabriel Plassat, François Bellanger and my nana Karolinette for their inspiration, feedback
and support.

! "!

Abstract

For an increasing number of people, the 2008 financial crisis challenged not only the bankers
but also the pillars of our society. They think that our model is no longer sustainable. Among
those people are many entrepreneurs wishing different tomorrows. Different movements
emerged calling for alternatives. Among them, a movement called collaborative consumption.
Based on the idea that sharing resources could be a way to save the environment, to save
money and to socialize, many businesses from this movement gained momentum and quickly
reached sky-rocketing growth. Almost all industries are impacted but two are especially
impacted already: Hotels and automotive. Since the car industry is undergoing profound
changes, we will study this particular case.
In a first part, we will present the collaborative consumption movement (what are the main
drivers, principles and systems) and give some insights about the strong disruption potential it
has on the whole economy. Then, through the study of the car industry situation, we will
discuss the major challenges of the industry and see that they are tied to the rise of
collaborative consumption. In the final part, designing possible futures for the automotive
industry and collaborative consumption companies via four scenarios will help us to answer
to questions such as Is a rapprochement between collaborative consumption companies and
the car industry could be the solution for both of them? It will also be the base for our
recommendations.

Key words: car industry, collaborative consumption, connectivity, collaborative
manufacturing

! #!

Contents

%&'()!*+!),-.'.%/! "!

(./%!*+!&''0)1.&%.*2/! #!

.2%0*345%.*2! $%!

67!5*((&'*0&%.1)!5*2/489%.*2! $$!
&'!()*+,!)-(,*+.! $$!
/'!0+-12+(3!4+-56-472(!&50!(.(,28(! $9!
.7!30.1)0/! 6:!
.7!/*5.&(!2)%;*0<.2=!+425%.*2&(.%.)/! 6"!!
..7!0)/40=)25)!*+!5*8842.%>! 6"!
...7!)21.0*28)2%&(!5*25)02/! 6#!!
.17!5*/%!5*2/5.*4/2)//! 6#!
..7!90.25.9()/! 6$!
.7!%04/%!')%;))2!/%0&2=)0/! 6$!!
..7!')(.)+!.2!%-)!5*88*2/! 6$!
...7!.3(.2=!5&9&5.%>! 6$!!
.17!50.%.5&(!8&//! 6?!
...7!/>/%)8/! 6?!
.7!90*345%!/)01.5)!/>/%)8/! 6?!!
..7!0)3./%0.'4%.*2!8&0<)%/! 6@!
...7!5*((&'*0&%.1)!(.+)/%>()/! 6@!!
6'!:)2+2!-,!(,&50(!5*:!&50!:)2+2!-,!6&5!;*! <$!

A7!)40*9)&2!5&0!.234/%0>! <=!
&'!()*+,!)-(,*+.! <=!
/'!6>++25,!(-,>&,-*5! <#!
.7!<)>!+.=40)/! AB!
..7!8&0<)%!%0)23/! AB!
...7!9*0%)0 /!#C6!+*05)/! :A!
6'!6)&7725;2(! 9?!
.7!5-&2=.2=!54/%*8)0!')-&1.*0! :"!
.7!&((D<2*;.2=!5*2/48)0! :"!
..7!5*22)5%)3!5&0! :#!!
...7!8*'.(.%>!/)01.5)/! :$!
..7!40'&2.E&%.*2! :?!
...7!)21.0*28)2%&(!.//4)/!&23!0)=4(&%.*2/! :@!
.17!&!8*1.2=!1&(4)!5-&.2! :B!

:7!0)/)&05-!F4)/%.*2!&23!8)%-*3! ?%!
&'!+2(2&+6)!@>2(,-*5! ?%!
/'!82,)*0!! ?%!
6'!7-8-,(! ?%!
0'!+-(A(! ?$!

"7!/5)2&0.*/!+*0!AG:G! ?<!
&'!A2.!,+250(! ?<!
/'!62+,&-5,-2(!&50!>562+,&-5,-2(!! ??!

! $!

6'!(625&+-*(! ?B!
.7!/5)2&0.*!6H!I!'&'>!>*4!5&2!30.1)!8>!5&0!J! "$!
..7!/5)2&0.*!AH!I!. 8!;&.%.2=!+*0!%-)!5&0!J! "?!
...7!/5)2&0.*!:H!I!&0%.+.5.&(!9&0&3./)/!J! "@!
...7!/5)2&0.*!"H!I!;-)0) /!5-)1>!K5-)10*()%LM!J! "B!
0'!+26*88250&,-*5(! C$!
2'!>,-7-D&,-*5!-5!&!4+*(426,-12!(,>0.!E+&82:*+A! C<!

5*25(4/.*2/! C9!

'.'(.*=0&9->!&23!&33.%.*2&(!0)+)0)25)/! C?!

&22),!6H!&//)//8)2%!*+!5*((&'*0&%.1)!5*2 !1&(4)!5-&.2!*+!
5*89&2.)/! CB!

&22),!AH!/5)2&0.*/!.2!9.5%40)/! C"!
!

! ?!

Table of exhibits

Exhibit 1: Collaborative consumption: drivers, principles and systems after Rachel Botsman
and Roo Rogers
Exhibit 2: Collaborative consumption initiatives classified by industries
Exhibit 3: Collaborative consumption SWOT
Exhibit 4: Impacts collaborative consumption can have on its macro-environment (PESTEL)
Exhibit 5:
Exhibit 6:!Private car sales evolution (1995-2011) after PWC-Autofacts
Exhibit 7:!Worldwide passenger car production evolution per region (2000-2011) after ACEA
Exhibit 8:!Vicious cycle Europe-centered manufacturers are in
Exhibit 9: New passenger cars registrations in Europe after PWC-Autofacts
Exhibit 10:! importance)
Exhibit 11: New players in the automotive value chain up to 2030 (inspired by KPMG)
Exhibit 12: Scenario method
Exhibit 13: Risk map
Exhibit 14: XXth
Exhibit 15: Matrix of scenarios
Exhibit 16: Challenges answers in the « Baby you can drive my car » world
Exhibit 17: Challenges answers in the « » world
Exhibit 18: Challenges answers in the « Artificial paradises» world
Exhibit 19: Challenges answers in the « ? » world

! @!

List of abbreviations

ATAWAD: AnyTime, AnyWhere, AnyDevice
AD: Anno Domini
BC: Before Christ
BRIC: Brazil, Russia, India, China
EU: European Union
GMO: Genetically Modified Organism
GPS: Global Positioning System
ICT: Information and Communications Technologies
IEEE: Institute of Electrical and Electronics Engineers
IS: Information Systems
LETS: Local Exchange Trading System
LN: League of Nations
LPG: Liquefied Petroleum Gas
OEM: Original Equipment Manufacturer
P2P: Peer-to-peer
PSA: Peugeot Société Anonyme
PSS: Product Service System
R&D: Research and Development
UN: United Nations
UK: United Kingdom
USA: United States of America
USSR: Union of Soviet Socialist Republics

! B!

Introduction
The global business environment is more complex and fast-moving than ever. On one hand,
globalization, digital connectivity and consumption have hugely increased. Over the last
twenty years, international trade and foreign investments more than tripled; mobile phone
subscriptions rose by 23,000 per cent and the number of Internet users grew by 29,000 per
cent; over a Billion people moved into cities with more resource intensive diets and life styles
and now, more than 1.8 Billion people are part of the global middle class. On the other hand,
human activity, characterized by extensive use of resources, has caused more extensive and
rapid changes to ecosystems in the last 20 years than at any other time in human history. It
has various dramatic consequences such as loss in biodiversity, acidification of oceans,
desertification, tropical deforestation and more. Shortages of a growing number of key
resources are becoming apparent, from water to fossil fuels, metals and arable lands. In this
context, businesses have to adapt and to place sustainability and connectivity at the core of
their strategy. Those conditions, while challenging for traditional players create a fertile
ground for alternatives. In this category, collaborative consumption is an eminent example,
the movement mainly based on the better utilization of resources have increasing impact on
traditional businesses even if yet difficult to assess. The car industry, an already old one but
not yet totally mature is an interesting case since it is undergoing profound changes. We will
then present in a first part the collaborative consumption movement, explaining its major
drivers, principles and systems and overviewing its strengths, weaknesses and its global
impact. Secondly, we introduce the European car industry with a short history, key figures
and trends about its current situation and finally major challenges that are coming.
In a last part, we will design scenarios in order to present different possible futures for the
impact of collaborative consumption on the European car industry. Based on these scenarios,
recommendations for both car manufacturers and collaborative consumption companies will
be made.

! 6G!

1. Collaborative consumption
a. Short history
Humans collaborate since prehistoric times. Most ancient human societies (hunter-gatherer
societies in which most or all food is obtained from wild plants and animals) are dated back as
far as 1.8 million years ago (Homo Erectus). They constantly needed to move around in
search of food, which limited the size of these societies. The main social functions were trade,
deal for food and other resources, production and education. In spite of sophistication in the
subsistence strategies, the first sedentary sites only appeared during the interval of c.25000-
17000 BC. The Natufian culture was the first to become sedentary at around 12000 BC.
According to University of Connecticut scientist Natalie Munro, feasts, especially in a funeral
context, may have played a key role, serving to integrate communities by providing the sense
of community.1 Sedentism increased contacts and trade: the productive gift (cereals, cattle,
sheep and goat) was exchanged through a network of large pre-agricultural sedentary sites.
Sedentism is coupled with the adoption of agricultural and animal domestication. This led to
the rise of population aggregation and formation of villages, cities and other community
types. After the agricultural revolution (c. 8500 BC.), communities grew in numbers thanks to
a more secured and increased food supply. Towns became centers of trade supporting various
rulers, educators, craftspeople, merchants and religious leaders. Rapidly, greater degrees of
social stratification appeared. Societies became more centralized with the shift to feudal
societies (From 476 AD) and the power concentrated in the hands of landowners. With the
industrial revolution (which occurred between 1750 and 1850), the power became even more
concentrated. Countries like United Kingdom and France were competing in the race to
industrialize. It was the rise of our current system, capitalism, ruled by open competition in a
free market, in which the means of production are privately owned and where the economy is
based on machines powered by fuels for the production of goods. Thanks to innovations in
textiles, steam power and iron making, the production dramatically increased.2
Population boomed and many people moved to cities to find employment. After the second
industrial revolution and throughout the XXth century, the mainstream system kept this race
for more individual profits and the pursuit of independence. It is the era of individualism.
According to Robert D. Putnam, between 1975 and 2000, attendance at club meetings in the
United States has fallen 58 percent, family dinners are down 33 percent and having friends
visit has fallen 45 percent. 3 But the shift underway from an industrial society to a post-
industrial society dominated by information, services and high technology gives us a different
vision. Information is a nonrival good and can be shared or gifted at practically no cost.
Services allow people to be more than passive consumers and to interact regularly with the
service provider. With information technologies, people can communicate more, collaborate
easily and optimize resources through sharing systems. Usenet is a very early case of this.
Back in 1979, one of the oldest computer network communications system was conceived:
Usenet. It is a worldwide distributed discussion system where users can post or read messages
to one or more categories called newsgroups.
In 1991, a young Finnish student posted a simple request on Usenet, asking feedback about
the operating system he was building during his free time. He received thousands of answers
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
6!NOOPHQQRRR7STUVWTVXYZYZ7TZ[QWVRSQAG6GG?:GAA6$#?XOX]O^_WT]S`S7SNO[a!
A!NOOPHQQVW7RUbUPVUX7Z^YQRUbUQ-_[XW]SZTUVO`!
:!9_OWX[c!0ZdV^O!37!6789):;'197:%'<'=(%'/799">#%'":.'?%-)-"9'7@'1A%&)B":'/7AAC:)$+D'

AGGG!

! 66!

from all other the world and his hobby became Linux, now the most famous open-source
software and most prominent example of free and open source software collaboration. Indeed,
the underlying source code can be used, modified and distributed (commercially or not) by
anyone under licenses4.
By the same period, between mid-80s and early-90s, another significant example of
collaboration started to spread across America and Europe. We call it Internet, a short version
of internetwork. It is a global system of interconnected computer networks. It is made of three
services :
World Wide Web: It is a global set of documents, images and other contents, logically
interrelated by hyperlinks.
Communication : Email (electronic mail) and Internet telephony
Data transfer: downloads, streaming, file sharing, etc.
It allows a nearly free and instantaneous sharing of ideas, knowledge and skills, making
collaborative work far easier. Numerous Internet-based services aiming to make easier
collaboration appeared and continue to appear every day. Two emblematic examples are
Napster and Wikipedia. Founded in 1999, Napster was first an independent peer-to-peer file
sharing service allowing people to easily share their MP3 files with other participants.
Even if the service was shut down in 2001 (because of intellectual property violations), it is
emblematic because it highlights the possibilities collaborative platforms can offer. Indeed,
people had access to 80 million songs (More than the most complete music services of today,
like Spotify or Deezer).
Wikipedia is another emblematic example. It is a free, collaboratively edited and multilingual
Internet encyclopedia launched in 2001. With 23 million articles, it is the largest encyclopedia
of the world. Students use Wikipedia more than libraries for their researches. Several studies
have shown that articles are generally of similar quality than traditional encyclopedia.5 To
keep this high level of quality, administrators (experienced and engaged users) monitor
behaviors and catch errors in less than an hour most of the time.6 In those two examples,
people are meeting online to produce, share and to have access to online content/resources. It
is just one form of collaboration enabled by information technologies. The second one,
meeting online to produce, share and to have access to offline content/resources can also have
significant impacts. Early examples are as old as Napster or Wikipedia. Craigslist was created
during the first years of the Internet existence, in 1995. It allows people to post classifieds,
community moderated and largely free, about almost everything (jobs, housing, personals, for
sale, items wanted, services, community, gigs, résumés and discussions forums). Today, it
covers more than 700 cities in 70 countries and has more than 60 billion monthly users in the
US alone.7 Another example is Couchsurfing, an hospitality exchange and social networking
service created in 2003. As an example, a young worker from Austria, say Wilfried, is going
to Thailand. He can use couchsurfing to find a place to stay and to find activities to do with
locals in Thailand. He can also offer activities and a space in his flat in Austria (non monetary
exchange) to other couchsurfers (name for members of the community). The website has
roughly 5 million members in more than 93,000 cities in 207 countries.8 This is a new vision
for hospitality. This is collaborative consumption.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
"!'ZOS[XWc!0XTNVa!e!0ZYV^Sc!0ZZ7! AG66!
#!NOOPHQQVW7RUbUPVUX7Z^YQRUbUQ;UbUPVUX!
$!NOOPHQQRRR7aVTZ_^^UV^7TNQaX]Pa_S]Y^XWV]VWT`TaZPVUV]_][ZWV]G!
?!NOOPHQQRRR7T^XUYSaUSO7Z^YQXdZ_OQfXTOSNVVO!
@!NOOPHQQfUaVS7TZ_TNS_^fUWY7S:7X[XgZWXRS7TZ[Q5Z_TN/_^fUWY.WfZY^XPNUT]WZOVhO7iPY!

! 6A!

Collaborative consumption describes the rapid explosion in traditional sharing, bartering,
lending, trading, renting, gifting and swapping reinvented through network technologies on a
scale and in ways never possible before. In a nutshell, it is « Using the Internet to get off the
Internet ». Reputation and community are at core of this economy. Users are characterized by
what they access, how they share and what they give away. This is a worldwide and trendy
movement now. More and more areas of our lives are created, produced and consumed in
collaborative ways, as we will see later in this first part.

b. Drivers, principles and systems
Rachel Botsman and Roo Rogers championed the concept of collaborative consumption and
started the movement with their 2010 book « yours: the rise of collaborative
consumption ». They notably defined the drivers, principles and systems sustaining the
movement. According to them, the four drivers are P2P Technologies, resurgence of
community, environmental concerns and cost consciousness; the four principles are trust
between strangers, belief in the commons, idling capacity and critical mass; the three systems
are Product Service Systems, Redistribution markets and Collaborative lifestyles (cf. exhibit
1). We will dive deeper in those drivers, principles and systems and eventually challenge
them.

!
2FGHIHJ!$K!6LMMNILONJHPQ!RLSTUVWJHLSK!XOHPQOT3!WOHSRHWMQT!NSX!TYTJQVT!NZJQO!+NRGQM!/LJTVNS![!+LL!+LQOT

! 6:!

i. Drivers
1. Social networking functionalities
P2P technologies are based on a peer-to-peer computer network, one in which each computer
can act like a client or a server for the other computers of the network and allow access to
resources such as files without the need of a central server. Napster was the first popular P2P
file-sharing system but collaborative consumption is rather based on P2P philosophy than P2P
technologies, P2P philosophy being free cooperation for the creation of a common good,
accessible for the members of the network. Collaborative consumption initiatives are based on
web-based social networking functionalities: profile, social links for each member and email
and/or instant messaging. For example, the 2.2 million members of the ride sharing company
Covoiturage.fr 9 cooperate (« free cooperation ») by publishing upcoming trips (offers with
price, number of seats available, date, duration, etc. and demands with date, duration, etc.)
and by sharing rides (« the common good »). Each user has a profile (with photo, general
information, contacts, reviews) and can send messages to other members. The main difference
with traditional social networks such as Facebook or Flickr is that here, the common good and
the cooperation have a major « offline » part: first, members arrange a meeting online and
then meet offline for a specific purpose, be it to share a ride, a workspace, a garden, etc. Both
are fueled by the sense of community that exists between members but collaborative
consumption systems demand a higher level of community engagement to work.

2. Resurgence of community
Since ages, people in the same locality or region and with common interests gather and create
communities, e.g. football clubs. With the emergence of telecommunications devices and
social networking services, online communities developed, removing the notion of physical
locality in its first form: this is what we call social web. People can have many social
interactions online (connect and communicate with friends, make new friends, create and
share content, share, buy or sale resources to others). Now, we count several hundred million
users in the biggest social networks (Facebook being the major one with around 1 billion
active users). The second form of online communities, communities communicating online to
meet offline, is at the core of collaborative consumption. The notion of local is important
again. According to the American sociologist Robert Putnam, the social capital (expected
collective or economic benefits derived from the preferential treatment and cooperation
between individuals and groups) is declining in United States notably because of television
and urban sprawl.10 While the impact of online social networks on social capital is an ongoing
debate, collaborative consumption can have a positive impact on it by allowing people to
meet again, to trust their community and to try to give as much as they receive. Collaborative
consumption nurtures the sense of community and the sense of community nurtures the
collaborative consumption. In this scheme, the self-interest meets the collective good.
According to a Campbell Mithun study11,

(environmental and
economical crisis questioning values of our society) is a key driver in bringing people
together.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
B!NOOPHQQRRR7TZjZUO_^XYV7f^QdaZYQ^VT^_OV[VWO!
6G!NOOPHQQVW7RUbUPVUX7Z^YQRUbUQ/ZTUXa]TXPUOXa!
66!NOOPHQQRRR7TX[PdVaaD[UON_W7TZ[Q$?@]WXOUZWXaDSO_`Dk_XWOUfUVSD^VXaUO`DZfDONVD

SNX^UWYDVTZWZ[`D[ZjV[VWO!

! 6"!

3. Environmental concerns
World population is expected to reach 8 Billion by 2025. Countries as big as China or India
(cumulating more than 2.4 billion inhabitants) are developing and becoming more resource-
intensive societies. Developed countries are consuming an unsustainable amount of resources.
If everyone on the planet was to live like the average American, we would need 5 planets to
sustain everyone.12 Consumers are generally aware of those growing environmental pressures
the global economy is facing. More and more are adopting an environmentally friendly
consuming behavior: transportation patterns, household energy, resource use and
consumption of everyday consumer goods. Behaviors such as recycling waste, reducing
energy and water consumption, bringing back used batteries or giving old clothes are
systematized. But oftenly, people
green products are more expensive. About 7 out of 10 French consumers would buy more
sustainable products if their price was the same as other .13 People do want to
have a positive impact on the environment but they have to be encouraged. This is where
collaborative consumption can play an important role. Indeed, to take an example, sharing a
ride with others is greener (if we consider that every participant actually planned to have that
trip) and 2 or 3 times cheaper than riding alone. While doing good for the earth, people
diminish expenses and have a good time.

4. Cost consciousness
According to International Labour Organization (ILO) estimates, the global economic crisis
increased world unemployment from 178 million in 2007 to 212 million in late 2009. 14 In
this context, households surf the Internet to find coupons, promotions and deals on websites
such as Groupon (deal-of-the-day website). They consume less and big investments are
postponed. For example, in France, the construction of individual houses decreased from
140,968 in 2005 to 107,433 in 2010.15 They are also looking for ways to get (additional)
revenues. By bartering, swapping, selling old goods or sharing resources that they do not use
all the time, people are liberating themselves from useless objects and get useful ones in
exchange or get money. Collaborative consumption can give substantial amount of additional
revenues. New Yorkers using AirBNB (website allowing non professional hoteliers to rent
out their apartments, extra bedroom and even couches to tourists) are making in average
$21,000 per year in income. 16 Car owners on RelayRides (peer-to-peer car sharing
marketplace) make on average about $250 a month and people on TaskRabbit (online
marketplace that allows users to outsource small jobs and tasks to others in their
neighborhood) can make $5,000 a month in San Francisco.17

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
6A!http://worldcentric.org/conscious-living/expanding-eco-footprint!
6:!)ONUTUO`!E'F%#'@&":G")#'%$'9"'B7:#7AA"$)7:'&%#>7:#"*9%'H'8X^TN!AG6A!
6"!NOOPHQQRRR7Yf[XY7TZ[QOZZaSQYaZdXaDXOXdXSVQVTZWZ[UTDXOXQ66@#$DRZ^aSD

_WV[PaZ`[VWOD^XOVS7NO[alXhggAB<#5&##9!
6#!NOOPHQQRRR7UWSVV7f^Qf^QONV[VSQOXdaVX_7XSPM^VY]UmGe^Vf]Um2&%/*/G#AGA!
6$!NOOPHQQjVWO_^VdVXO7TZ[QAG6AQG6QA:QXU^dWdDWVRD`Z^bDUWTZ[VQ!
6?!NOOPHQQ_SXOZX`:G7_SXOZX`7TZ[QOVTNQWVRSQSOZ^`QAG6ADG?D6#QSZTUXaDSNX^UWYD

VTZWZ[`Q#$A":6"AQ6!

! 6#!

ii. Principles
1. Trust between strangers
In traditional consumption schemes, there are a lot of middlemen between
producers and consumers and processes are not transparent. Rules and norms reinforced by
corporate communication and brand generate trust. In collaborative consumption schemes, we
have to trust someone we never met yet in person. If we trade on a barter website, we have to
trust that the exchange is fair and the person is reliable; on a peer-to-peer accommodation
website such as AirBNB, that the person is harmless and will not destroy our flat. There is a
more efficient way for the platform to build the necessary trust than governing unilaterally.
By providing the right tools to users to coordinate projects or specific needs and the right to
monitor each other, letting them self-govern resources become possible. This is one big idea
vernance, especially the
commons) awarded by a Nobel Prize in economy. Then, the role of the company is to act as a
curator and ambassador, creating platforms that facilitate self-managed exchanges and
contributions, the most important facilitating element being a well-designed reputation
system. This should help users in coordinating their specific needs on the platform and
monitor others by: getting relevant knowledge about other users such as past actions,
interests, whom users know, etc. (depending on the purpose of the website) and rating users
we interacted with. Now, those systems are part of the most successful e-commerce websites
such as Amazon or eBay.

2. Belief in the commons
The notion of commons first appeared when Romans defined res publica (things set aside for
public use). Res publica was made of parks, roads, public buildings. The concept became
growingly challenged during the XVth century with the rise of private property and enclosure.
At this time and until recently, shared resources were synonym of overuse and misuse by
individuals, who will always act in their short-term interests, as theorized in the famous 1968
The tragedy of the commons ». The Internet challenged this vision.
As a network of networks, it enables billions of humans to share the most diverse resources in
a relatively self-managed way. Influential researchers, such as Lawrence Lessig and Elinor
Olstrom, are promoting the value of a commons of cultural, educational and scientific ideas.
In 2002, Lessig launched Creative Commons, a non-profit organization providing free
copyright licenses to encourage sharing and collaboration but which still restricts usages to
which the creator does not consent. Today, hundreds of millions licenses have been issued in
more than 50 countries. Collaborative consumption expands these principles beyond contents
under license and apply it to other resources (e.g. car or houses), intending to provide the right
resources for the right person at the right place and the right moment, this being
.

3. Idling capacity
The unused potential of a resource when not in use is referred to as idling capacity. Tangible
resources such as bikes, cars, drills but also intangible assets such as time, space or energy
have an idling capacity. In our current economic system based on private ownership and
centralized networks, there is a huge opportunity. For example, people owning a power drill
use it on average only between six and thirteen minutes in its entire lifetime. Private owned
cars are parked on average 95% of the time. With modern technologies including social
networks and real time location capabilities of hand-held devices, it becomes easier to
redistribute this idling capacity elsewhere. If a person A want an available resource from

! 6$!

person B, person A should be able relatively seamlessly to locate it, have access to it, and
learn to use it if necessary. Available and upcoming technologies are a big help in that. The
challenge is more psychological: it is necessary to lower the transactions costs. To change

greater than perceived costs. Here, what we are not able to give away (e.g. liberty, private life,
etc.) and the resources necessary to have access to the wanted service are the main perceived
costs. The trick is to provide substantial benefits to users, taking advantage of the most idling
capacity possible without being privative or intrusive.

4. Critical mass
In social dynamics, critical mass is a sufficient number of adopters of an innovation in a
social system so that the rate of adoption becomes self-sustaining and drives further growth.18
These early adopters help people to cross the psychological barriers and convince them that
they should try. In this scheme, the first experience is very important. An incident occurring
during the first experience is very likely to have much more significance and negative impact
than an incident occurring during the 100th experience and could keep away potential users.
This is critical for collaborative consumption because it can be seen as a social system where
the social experience consumers have is pretty different to the one they have in conventional
stores. More, it calls new behaviors with high interactivity between users. It is also important
in terms of value proposition. To shift from conventional shopping, the offer (built by
platform users: community is the product) must be at least as large and satisfactory. For
example, AirBNB listings must be at least as rich as those of Booking (leading online hotel
booking website). An important leverage to reach critical mass is social proof: where people
assume the actions of others reflect the correct behavior in a given situation. As Rachel
Botsman and Roo Rogers state in their book , the social phenomenon of
role in collaborative
consumption.

iii. Systems
1. Product service systems
As our online brands define who we are, what we like, our status and the groups we belong to,
actual ownership becomes less important than use or use by association. People are managing
their profile on social networks as a brand: this is what we call personal branding. Being
associated to a bad video on YouTube is much more damaging than being seen downtown
driving an out-of style car. It has an important impact on consumption. We do not want stuff
but the experiences or needs it fulfills. This is an open door for product service systems.
According to Oksana Mont19, one of leading researchers in this area, Product Service Systems
(PSS) can be defined as a system of products, services, supporting networks and infrastructure
that is designed to be competitive, to satisfy customer needs and to have lower impact on
environment than traditional business models. There are considerable debates about the
classification of PSSs. To put it simply, we can distinguish two models:
Usage PSS. The product is owned by a company or an individual or a community of
individuals and multiple users share its benefits through a service (generally under the
form of rental). Products with high idling capacity (household tools or cars), limited

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
6@!NOOPHQQVW7RUbUPVUX7Z^YQRUbUQ5^UOUTXa][XSS]KSZTUZ`WX[UTSL!
6B!*bSXWX!8ZWO7!4:$&7.CB):;'":.'.%-%97>):;'"'255'B7:B%>$'):'58%.%:'AGG6!

! 6?!

use because of fashion (clothes), temporary need (baby products and games),
diminishing appeal and value after usage (films, books) or high purchasing costs
(luxury or electronic goods) are well suited for such a business model.
Extended-life PSS. After-sales services such as maintenance, repair or upgrading
Products that are expensive or
difficult to repair (electronic goods), that need frequent updates or maintenance to be
secure and appealing fit well in this scheme.
This business model is at the heart of the circular economy (systemic vision of the economy
where there is no waste, just biological nutrients designed to reenter the biosphere safely and
technical nutrients designed to circulate without entering the biosphere as opposition to our
). It can have huge positive impacts on the
environment. It is estimated that just shifting a fifth of household spending from purchasing to
renting would cut annual CO2 emissions by about 2 per cent (13 million tones of CO2).20

2. Redistribution markets
Used goods have been exchanged for centuries. The first known handwritten notices listing
goods people wanted or goods they have to give away date back to XVth century in England.
Today, redistributing happens without thinking about it: forward an email, list used goods on

or social networks are all forms of redistribution. It has never
been easier to form groups and communities than today, enabling redistributions markets to
scale like never before. There are more than 221 million eBay members trading more than
$52 billion of goods each year. Very useless goods for a person A can have a high value for a
person B and platforms such as eBay allow the transaction between person A and B avoiding
him/her to buy a new product. A less capitalistic form of redistribution is also growing on the
Internet especially for media contents: swapping. The most common form is a three-way swap
(e.g. User A send a CD to user B, B send a video game to User C and User C send a DVD to
User A) since the coincidence of wants is very limited in a two-way form. Experience shows
that swapping can provide choice and instant gratification as conventional shopping does and
that it becomes an habit for most users that subscribed to such websites. Once again, the
positive environmental impact can be significant. Even with the impact of transportation
associated to the transaction of the (re)used good, using and reusing is still better than buying
something new. According to William McDonough, one of the fathers of circular economy, a
product itself contains only 5 per cent of the raw materials used to produce it.

3. Collaborative lifestyles

out 7 collaborative lifestyles:
Co-working: Style of work that involves a shared working environment, generally an
office, and independent activity (coworkers are employed by different organizations).
It was developed by nomadic Internet entrepreneurs seeking an alternative to working
in coffee shops and/or to isolation in home or independent offices. Its growth is linked
to the raise of teleworking (work is no longer associated to a place but more with
what we actually do). We count now about 1,800 co-working spaces in the world.21
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
AG!NOOPHQQRRR7ONVOU[VS7TZ7_bQOOZQVWjU^ZW[VWOQX^OUTaVA6""?#?7VTV!
A6!NOOPHQQRRR7VSb[XY7TZ[QVWQ6@GGDTZRZ^bUWYDSPXTVSDRZ^aRUVD?GGDUWDONVD_SD

S_^jV`!

! 6@!

Co-creation: This is a marketing and business strategy where customers are no longer
passive but actively create value along with the firm. Major concepts includes
crowdsourcing (outsourcing creative tasks to a distributed group of people) and open
innovation (buy or license patents from other companies and take outside of the
company internal inventions not being used). The personalization of technologies is
materialized by growing customization and co-creation is just the next step of this
process, enabled by social networks. Major brands such as Nike, Nokia or IBM are
already using it. Open source communities are entirely based on this principle: all
users have access to the source code and can modify/improve it.
Collaborative manufacturing: The major form of collaborative manufacturing is
crowdsourcing applied to manufacturing. Users submit ideas on an online platform
such as Quirky or Shapeways and can get a prototype of their product. Then, it can be
industrialized and produced on demand. The process includes more or less community
interactions depending on the platform (Quirky is more based on the wisdom of the
crowd than Shapeways). Such initiatives are enabled by 3D Printing or additive
manufacturing (process of making three-dimensional solid objects from a digital
model). Users then, submit their digital models and the company, which has industrial
3D printers, can manufacture the products. Shapeways has already sold more than 1
million user-created products. The democratization of 3D printing combined with
collaborative platforms has 3 major impacts on manufacturing:
! Speed to market (faster production: from assembling process and mass
production to additive process with small and decentralized teams and on-
demand production).
! Risks to go to market lowered to almost zero (easy to test ideas and to take into
account feedbacks before scaling up)
! Possibilities to produce things not possible in other ways.
Projects based on distributed teams, open source approach and software project
management (agile, scrum) such as Wikispeed can also have big impacts on
manufacturing. The Wikispeed project team conceived and built a competitive car in
only 3 months (several years in the traditional car industry).
Another notable initiative is the Fab Lab movement: small-scale workshops around
the world offering personal (digital) fabrication. People show up to build things that
can fulfill specific needs and that are not available in stores.
Crowdfunding: Collective initiative of individuals who network and pool their
resources to support efforts initiated by other people or organizations. It is an
interesting financing source for activities with difficulties to find investors (e.g.
culture and/or small businesses). The JOBS act (American legislation allowing for a
wider pool of small investors with fewer restrictions) signed by Barack Obama on
April, 2012 should facilitate crowdfunding as funding of a company (small amounts of
equity sold to investors).
P2P lending: When you lend money to a friend, you do P2P lending. It has existed for
thousands of years. The main difference is that, today, both parties (the lender and the
borrower) can have no relationship and still have a safe and successful transaction.
P2P lending online platforms use sophisticated screening and credit checking to
ensure that borrowers can afford the loan. The default rate is actually lower than for
credit cards.
Bartering & Social currencies: Barter is the oldest form of economic trade. Which is
and the
matchmaking of needs are far greater. The emergence of barter networks (networks

! 6B!

where members can exchange goods and even skills valuable for others) pushed the
need for social currencies. For example, Local Exchange Trade System (LETS) use
time as currency. For every hour you spend doing something useful for someone in
your community, you bank at an online portal and
spend on things you may need done.
Skill sharing: Skill sharing platforms allow anyone to become a teacher (online classes
and mainly

Wecommune. The motto for P2P u
putting passionate learning and teaching and democratization at core of their mission
while local communes are local communities where resources (tangible and
intangible) are shared. Communes can have their own social currency.

! AG!

c. Where it stands now and where it can go
Collaborative consumption has various forms but sharing is still at the heart of the model. It generally has positive societal and environmental
impacts but this is not systematic and the phenomenon is too young to seize every impact it has on society. Which is sure is that a broad array
of economic sectors is impacted from banking to retail and hotels.
(eBay is bigger but it is a pure online company). Below are the main companies classified by industry. Sectors as broad as retail and
manufacturing are undergoing profound evolutions, if not revolutions, and collaborative consumption plays a role in it. As we explain later,
car industry is especially likely to be turned upside down: from a -mass production & car ownership model- to a -collaborative manufacturing
model-.

Economic sector Collaborative consumption initiatives : Company (Activity) Key numbers
PSS Redistribution Collaborative lifestyles
markets
Finance/Banking Kickstarter (Crowdfunding) 73,620 launched projects
$381 million dollars pledged
Zopa (P2P lending) Over £238 million lend
Hotels AirBNB (P2P + 200,000 listings
accomodation) 5 million nights booked during S1
2012
Tourism tours and Vayable (P2P tourism activities and More than 2,500 experiences in 600 cities
events events)
Taxi SideCar (Real-time More than 50,000 rides in 4 months in the
P2P Ride sharing) San Francisco Bay Area
Education Skillshare (Skill sharing) More than 15,000 hours of classes in 9
months
Energy Open Source Energy project None
(Decentralized energy production. Same
ideology as Open Source Ecology)
Manufacturing Open Source Ecology (Network of people Around 5 third parties have started to
developing the Global Village produce Global Village Construction Set

Construction Set : open technological products
platform that allows for the easy
fabrication of the 50 industrial machines
that it takes to build a small civilization
with modern comforts)
Fab Labs 165 Fab Labs in the world
Quirky (Social product development) +260,000 Quirky members
Shapeways (3D printing marketplace) + 6 billion 3D printed product variation on
the Shapeways marketplace
Car industry Voiturelib (P2P Car 5,000 cars listed
(including rental)
manufacturing) Blablacar (Ride 2.3 million members in France
sharing)
Wikispeed (open source car) Wikispeed is a commuter car that costs
$25,000 and consumes 1.5l/100km
Food industry La Ruche Qui Dit Oui ! (social e- + 60,000 members
commerce platform for agricultural
products)
Landshare (Urban community garden) + 70,000 members
Retail industry Bartercard (Bartering) +$1.3 billion in cashless transactions
traded per annum
Zilok (P2P Renting 200,000 objects to rent
marketplace)
eBay (P2P + 221 million member
Auction +$52 billion of goods exchanged in
marketplace) 2010
2FGHIHJ!<K!6LMMNILONJHPQ!RLSTUVWJHLS!HSHJHNJHPQT!RMNTTHZHQX!IY!HSXUTJOY

! AA!

As a complementary approach that should help us to understand what is collaborative
consumption now and how far it can go, we will overview the phenomenon through:
a SWOT analysis
a macro environmental overview: impacts collaborative consumption could have on
its macro-environment (PESTEL model)
and a Value chain analysis : impacts collaborative consumption could have on the
value chain of companies.

SWOT
Collaborative consumption has both rational and emotional benefits driving its adoption by
users:
By offering complementary revenues for those listing their resources and by having a
cost-competitive offer (an average ride Paris-Lyon on a ride sharing website is cheaper
than the same trip by train or plane) for those accessing resources, collaborative
consumption provides evident financial gains.
By taping in existing resources instead of pushing consumers to buy new stuff, it is an
affordable way to act for the environment.
It provides a social and generally fun experience and strengthens the feeling of being
part of a community.
As Internet becomes mobile, penetrates all economic sectors and most of social
activities, a vast, and, growing majority of people in developed countries are now
I nternet-savvy (and it starts to become true in developing countries). All age
categories are concerned which implies an adapted user experience on all

a generally
good user experience, mixing innovation and simplicity of use, and based on ICT
(especially generalization of mobile-based applications).
A in this movement is the local economy:
AirBNB and others P2P accommodation websites drive tourists to local stores, La
Ruche Qui Dit Oui provides substantial revenues to local farmers (more than 80% of
the transactions), collaborative manufacturing (e.g. Fab Labs) aims to bring back the
production to a local level and websites such as Neighborgoods are fostering local
communities and exchanges.
As we see it, exchanges and social are at the heart of collaborative consumption, hence the
importance of trust between strangers. This is still a weakness despite all efforts made by
companies because
22

Since it is a new service, there is a general lack of awareness. What is and what is not
collaborative consumption is not always clear to understand for non-specialists and
confusions (they have a blur perception of collaborative consumption/collaborative
economy/sharing economy) can easily be made. For example, P2P car sharing and car
sharing/car clubs are rarely differentiated. (P2P car sharing taps on existing resources while

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
AA!Tf!fZZOWZOV!l6A!

car sharing/car clubs do not). This not helps in the development of the awareness of this still
young movement. Another drawback is that, even if people are aware and willing to try the
service, -based lifestyle, where our resources
are always available when we need them, to an usership-based lifestyle, where a process is
necessary to access to the resources when we need them (transaction costs).
Based on I CT strength but it is also a weakness since a growing
number of people is voluntarily disconnected and want to live a life offline. They already
represent around 15% of the 15+ years old population in France. As technologies evolve
23
.
Collaborative consumption is based on exploiting existing resources (transforming the
maximum quantity of waste in valuable resource and chasing idling capacities), which

processes and generates huge amounts of waste (about 3,500 Billion kilos of waste produced
in the world in 2009!)24. Environmental issues are another opportunity since we are now at a
point where governments are aware of those issues and chose solutions to answer to it.
Collaborative consumption can seize this moment to impose itself to governments as a
solution that cannot be ignored (it implies independent studies proving its benefits).
Social and exploitation of social data (e.g. User Generated Content) are at the heart of the
movement. More data have been produced in the last 3 years than ever before. The rise of
connected objects (tablets, mobiles, fridges, cars, houses and even white stick, etc.) will
amply this phenomenon. Big Data (technologies enabling exploitation and interpretation of
data sets too large to be processed by traditional technologies) and ATAWAD (technologies
enabling connection to a network at Any Time, AnyWhere and with Any Device) will allow
applications unimaginable today. This is a big opportunity for collaborative consumption
since it will be possible to measure new sorts of waste and to make user generated content
relevant for new areas. For example, social networks where people share the real performance
of their products could develop.
Such a movement is disruptive to traditional businesses since they are not so based on
optimization of resources. It generates frictions and P2P accommodation, car sharing, real
time car sharing or couchsurfing websites have all faced lobby from traditional actors
aiming to get those websites closed (e.g. AirBNB vs the Hotel Industry). This is a potentially
strong threat to collaborative consumption companies even if the movement as a whole seems
too strong to be stopped. 25 Another threat is the taxation of financial gains obtained by
listing resources on websites and sharing them. With the development of the movement, those
financial gains will likely be regulated and taxed. People could see less appeal in sharing or
could try to short-circuit collaborative consumption platforms (e.g. Through AirBNB, person
A arrange a stay at person

and taxes).

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
A:!-XjXS!8VUX!+^XWTV!SO_`!I!3I2F3JJ!J!/VPOV[dV^!AG6A!
A"!NOOPHQQRRR7PaXWVOZSTZPV7TZ[QVTNVOSQ:$:DbUaZSDVDVTNVOSD^ViVOVSDXWSDaVD

[ZWV7NO[a!KUW!+^VWTNL!
A#!.WOV^jUVR!RUON!&WOZWUW!(VZWX^!

! A"!

Strengths Weaknesses
Financial gains for users Based on trust between strangers
Humanization of exchanges/community Lack of awareness.
Environmental benefits Transaction costs.
Good for the local economy Based on ICT (growing number of
Based on ICT (vast and growing majority growing gap
of Internet-savvy people) between « geeks » and them).
Opportunities Threats
Existing resources Powerful lobby of traditional businesses
Environmental issues Taxation of financial gains
Big data & « Anytime, Any Where, Any
Device »
2FGHIHJ!9K!6LMMNILONJHPQ!RLSTUVWJHLSK!(:*,

As we see in the analysis of its strengths, weaknesses, opportunities and threats, the
collaborative consumption movement/sharing economy can impact (and is impacted by) its
whole environment. More precisely, we can ask what impacts could collaborative
consumption have on its macro-environment (Political, Economical, Social, Technological,
Environmental and Legal)?

Political
The movement could lead to the horizontalization of governing systems (participative
democracy). In traditional occidental democracies, the governing structure is
characterized by little consultation of citizens. In the future, for given problems such
as constitution, societal questions, local issues, etc., crowdsourcing could be used to
generate debates and ideas between citizens. In this scheme, governments then select
ideas and implement them.
Economical
Evolution of work. People will likely contribute to several firms and get paid for that
instead of working for a single firm. Workplaces as we know today will decrease
while work from home and coworking spaces will increase.
The production could potentially be reorganized and relocalized. Everyone will be
able to design, produce and sell a product thanks to social manufacturing platforms
associated to 3D printing. Companies will use those platforms to crowdsource ideas
and to get feedback on their products/services.
Under the influence of Internet and collaborative consumption, consumers want not
to own products but to share services. It is a call for a distributed service-based
economy. Circular economy could develop, as it is the most sustainable scheme for a
service-based economy.
Social
Resurgence and valuation of local communities. To get access to resources of interest
for them, people will likely meet directly with the producers/owners in their local
community (as opposition to retail chains and the likes).
Change in values. The social status will presumably be expressed by the influence we
have on social networks and the services we use, not by what we own.

! A#!

Technological
As we said earlier, Big Data and ATAWAD are big opportunities for collaborative
consumption. Logically, entrepreneurs of the movement will collaborate in the
development of connected objects and in the liberation of data (e.g. Open Data: data
from the public sector available for third parties, development of the connected car,
etc.). It can be done by two ways: developing directly those technologies or
developing services/applications based on them, thereby developing the usage.
Environmental
Development of urban agriculture. The world will be more urbanized but in the same
time, people will not want to renounce to quality food. Urban gardening communities
will continue their growth and maybe represent a significant production source.
Collaborative consumption is based on optimization of existing resources and ICT
(Information and Communications Technologies). This can have important impacts
such as: less transportation, less waste and more greenhouse gas emissions due to
ICT.
Legal
As for politics, crowdsourcing could be used to create debate and generate ideas of
laws. In this scheme, lawmakers will then select ideas, implement some, and get
continuous feedback from citizens. A law will be managed as a product.
2FGHIHJ!?K!-VWNRJT!RLMMNILONJHPQ!RLSTUVWJHLS!RNS!GNPQ!LS!HJT!VNROL]QSPHOLSVQSJ!^42(,27_
5ZaaXdZ^XOUjV! TZWS_[POUZW! XaSZ! NXS! U[PXTOS! ZW! ONV! jXa_V! TNXUW! KTNXUW! Zf! XTOUjUOUVS! XW!
Z^YXWUgXOUZW! PV^fZ^[S! UW! Z^V^! OZ! VaUjV^! jXa_VL! Zf! TZ[PXWUVSH! UO! U[PaUVS! SNUfOS!
ON^Z_YNZ_O! ONV! bV`! XTOUjUOUVS! UW! ONV! jXa_V! TNXUW! KfZ^! [Z^V! UWfZ^[XOUZWc! Tf7! &WWVh! 6L!
VSPVTUXaa`!fZ^!ONV!fZaaZRUWY!XTOUjUOUVSH!
&SSVOS! e! 9V^SZWWVaH! 1V^`! U[PZÔXWO! U[PXTO! Kf^Z[! ZWDSUOV! RZ^bV^S! OZ! ^V[ZOV!
TZWOÛd_OZ^S!RNUTN!U[PaUVS!XaSZ!aVSS!XSSVOSQPN`SUTXa!d_UaUWYSL7!
0VSVX^TN! e! 3VjVaZP[VWOH! 1V^`! U[PZÔXWO! U[PXTO! Kf^Z[! UWDNZ_SV! UWWZjXOUZW! OZ!
ZPVW!UWWZjXOUZW!_SUWY!T^ZRSZ_^TUWY!XW!VhOV^WXa!TZWOÛd_OUZWSL!
3VSUYWH! 1V^`!U[PZÔXWO!U[PXTO!Kf^Z[!P^Z_TO! VSUYW! OZ!SV^jUTV!VSUYW!XW!SNUfO!
OZRX^S! X! TU^T_aX^! VTZWZ[`! RUON! X! T^XaV! OZ! T^XaV! aUfVT`TaV! XS! ZPPZSUOUZW! OZ! X!
T^XaVDOZDY^XjV!aUfVT`TaV!Z[UWXOUWY!Z_^!VTZWZ[`!OZX`L!
9^Z_TOUZWH!1V^`!U[PZÔXWO!U[PXTO7!K=VWV^XaUgXOUZW!Zf![XSS!PV^SZWXaUgXOUZW!XW!
[XSS! P^Z_TOUZW! PZSSUda`! ^VPaXTV! d`! XW! ZW! V[XW! P^Z_TOUZW! XPPaÙWY! ONV!
[ZVa!Zf!PÛWOUWY!OZ!ZdiVTOSL7!
8X^bVOUWY! e! 5Z[[_WUTXOUZWH! 1V^`! U[PZÔXWO! U[PXTO7! +Z^! TZ[[_WUTXOUZW!
XTOUjUOUVSc! TZ[[_WUO`! US! ONV! d^XWc! RNUTN! U[PaUVS! X! UffV^VWO! XPP^ZXTN7! +Z^!
[X^bVOUWY!XTOUjUOUVSc!fZT_S!ZW!TZ^V![USSUZWS!SUWTV![X^bVOUWY!US!SP^VXUWY!UW!VjV^`!
X^VX!Zf!TZ[PXWUVS!KVjV^ÒNUWY!US!X!P^Z_TOL7!
/XaVS!e!5_SOZ[V^!SV^jUTVH!1V^`!U[PZÔXWO!U[PXTO7!+^Z[!XW!ZffV^DV[XW![ZVa!
OZ!X!TZZPV^XOUZW![ZVa7!

!
2FGHIHJ!CK!6LMMNILONJHPQ!RLSTUVWJHLS

! A$!

2. European car industry
a. Short history
The European car industry is born at the end of the XIXth century. Steam-powered self-
propelled vehicles able to transport people and cargo appear in the late XVIIIth century with
-Joseph Cugnot in 1770-1771 but it is only in 1888 that
first automobiles are produced (by Karl Benz in Germany). Panhard et Levassor (1889) and
Peugeot (1891) are the two first automobile-only companies. Half of the world production is
concentrated in France at the beginning of the XXth century. At this time, automotive
technology was growing rapidly due to an important number of manufacturers competing and
trying to gain attention (it was still a niche market). Steam, electricity and petrol/gasoline-
powered vehicles were comp
engines achieved their dominance. Then began World War I in Europe, affecting a lot the car
production and playing in favor of the American car industry (producing about 2 million
vehicles in 1918). The period between 1919 and 1929, known as vintage era, is marked by the
transition from open-bodies cars to closed-bodies cars. 26 In 1930, the number of auto
manufacturers declined sharply as the industry matured and consolidated in a context of Great
Depression. Mechanical innovations (e.g. Front-wheel drive) and the United States
domination are characteristics of this decade. Until the 1960s the Big Three (Chrysler, Ford
and General Motors, American firm from Detroit) dominated the world car production while
Europe was slowly recovering from World War II. During the 1970s (marked by oil crisis),
innovation is stagnant in the United States while Europeans and Japaneses appear as major
players on the international scene (with brand such as BMW, Toyota, Nissan). Asia became
definitively the first production region in the modern era (1980s-2000s), an era characterized
by mutualized production platforms, fuel efficiency and environmental concerns. A crisis
surged in 2008-2010 (global financial downturn, high prices of automotive fuels), affecting
hugely all players, the American ones being the most impacted (General Motors and Chrysler
went to bankruptcy, saved later by the US government.). As we will see in parts b. and c.,
times are still difficult and huge challenges have and will have to be faced by European car
manufacturers if they are up to survive.
We cannot relate the story without mentioning productive models. It is interesting to notice
that, throughout the car history, at least two productive models coexisted. They can be
defined as a corporate governance compromise, enabling the sustainable implementation of a
profit strategy viable in the growth modes framework (e.g. heterogeneous market and flexible
work) of countries where firms have activities thanks to coherent and acceptable means for
concerned stakeholders (banks, directors, unions, governments, workforce, etc.). 27 New
productive models will very likely spread throughout the XXIth century. In this context, it is
important to understand how they can come to existence and spread. Six productive models
marked the XXth century and ruled the car production upon different forms in different
countries:
Taylorist model: This model is particularly relevant in an economy where the market
is heterogeneous and the work flexible and categorized. Products are specific and
diversified and the customer base is limited though socially and economically
segmented. The organization is rigid (tasks to accomplish are pre defined).
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
A$!NOOPHQQVW7RUbUPVUX7Z^YQRUbUQ-USOZ^`]Zf]ONV]X_OZ[ZdUaV!
A?!0ZdV^!'Z`V^!XW!8UTNVa!+^V`SSVWVO!J97##")&%'.%#':7$)7:#'K9"*7&K%#'>7C&'":"9+#%&'9%#'

$&"L%B$7)&%#'.%#'@)&A%#'%$').%:$)@)%&'9%#'A7.M9%#'>&7.CB$)@#'6BBB!KUW!+^VWTNL!!

! A?!

Employees can get salary increases if they meet or exceed production times and
procedures. The corporate governance compromise is established between directors,

Woollardist model: This model is particularly relevant in an economy where the
market is balkanized (fragmented) and the work flexible and categorized. Products
are very specific and produced in small series and the customer base is split in very
differentiated segments. The organization is flexible, workers are organized in teams
and have autonomy. Work hours are adjusted in function of the production needs.
The corporate governance compromise is established between owners, directors and
several categories of employees.
Fordist model: This model is particularly relevant in an economy where revenues are
equally distributed. Products are standardized and accessible at a low price. The
customer base is seen as a whole or differentiated in two or three segments. The
organization is centralized, with operations standardized and pre determined. Work
hours and wages are fixed. The corporate governance compromise is established
between directors and unions (unions accept the work organization in exchange of a
growing purchase power for employees).
Sloanist model: This model is particularly relevant in an economy where revenues are
moderately segmented and nationally coordinated. Products are offered upon several
product ranges, versions and options to answer to the demand of a customer base with
different needs and expectations. The strategic decisions are centralized but the
operations are decentralized. Employees assume various tasks and get, in exchange,
social protection, career path and constant growth of their purchase power (depending
on their seniority and responsibilities). The corporate governance compromise is
established between directors and the most powerful unions.
Toyotist model: This model is based on constant cost reductions. Products, offered in
increasing volumes without taking into account fluctuations of the demand, are fully
equipped for each market segment (no excessive diversity). This model is
characterized by just-in-time production. Workers and contractors are encouraged to
contribute to cost reductions. The corporate governance compromise is based on the
sustainability of the company, of employment and employees, of contractors and
suppliers.
Hondist model: This model is based on innovation and flexibility. Innovative and
specific products are offered to meet new expectations on the target markets. This
model is characterized by low automation and reactive personnel (mass production is
the market reacts well to the product and fast removing is the market reacts
negatively). Expertise and individual initiatives are encouraged at all levels of the
company. The corporate governance compromise is established between directors
and employees (organizational and financial independence from banks and suppliers
is important for the company in order to take the necessary risks).

! A@!

b. Current situation
i. Key figures
In 2011, 13.4 million new cars have been registered in Europe. A negative growth is expected
for 2012 (-6,8% vs 2011) and levels of 2011 will not be recovered before 2014 (forecast
PWC: 13,5 new cars registrations in 2014). Car manufacturing follows the same trend: 16.7
million cars in 2011, 15.9 million in 2012 and 17.4 million in 2014. This is an important
industry since it is a large employer (2 billion direct jobs and 10 million indirect jobs in
Europe) and a leading European Union export sector with a net trade contribut
-

ii. Market trends
During the last years, the market dramatically evolved. China became the biggest market in
the world with more than 17 million cars sold in 2011. At a slower pace, Brazil, Russia and
India followed the same path and represent now all together more than 10 million cars sold
(cf. exhibit 6).

2FGHIHJ!BK!4OHPNJQ!RNO!TNMQT!QPLMUJHLS!^$##C]<%$$_!NZJQO!4:6]&UJLZNRJT!
!

In those countries, opportunities are huge for car manufacturers because they are equipment
markets (16 cars per 1000 inhabitants in India, 47 in China and 153 in Brazil). In opposition,
more mature markets such as North America and Europe are replacement markets since most
of the population already owns a car (814 cars per 1000 inhabitants in USA, 587 in UE15).

economic context, US market faced a huge slowdown from 2007 to 2009, years of the
subprime crisis. To a lesser extent, Europe was also impacted. Government subsidizes
(scrappage program) sustained the customer demand and helped the industry to overcome this
period. As the Old Continent is living the sovereign debts crisis since 2009, states are under
pressure, have to cut expenses and cannot afford sustaining the demand for cars again. This is
a more structural crisis for manufacturers since car sales will likely never reach levels of the

! AB!

early 2000s (they agree on an average of 13 million car sales versus 16 million in the
2000s28). With important and capital-intensive production sites in Europe (16 million cars
produced in 2011 cf. exhibit 7), restructurations and market consolidation are to be expected.

2FGHIHJ!=K!:LOMX`HXQ!WNTTQSQO!RNO!WOLXURJHLS!QPLMUJHLS!WQO!OQHLS!^<%%%]<%$$_!NZJQO!&62&!
!

Players with a strong internationalization (e.g VolksWagen Group, Hyundai-Kia) have cash
and conduct a very aggressive commercial strategy (large discounts and promotions)
involving a price war and endangering players focused on Europe. These will have to
accelerate their internationalization by building production sites in key locations (with low
productions costs, flexible workforce and strong customer demand) while reducing their
positions in declining markets (such as France, Spain, Italy). Strategic alliances will be key in
such a context since the vicious cycle they are in can hardly be broken alone. Indeed, for those
generating most part of their margins and/or having most of their activity in Europe, the
pressure on prices have direct impact on their global margins, which means less investments
and less innovations, a pitfall in a long-term flat market where releasing regularly new models
is not even sufficient to stay in the race (cf. exhibit 8).

67!2VYXOUjVQfaXO!
SXaVS!Y^ZRON!C!
$7!(VSS! P^Z_TOUZW! A7!-UYNV^!
UWWZjXOUZWS! ZjV^TXPXTUOUVS! SOZTbS!

#7!(VSS! :7!9^VSS_^V!ZW!
UWjVSO[VWOS! "7!(ZRV^! P^UTVS!
[X^YUWS!

2FGHIHJ!"K!1HRHLUT!RYRMQ!2UOLWQ]RQSJQOQX!VNSUZNRJUOQOT!NOQ!HS!

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
A@!NOOPHQQRRR7aUdV^XOUZW7f^QVTZWZ[UVQAG6AQ66QGAQSVaZWDaVSDTZWSO^_TOV_^SDaVDWUjVX_D

O^VSDdXSDVDaXDV[XWVDVSOD_^XdaV]@#?@#:!KUW!+^VWTNL!

! :G!

8XW_fXTO_^V^S! ONXO! NXjV! [XiZ^! UffUT_aOUVS! UW! )_^ZPV! X^V! +^VWTNc! .OXaUXW! XW! &[VÛTXW!
RNUaV!ONV![ZSO!S_TTVSSf_a!ZWVS!X^V!=V^[XWH!
1ZabSRXYVW! K=V^[XW`LH! Ac6C! [UaaUZW! WVR! PXSSVWYV^! TX^S! ^VYUSOV^V! UW! AG66!
KCGn! jV^S_S! AG66L7! -VaPV! d`! X! fXjZ^XdaV! WXOUZWXa! [X^bVO! XW! ^VY_aXOUZW! KWZ!
SPVV!aU[UOXOUZW! ZW!NUYNRX`Sc!NUSOZÛT!aZjV! SOZ^`!dVORVVW! =V^[XWS! XW!SVXWSc!
faVhUdaV! RZ^bfZ^TVLc! ONV! Y^Z_P! S_SOXUWV! UOS! Y^ZRON! d`! d_UaUWY! XW! VhPZÔUWY!
RZâRUV!SO^ZWY!d^XWS!ZW!fZ_^!SVY[VWOSH!a_h_^`!K9Z^STNVc!'VWOaV`Lc!P^V[U_[!
K&_ULc![XUWSO^VX[!K1ZabSRXYVWL!XW!XYY^VSSUjV!K/bZXc!/VXOL7!!!
9/&!K+^XWTVLH!6![UaaUZW!WVR!PXSSVWYV^!TX^S!^VYUSOV^V!UW!AG66!KD6AQ6:n!jV^S_S!
AG66L7!9/&!fXTVS!X!N_YV!SaZRZRW!UW!UOS!bV`!)_^ZPVXW![X^bVOS!K.OXa`c!/PXUW!XW!
+^XWTVL! XW! S_ffV^S! fZ^! dVUWY! VhTa_SUjVa`! P^VSVWO! UW! ONV! VTaUWUWY! YVWV^XaUSO!
[X^bVO!SVY[VWO!KYVWV^XaUSO!TX^Sc!S[Xaa!S_TN!XS!AG@!Z^![VU_[!S_TN!XS!5"L7!;UON!
?GG![UaaUZW!aZSSVS!UW!TX^!P^Z_TOUZW!fZ^!-6!AG6Ac!9/&!US!UW!X!^X[XOUT!SUO_XOUZW!
_V! OZ! UOS! fXUaV! UWOV^WXOUZWXaUgXOUZW! SO^XOVY`! KUWS_ffUTUVWO! UWOV^WXOUZWXa!
UWjVSO[VWOSc!WZ!SO^XOVYUT!XaaUXWTVSc!fZT_S!OZZ!U[PZÔXWO!ZW!ONV!)_^ZPVXW![X^bVOL7!
%NV`!RUaa!TVÔXUWa`!NXjV!UffUT_aOUVS!OZ!^VWVR!ONVU^!P^Z_TO!ZffV^!UW!ONV!_PTZ[UWY!
`VX^S7!
0VWX_aO! K+^XWTVLH! ?GGbC! WVR! PXSSVWYV^! TX^S! ^VYUSOV^V! UW! AG6A! KD6#QD6$n!
jV^S_S!AG66L7!!&S!9/&!ZVSc!0VWX_aO!fXTVS!X!N_YV!SaZRZRW!UW!UOS!bV`!)_^ZPVXW!
[X^bVOS! XW! S_ffV^S! fZ^! dVUWY! [ZSOa`! P^VSVWO! UW! ONV! YVWV^XaUSO! [X^bVO! SVY[VWO!
RNUaV! ONV! PZSUOUjV! [X^bVO! `WX[UT! US! UW! aZRDTZSO! XW! P^V[U_[! SVY[VWOS7!
2ZWVONVaVSSc!ONVU^!SO^XOVYUT!XaaUXWTV!RUON!2USSXW!NVaPV!ONV[!OZ!^V_TV!TZSOS!XW!
OZ!VjVaZP!ONVU^!UWOV^WXOUZWXa!P^VSVWTV7!&WZONV^!PZSUOUjV!PZUWO!US!ONVU^!S_dSUUX^`!
3XTUXc!PV^fZ^[UWY!RVaa!ZW!ONV!aZRDTZSO!SVY[VWO7!
=8!K4/&LH!?GGb!WVR!PXSSVWYV^!TX^S!^VYUSOV^V!UW!AG6A!KD66QD6An!jV^S_S!AG66L7!
/XjV! d`! ONV! &[VÛTXW! YZjV^W[VWO! _ÛWY! ONV! S_dPÛ[VS! TÛSUSc! =8! OZZb!
XjXWOXYV! Zf! ONV! &[VÛTXW! [X^bVO! ^VTZjV^! XW! US! WZR! ONV! SVTZW! dUYYVSO!
[XW_fXTO_^V^!UW!ONV!RZâ7!.OS!XTOUjUOUVS!UW!)_^ZPV!YVWV^XOVS!U[PZÔXWO!aZSSVS!KUOS!
d^XW!*PVaD1X_hNXaa!US!PZSUOUZWV!ZW!ONV!YVWV^XaUSO!SVY[VWOL!d_O!ONV`!^VP^VSVWO!
aVSS! ONXW! 6Gn! Zf! ONVU^! OZOXa! TX^! SXaVS! K=8! NXjV! SO^ZWY! P^VSVWTV! UW! 4/&! XW!
5NUWXL7!
+Z^! K4/&LH! $#Gb! WVR! PXSSVWYV^! TX^S! ^VYUSOV^V! UW! AG6A! KD66QD6An! jV^S_S!
AG66L7!%NV!SUO_XOUZW!US!k_UOV!SU[UaX^!OZ!=8!KU[PZÔXWO!aZSSVS!UW!)_^ZPV!d_O!SO^ZWY!
UWOV^WXOUZWXa! P^VSVWTVL7! )_^ZPVXW! ZPV^XOUZWS! X^V! WZO! VhPVTOV! OZ! YVWV^XOV!
P^ZfUOS!dVfZ^V!AG6#7!

2FGHIHJ!#K!5Q`!WNTTQSQO!RNOT!OQHTJONJHLST!HS!2UOLWQ!NZJQO!4:6]&UJLZNRJT

! :6!

iii. PORTER
To analyze the European car industry and its relative competitive pressures, we conduct a
PORTER analysis, based on the model developed by Michael E. Porter from Harvard
Business School in 1979. The initial model considered five forces: buyer bargaining power,
supplier bargaining power, threat of substitutes, threat of new entrants and intensity of
competition. In the mid-1990s, the model has been extended with the addition of a sixth force.
This force can be the third sector, the government or complementors (complementary
products and services). For the car industry, the government is the most prominent force and
will be evaluated in our analysis.

Buyers: Final customer (households and companies) bargaining power is traditionally low
(low volume purchases). That said, several shifts and trends in the market will increase the
pressure exerted by buyers. First, clients are more versatile than before and no longer buy cars
from the same brand all life long, thus efforts have to be made to get their loyalty. Customers
can afford several cars, generally two, each with a more specific use. The offer is now very
large (more than 300 models on the market in 2011 and it keeps increasing) to respond to that.
Second, in the current crisis context (materialized by production overcapacities and lower
sales), industry leaders drive prices down and apply important discounts and promotions,
driving up the cost of acquisition of a customer. Last but not least, an important shift is
patrimonial value » than a direct value
added for getting from a point A to a point B. This is the era of the servicial car. Implications
are twofold :
People less wants to own car and are more open to alternatives (public transport, bike,
walk, scooter, car sharing services) especially in cities.
Customers will be governments and companies with a « fleet management » mindset.
They will launch calls for tenders and make their decision according to the Total Cost
of Mobility (the goal being to find the cheaper solution guaranteeing maximum of
mobility for the contributors of the company). The volume of their purchases will be
far greater than today thus increasing the bargaining power of buyers.
Buyers bargaining power: 2/5 trend: ++

Suppliers: Traditionally low before the 1990s, the bargaining power of suppliers really
increased since then. With the advent of the toyotist productive model, car manufacturers
have concentrated on their core business (vertical disintegration) even if they keep financial
control on their supplier subsidiaries when they have ones (e.g. PSA with its subsidiary
Faurecia). Purchases can represent today up to 80% of the total cost price29. Car suppliers
have gained importance, they restructured and built worldwide oligopolies, creating a whole
industry and increasing dramatically their power on manufacturers. In the future, growing
pressures from suppliers are expected. The connected car will move the value chain. The risk
for car manufacturers is to become nothing more than suppliers for software companies.
Expertise in new motorizations such as electric, hydrogen or fuel cells could be brought by
external players already well advanced in those domains. Those types of suppliers could
become competitors. For example, Bolloré, based on its expertise on capacitors, launched its
electric car, the BlueCar, and won the call for tenders for the car sharing service Autolib
sponsored by the mayor in Paris. This is also especially true in China where technology in
batteries is advanced.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
AB!1UWTVWO!+^UYXWO!F%#'@7C&:)##%C&#'"C$7A7*)9%#'">&M#'NO'":#'.%'A7.C9"&)$K'<'C:%'":"9+#%'

.%'9"'()K&"&B()%'A7:.)"9%'%$'.%#'>%&@7&A":B%#'):.)-).C%99%#'*TOZd^V!AGG?!KUW!+^VWTNL!

! :A!

Suppliers bargaining power: 3/5 trend: +
Industry competitors: According to automotive experts, the European market is the most
difficult in the world. Tax burden, heavy regulation combined with regional disparities and
high expectations from customers (high standards) are basic elements to manage to succeed in
the region. Europe being the third biggest market and the worldwide center of car innovation,
especially in design, every important manufacturer has to be present which imply an
important competition, even more now in this context of crisis. Industry leaders such as
Volkswagen drive down prices (price war) affecting the weakest players. As a consequence,
companies focused on the European market could definitely disappear in their current form
(including leaders such as PSA). In the future, some will disappear but manufacturers from
BRIC (Brazil Russia India China), software companies and traditional suppliers could enter
the market, bringing even tougher competition.
I ntensity of rivalry: 4/5 trend: +

New entrants: At the beginning, only European car manufacturers were present in the
European market. Quickly, Americans entered the market followed by Japaneses in the 60s
and the Koreans in the 90s. We count now three Japanese groups, two Americans and one
Korean among the thirteen biggest groups in Europe. Great Wall, a Chinese company entered
the European market this year with a low-cost offer first targeting Bulgaria, Macedonia,
Albania and Montenegro, more accessible and dynamic countries than Spain, France or
Germany. Making the most of the low-cost segment dynamism, manufacturers from China
and India will adress the entire European market following then a premiumization strategy.
Another kind of new entrants will bring a threat to existing manufacturers : suppliers of new
motorizations (such as fuel cells) and software companies (cars are becoming more and more
robots, the most advanced step being self-driving cars). Existing car manufacturers have
generally strong history, culture, brand and heavy structures, making them reluctant to change
and sensitive to newcomers (even if the entry barriers are traditionally high in this industry).
Threat of new entrants: 3/5 trend: +

Substitutes: In the collective imaginary, cars have already been replaced by smartphones and
statuses on social networks. In the 70s, admiration could be won by driving a fancy car ; in
the 2000s, this is more the number of followers that someone has on its social networks that
could play this role. As a transportation mean, the private car is still the most common
transportation mode (3 out of 4 trips are made by car) but is in competition with a growing
number of rivals, especially for urban trips: train, metro, tram, bus, walk, bicycle, scooter,
motorcycle; ride sharing, car sharing and bike sharing programs; no transport with the rise of
telecommuting and e-commerce. A significant number of cities is about to plan to reduce the
place of the private car in the future, hence favoriting alternatives. In Europe, London has
already taken such initiatives and others such as Paris will follow.
Threat of substitutes: 2/5 trend: ++

Governors: European Union, national and local governments are all exerting pressures on car
manufacturers : respectively restrictive safety and environmental norms, oil taxes and state
subsidizes, car restriction policies (tolls and taxations). Car innovation is entirely conditioned
by those norms, especially environmental ones. In 2015, at least 95% of the average weight of
an out-of-order car will have to be upcycled (85% in 2006) and CO2 emissions from cars will
have to be reduced to 95 grams/kilometer by 2020. Being a key industry in crisis (especially
in France and Italy), there is a strong interventionsim from states to help national
« champions » (e.g. PSA in France).

! ::!

Pressure exerted by governors: 4/5 trend: +

'_`V^S!

/_dSOUO_OVS!
=ZjV^WZ^S!

.W_SO^`!
TZ[PVOUOZ^S!

2VR!VWO^XWOS!
/_PPaUV^S!

2FGHIHJ!$%K! !

c. Challenges
i. Changing customer behavior
On one hand, Internet and telecommunication networks are pervasive technologies. Internet-
based softwares are capturing increasing value in many industries, if not all. On the other
hand, having become accustomed to instant internet access at home and in the office, people
developed, in « rich » countries, expect the same connectivity when on the move, with access
to smartphones, tablets and mp3 players, as well as satellite navigation. This will lead to
connected objects generalization (« The Internet of Things ») and to changing customer
demand. For car manufacturers, it brings several challenges. With extensive and transparent
at their disposal and growing appetence
for (internet-based) services, customers will demand a personalized and hassle-free
experience, forcing manufacturers to find ways to provide mass personalized and connected
cars along with mobility services.

1. All knowing consumer
Today, 79% of American consumers use their smartphone while shopping and 77% of French
internet users make online researches before going to « physical » stores. 30 For years,

difficult and based on partial information. With the rise of the participative Internet,
empowered collectives of consumers are acting to liberate the data. In this mission, they are
-commerce websites and by
regulations forcing companies to be more transparent and more inclined to disclose data (e.g.
environmental labels). Lately in the United States, Hyundai-Kia faced a $775 million lawsuit

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
:G!8oUX[oO^UV!XOX!AG6A!KUW!+^VWTNL!

! :"!

for having overstated the fuel efficiency ratings on more than one million recently sold
vehicles31. Via worldwide online communities supported and financed by third players such
as NGOs or citizens associations, consumers will be able to get all the strategic data to guide
their purchase (peer reviews, production mode, carbon footprint, work conditions, distribution
of revenues, etc.). It has two opposite effects: not only the third sector (consumers,
associations, NGOs, open-source movements and communities) will be able to monitor
reverse marketing » but also car manufacturers will
Actually, the third sector
could reach an even greater level of empowerment: they could become their own car
manufacturers. Thanks to management methods such as Agile, Scrum and Lean (used notably
for software management) and tools such as 3D printers and online collaborative applications
(Dropbox, Google docs, etc.), financial and equipment resources necessary to build a
competitive and easily upgradable car are affordable for a group of less than 100 people.
Open source communities such as Wikispeed produce cars in only three months and sell them.
According to Agile principles, all their cars are modular and are iterated every seven days
(when traditional innovation in the car industry takes several years). It takes the same time to
change a tyre or the engine. To avoid disruption, car manufacturers will have to adopt those
methods. Will they understand this challenge and eventually sell cars by modules letting
consumers to build their very own car or else will they integrate social data in their marketing
to deliver personalized finished products or do anything else? The first initiative would face
important resistance from governors and employees since it would be accompanied by drastic
reductions in production capabilities and certainly employment. The second approach, even if
closer to the current model of car manufacturers, is also challenging. Indeed, the available
market being a sum of niche markets, customers-influencers have to be identified, influenced
and integrated in innovation processes to provide the « right » offer to the « right » people. In
order to do so, companies need to disclose strategic data, to tie those data with data from
social networks and to include them in the service or product provided to consumers: this is a
call for the connected car.

2. Connected car
Early signs of connected car (in this scheme, car, like a mobile phone, is an element of a
telecommunication network, Internet in general) came to public use during the 1990s via
GPS, sensor-based driver assistance such as water and oil level monitoring and on-board
communication systems such as car radio. Since then, the mobile phone market exploded
(more than 450 million devices in 2010 in Western Europe) 32 . While most were feature
phones in 2010 (low-end devices), smartphones (high-end devices with most advanced
computing capacities enabling applications such as video, photo, GPS, social networks)
should represent the majority by 2014. Behind this trend lies the need to be always connected
even when driving a car. We count already more than 5 million connected cars in the world
(penetration of 5%) for a $15 Billion market. A strong growth is expected with 210 million
cars in 2016 (penetration of 16%) to reach $40 Billion. This is a big opportunity for car
manufacturers as much as a big challenge. Major issues and questions lies in the impacts on
the control of connectivity, the divergence of
development cycles and the role played by the involved stakeholders.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
:6!NOOPHQQfUWXWTV7`XNZZ7TZ[QWVRSQN`_WXUDbUXDfXTVD??#D[UaaUZWDGA"AG?6AB7NO[a!!
:A!NOOPHQQRRR7XWXa`S`S[XSZW7TZ[Q&dZ_OD

4SQ2VRSQ.WSUYNOQ/[X^OPNZWV]PVWVO^XOUZW]&_YAG66Q!!

! :#!

As of today, connectivity is a bunch of additional paying services. Only few manufacturers
such as GM with Onstar succeeded with this approach, consumers having the powerful habit
to pay for a whole product. In the same time, they cannot include the access to all connected
services by rising the initial price of the car since sales are already dramatically falling. They
will have to envision the car as a platform open to all sorts of external developers allowing
them to provide dedicated applications.
The design of the connectivity depends on the approach taken. As of today, some
manufacturers have a minimalist approach and envision it as an in-car dock for smartphone.
Online app store companies keep all the control. More consequent approaches lies in the
integration of an embedded system:
By the manufacturer at the moment of the purchase (e.g. R-Link by Renault, BMW
connected drive, Kia UVO, etc.). In general, with this approach, the control stays in
the hands of the software providers since this element is outsourced (e.g. Microsoft
powers Fiat Blue&Me, Ford Sync with MYFORD TOUCH and Kia UVO)
By the manufacturer as an option of the already present GPS terminal (e.g. Peugeot
connected apps)
By a complementator (embedded system company such as Parrot, Pioneer or GPS
companies providing a platform for developers such as Tom-Tom) after the purchase
It appears that in most cases, car manufacturers do not control connectivity. It is an alarming
point for them since more and more value will be concentrated in the software, especially for
autonomous cars. IEEE anticipates that they will represent 75% of the US market by 204033.
Even if this forecast can sound optimistic, Google has already a self-driving car, the Google
car, authorized in some US federal states such as Nevada. The car is a Toyota Prius but all the
value is in the cameras, other sensors and information retrieved from Google Street View
powering the car. Those softwares and technologies can be produced in a matter of months
while cars can take years to come to market. Here lies another problem: divergence of
development cycles. To tackle this problem, Audi integrates new products and services into
existing vehicles seemlessly thanks to a modular approach. At a higher level, this approach
could even allow development cycles to converge (cf. Wikispeed). It is a key point since
connectivity is less an enabler for entertainment than a way to increase safety and reduce
traffic problems. That is why a lot of stakeholders are involved: telecommunication operators
(providing car-to-car, car-to-OEM, car-to-infrastructure, car-to-any internet-capable object
connectivity), infrastructures (red lights operating mode can be adapted to the traffic and
could even disappear with autonomous cars), car manufacturers, software companies and
mobility services operators.

3. Mobility services
Traditionally, car innovation is concentrated in the product (design, motorization, safety
technologies, driver assistance, etc.). With an important focus on technologies, car prices did
not decrease while usage costs largely increased (oil prices, increasing price of car
maintenance) in a context of economic downturn. Added to that, the rise of the Internet, social
networks and video games reduced the car appeal for youngsters. For many people especially
in remote areas, owning a car is still a necessity, as mobility needs grow, but it is not a
pleasure or a real satisfaction anymore. For people living in cities such as Paris, Tokyo or
Amsterdam, owning a car is a reality for only 40% of the population or even less. The modal
part of the owned car is decreasing at a growing pace. But they are also part of the solution:
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
::!NOOPHQQRRR7ONVTX^TZWWVTOUZW7TZ[QWVRSQ6G?BA$6]UVVVDSX`SDONXOD?#DZfDjVNUTaVSD

RUaaDdVDX_OZWZ[Z_SDd`DAG"G!!

! :$!

The Future of the Automotive Industry

The Future of the Automotive Industry

Recomendados

Recomendados

Mais conteúdo relacionado

Mais procurados

Mais procurados (19)

Destaque

Destaque (20)

Semelhante a The Future of the Automotive Industry

Semelhante a The Future of the Automotive Industry (20)

Último

Último (20)

The Future of the Automotive Industry