How can we get cities to work with automotive startups?

A lot of the discussion at the autotech theme at this year’s 4 Years From Now (4YFN) conference in Barcelona was focused on how and why cities should work with startups. One major stepping stone is give them permission – and regulations!

Karolina Korth, chief digital officer of Siemens Mobility Spain, said that from the legislators' side, cities need to create regulatory sandboxes to open the door for new mobility services. But for regulators to act, they first need to have an idea of what they're doing and what the potential outcome would be.

• Read Part One: Collaborations and the race to win mobility

Cities need to adapt laws to fit the changing needs of citizens, but tread lightly. Imagine if Paris gave Uber carte blanche to offer its services unchecked and unchallenged. The entire taxi industry would be left in free fall, the safety of passengers would be put at risk through unverified drivers and vehicles, and, ultimately, the city would be boxed out of accessing its own mobility data. Paris would ultimately be forced to hand over the reins of its entire urban mobility to a tech giant.

In order to avoid this apocalyptic scenario, governments need to be a lot closer to innovation. Rikesh Shah, head of commercial innovation at Transport for London, argues that it's not just technologies we need to adopt, but new business models: "We need to engage early with them in order to understand them."

In the automotive industry, we're starting to see a changing landscape. User behavior is evolving, and this is what ultimately will determine which innovations are successful, and which ones aren't. OEMs have understood that Uber and co are here to stay. "They have to move in the same direction to stay relevant," warned Dirk Evenson of New Mobility World.

How are OEMs preparing for a new mobility ecosystem?

The automotive experts at 4YFN not only looked at how legislators and tech companies need to change – but also what the automotive industry must do to be prepared for the future.

"In the past decade, the mobile phone industry has seen amazing progress, but what has been done in the automotive industry?" Tanja Kufner, partner at MHP – a Porsche Company, challenged the panelists at her session.

Avner Goren, director of IoT and imaging architecture at Intel Corporation, echoed this sentiment, albeit slightly more dramatically: "I don't see how the automotive industry can survive if the pace of development doesn't catch up to that of consumer electronics."

These tortoise and hare comparisons, while accurate, fail to consider the stakes if a faulty model goes to market. "The biggest difference is that a car is a top quality product. If the safety of a vehicle hasn't been tested and confirmed 1000 times, it could cause deaths. If a phone malfunctions, it's annoying, but not deadly. We as manufacturers have to ensure the quality of each car to the highest standards, and phones simply don't have that pressure," explained Olivier Lenz, Programs Director at the Fédération International de l'Automobile (FIA).

There's also less motivation to change because it doesn't affect the bottom line... yet. While we may be thinking about what mobility will look like in the future, people are still buying cars today. Kufner added, "VW, for example, had its most profitable year in history in 2018. There's no financial incentive right now to move away from what works."

• Read Part Three: Collaboration with each other, and startups, as the key to survival for OEMs

When asked how SEAT will make money when personal vehicle ownership goes down, Javier Rivera, corporate strategy manager at SEAT, said "there will still be cars sold, but the variety of cars will change; small autonomous cars will be used in urban areas, and SUVs for long distance road trips and IKEA runs." Whether owned by individuals or fleets, the total amount of cars on the streets will reduce, but their usage will go up. Right now, cars spend about 90 percent of their lifetime parked somewhere.

"When there are fewer cars being used more efficiently and more often, they will need to be replaced more often than cars today." Time will tell whether his positive outlook for OEMs is realistic or just wishful thinking.

Changing business models for changing times

Nissan, for one, is focusing its energy on listening and responding to consumer needs. Its vision is to move from a push to pull model, wherein customers will drive new innovation in products and services. Francisco Carranza, managing director of Nissan Energy, emphasized this point: "We need to evolve, car manufacturing needs to adapt. We need to transform the supply chain and develop more batteries and charging infrastructure." This type of strategic overhaul requires building an innovation ecosystem with three key elements:

• Recognize your own limitations; you cannot do everything alone
• Support open innovation and build internal capabilities
• Attract, recruit, develop, and retain top talent

This requires fighting the 'not invented here' syndrome common to most corporates. Daimler realized that this mentality directly hinders innovation. "Our mentality went from 'not invented here' to 'proudly found elsewhere,' said Philipp Gneiting, head of open innovation at Daimler, on its transition from premium car manufacturer to mobility service provider.

Historically, carmakers never had a direct relationship with their customer – there was always the dealership in between. It was a push model. Auto brands would build a model, ship it to a retail center, and it either would or wouldn’t sell. They would then improve the models based on performance results and innovate in increments. Right now, there are a lot of opportunities to open up the market. "We look to startups to break through our closed OEM environment," said Lenz on the FIA perspective.

Dirk Evenson of New Mobility World argued that there's always been innovation in the automotive industry, and that companies don't necessarily have to look to startups for technological developments: "without startups, there would still be innovation, but not disruption. Not the kind of leap that changes the game."

• Read Part One: Collaborations and the race to win mobility
• Read Part Three: Collaboration with each other, and startups, as the key to survival for OEMs