Executive Summary

The automotive industry in the ASEAN region is undergoing significant transformation to tackle urban mobility challenges through innovative business models. Key trends driving this change include the rise of shared mobility solutions, such as car-sharing and ride-hailing, which are helping to ease traffic congestion. However, the industry faces several challenges, including declining car sales and overcapacity in manufacturing.

In response, companies are diversifying their offerings and new business models like vehicle leasing and subscription services are gaining traction, providing consumers with more flexible and affordable options.

Additionally, partnerships are becoming essential for fostering innovation and developing forward-looking mobility solutions. These efforts are all aimed at creating a more sustainable and efficient future for urban transportation in the region.

Introduction

Vehicle ownership remains a symbol of economic advancement and personal mobility. However, disparities in ownership rates across countries provide key insights into both global trends and regional shifts toward more sustainable transportation options. In Asia, a growing focus on electric vehicles (EVs) and shared mobility is shaping the future of transportation, offering critical solutions to urban mobility challenges.

The shift towards electrification and shared mobility isn't merely a trend but an essential evolution in the automotive landscape. As governments enforce stricter emissions regulations and urban areas become increasingly congested, the pivot to electric vehicles and innovative mobility solutions is not only a response to environmental imperatives but also a strategic move to meet changing consumer expectations.

Challenges and Opportunities

The automotive industry is undergoing significant disruption as consumer behaviours continue to evolve. Many question the necessity of car ownership, prioritizing practicality over status. This shift has led to several challenges:

• Declining Car Sales: With fewer people opting for personal vehicles, profitability is shrinking.
• Overcapacity: Manufacturing capabilities are outpacing demand, leaving excess supply.
• Job Losses and Consolidation: To counter reduced profits, companies are downsizing and merging.
• Supplier Impact: Lower demand for vehicles means a decreased need for components, affecting the broader supply chain.

In response, companies in the Asia-Pacific region are adopting various strategies, such as introducing new models, integrating smart features, and enhancing the customer buying experience. Despite these efforts, success remains limited, underscoring the need for a shift toward a mobility-centric business model.

Innovation-Driven Landscape

In the APAC automotive market, there are four dominant players:

1. Traditional Automakers: These companies primarily focus on selling vehicles but have experimented with shared mobility services.
2. New-Generation EV Companies: Brands like Nio and Xpeng offer eco-friendly vehicles with advanced connectivity, targeting younger consumers.
3. Tech Companies: Firms like Apple and Huawei are entering the automotive space with a focus on maximizing service consumption through integrated platforms.
4. Transaction focused chains: Companies like Carsome, which specialize in facilitating the buying and selling through digital platforms, offering services such as vehicle inspections, pricing transparency, and streamlined transactions through offline integration.

Growing Business Models in the ASEAN Market

New entrants in the market, like technology firms and EV startups, have driven a shift towards more integrated and service-oriented business models. This evolution is evident in the strategic moves of companies such as GoTo and Tokopedia, which are diversifying their portfolios to include automotive services, leveraging their vast digital ecosystems to offer seamless user experiences.

Moreover, the ASEAN market is witnessing a surge in vehicle leasing and subscription services. These models cater to the growing consumer preference for flexible and cost-effective mobility solutions. By enabling users to switch between different types of vehicles based on their needs without the long-term commitment of ownership, these services are reshaping consumer expectations and fostering a more sustainable approach to car usage.

The growing demand for mobility has led to the rise of two main business models in Asia:

• Aggregating Demand and Crowdsourcing Mobility: Platform aggregators like Didi Chuxing and Grab are expanding their services by leveraging crowdsourcing, offering new opportunities for individuals to earn by fulfilling mobility requests.
• Integrating Car Ownership with Shared Mobility: Making car ownership more financially sustainable by enabling vehicle leasing, sharing, and maintenance, allowing private owners to monetize their assets.

Partnerships Driving Innovation

Collaborative ecosystems are vital to the success of new business models in the automotive industry. Companies are leveraging partnerships with complementary strengths to transition more smoothly. For instance, China’s UCAR acquired a stake in Germany’s Borgward to innovate the auto retail model, separating R&D from sales.

Collaboration has become a linchpin for success, with stakeholders from different industries forming alliances to harness their unique strengths. The synergy between traditional automakers and tech companies is particularly noteworthy, as it facilitates the development of smarter, more connected vehicles that appeal to tech-savvy consumers.

Despite substantial investments in startups aimed at disrupting the industry, many innovative efforts have failed to scale due to limited consumer readiness. In contrast, Asia, with its large population and rapid EV adoption, offers a fertile ground for companies to test and commercialize new technologies.

Evolving Market Demands

The automotive sector is no longer the exclusive domain of traditional carmakers. Barriers to entry have fallen, allowing new competitors to challenge established players. To stay competitive, companies must move away from legacy business models and embrace mobility-focused strategies. Those that adopt purpose-driven business models and build strong partner ecosystems will emerge as leaders in this evolving market.

The pace of technological advancement in the automotive industry is unparalleled. From autonomous driving to smart connectivity, the integration of cutting-edge technologies is reshaping the way we perceive and interact with vehicles. Particularly in the ASEAN market, where urbanization and increasing incomes are driving demand, the push for innovation is more intense than ever. Companies are not only focusing on developing new vehicles but also on creating a seamless digital experience that integrates cars into the broader ecosystem of smart cities.

Furthermore, sustainability is at the forefront of these innovations. With stringent environmental regulations and consumer demand for greener alternatives, companies are investing heavily in electric vehicles (EVs) and related infrastructure. This shift is not just about reducing emissions but also about creating new value chains that encompass everything from battery recycling to renewable energy integration.

Amidst these dynamic changes, regulatory frameworks are evolving to keep pace with technological advancements. Governments across the region are rolling out policies to support EV adoption, smart infrastructure, and sustainable urban mobility solutions. These regulations provide a conducive environment for innovation, encouraging companies to invest in research and development.

How We Can Help

In this fast-changing landscape, we provide the expertise needed to navigate the complexities of the automotive industry. Our consulting services focus on:

1. Creating the Car Your Customer Needs - Quickly
   We help you accelerate vehicle relevance, ensuring that customer demands are met with speed and precision through agile research methodologies and hands-on insights.
2. Enhancing Operational Agility and Resilience
   By optimizing operations, we improve your ability to respond to market changes and build more resilient supply chains, ensuring long-term success.
3. Improving Product Quality Amid Shrinking Cycle Times and Costs
   We implement strategies to maintain product quality even as development cycles shorten, helping you reduce costs while ensuring competitive, high-quality products.