The automotive sectors big structural change is here

If there’s one common theme uniting business sectors right now, its deep structural change, which is challenging big business and throwing up new incomers to markets, if not entirely new sectors. Three key reasons driving these changes are rapid technological developments, the rise of the conscious consumer and organically evolving consumer preferences.

Automotive is a prime example of a big, established sector impacted by these changes. Technological developments are changing the nature of vehicles produced, with electric vehicles (EVs) acquiring a growing share of the market. Automated cars and even flying cars are next in the line of advancements currently being witnessed. Conscious consumers concerned about their environmental impact are driving part of the EV demand and are also fuelling services like carpooling and other alternatives to car ownership. Improved supply of conveniently available public transport, the fact that car ownership is no longer seen as a life milestone and the advent of car subscription services are also changing the vehicle market and in turn the automotive industry.

EVs spawn new possibilities

Among the most significant developments is the rise of electric vehicles, with the global stock inching above the £5m mark in 2018 as per International Energy Agency estimates. This represents an increase of 63% over the previous year, with a number of leading auto manufacturers producing EVs, including Tesla (NASDAQ: TSLA), Chevrolet (NYSE: GM), Ford (NYSE: F), BMW (ETR: BMW) and Daimler AG (ETR: DAI).

Where there is increased demand for EVs, there’s also greater provision for services associated with it. Started in 2009, Pod Point is one such example, which provides charging points across the UK. The company estimates that a vehicle is charged on its points once every 42 seconds on average. It has raised £12.3m in funding so far, including via crowdfunding. EV technology is also powering fledgling technology for flying cars through companies like VRCO. Started in 2015, the company is building two-person electric air-crafts called NeoXcraft and has also raised some funding.

Autonomous cars become a reality

Besides EVs, newer versions of fossil-fuel-based vehicles like autonomous cars are also being developed, with technology supplied from UK based startups. Consider the example of Oxbotica, which powers the Ford Mondeos, which was operated on public roads for the first time last month. Started in 2014 and currently in its Series B round of funding, the company has raised £22.6m in four rounds so far from investors like Parkwalk Advisors, an Innovate UK grant and the initial funding from Oxford University Innovation.

FiveAI is another self-driving car technology startup, which launched trials last month for its vehicles on the streets of London. Founded in 2015, it has raised around $38m so far in funding, considered to be the biggest funding amount for self-driving cars from Europe so far. The Cambridge based company will do the trial runs for the next 10 months, before the vehicles can actually be on the road. It's unknowable right now how things will progress from here, but if all goes well, autonomous cars may well be a reality on UK roads in the near future.

Cars as a service, not a product

That FiveAI’s fleet of cars is geared to provide to meet public transportation needs as a taxi service is not surprising at a time when car ownership is on the decline in the UK. In the nine months to September this year, car sales have fallen by 2.5%. It is likely that part of this decline is due to uncertain conditions related to Brexit, but structural changes including inclination towards use of public transport for reasons of environmental consciousness, convenience and the availability of options like Uber have made consumers independent of private car ownership. Taking a cue from these trends, a number of UK based startups are providing car services to meet demand gaps as well.

London based car-subscription provider Drover is an example of one such service. Launched in 2016, the company focuses on making car usage easier by “Moving away [from] steep upfront payments, lengthy credit checks, and hours spent in dealership waiting rooms” according to one of its press releases. Its unique selling point is a fully digital transaction process, a convenience for consumers. Investors also see promise in it, with the company receiving unding of £7.5m from no less than six different investors that include Version One Ventures, Cherry Ventures and BP Ventures.

If Drover provides cars on subscription, Hiyacar allows owners to rent out their vehicles in a model that makes it an “Airbnb for Cars”. With 65,000 users since its first car hire in early 2016, the company now has 2,500 cars being shared. It is estimated that it can eliminate 11 cars from the roads per car-share, which can have significant environmental implications besides being convenient. The company has raised funding of £8.5m through multiple crowdfunding rounds, angel investments, seed and venture funding.

These companies are just the tip of the iceberg as far as automotive innovation in Britain is concerned, with a plethora of other firms offering competitive as well as complementary services to the ones mentioned above. Together, they are poised to transform the industry altogether, indeed they already are.