AcknowledgementsWith thanks to Olivier Delbard, Lauren Anderson, Antonin Leonard, Paulin Dementhon,Gabriel Plassat, François Bellanger and my nana Karolinette for their inspiration, feedbackand support.! "!
AbstractFor an increasing number of people, the 2008 financial crisis challenged not only the bankersbut also the pillars of our society. They think that our model is no longer sustainable. Amongthose people are many entrepreneurs wishing different tomorrows. Different movementsemerged 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 savemoney and to socialize, many businesses from this movement gained momentum and quicklyreached sky-rocketing growth. Almost all industries are impacted but two are especiallyimpacted already: Hotels and automotive. Since the car industry is undergoing profoundchanges, we will study this particular case.In a first part, we will present the collaborative consumption movement (what are the maindrivers, principles and systems) and give some insights about the strong disruption potential ithas on the whole economy. Then, through the study of the car industry situation, we willdiscuss the major challenges of the industry and see that they are tied to the rise ofcollaborative consumption. In the final part, designing possible futures for the automotiveindustry and collaborative consumption companies via four scenarios will help us to answerto questions such as Is a rapprochement between collaborative consumption companies andthe car industry could be the solution for both of them? It will also be the base for ourrecommendations.Key words: car industry, collaborative consumption, connectivity, collaborativemanufacturing ! #!
Table of exhibitsExhibit 1: Collaborative consumption: drivers, principles and systems after Rachel Botsmanand Roo RogersExhibit 2: Collaborative consumption initiatives classified by industriesExhibit 3: Collaborative consumption SWOTExhibit 4: Impacts collaborative consumption can have on its macro-environment (PESTEL)Exhibit 5:Exhibit 6:!Private car sales evolution (1995-2011) after PWC-AutofactsExhibit 7:!Worldwide passenger car production evolution per region (2000-2011) after ACEAExhibit 8:!Vicious cycle Europe-centered manufacturers are inExhibit 9: New passenger cars registrations in Europe after PWC-AutofactsExhibit 10:! importance)Exhibit 11: New players in the automotive value chain up to 2030 (inspired by KPMG)Exhibit 12: Scenario methodExhibit 13: Risk mapExhibit 14: XXthExhibit 15: Matrix of scenariosExhibit 16: Challenges answers in the « Baby you can drive my car » worldExhibit 17: Challenges answers in the « » worldExhibit 18: Challenges answers in the « Artificial paradises» worldExhibit 19: Challenges answers in the « ? » world! @!
List of abbreviationsATAWAD: AnyTime, AnyWhere, AnyDeviceAD: Anno DominiBC: Before ChristBRIC: Brazil, Russia, India, ChinaEU: European UnionGMO: Genetically Modified OrganismGPS: Global Positioning SystemICT: Information and Communications TechnologiesIEEE: Institute of Electrical and Electronics EngineersIS: Information SystemsLETS: Local Exchange Trading SystemLN: League of NationsLPG: Liquefied Petroleum GasOEM: Original Equipment ManufacturerP2P: Peer-to-peerPSA: Peugeot Société AnonymePSS: Product Service SystemR&D: Research and DevelopmentUN: United NationsUK: United KingdomUSA: United States of AmericaUSSR: Union of Soviet Socialist Republics ! B!
IntroductionThe global business environment is more complex and fast-moving than ever. On one hand,globalization, digital connectivity and consumption have hugely increased. Over the lasttwenty years, international trade and foreign investments more than tripled; mobile phonesubscriptions rose by 23,000 per cent and the number of Internet users grew by 29,000 percent; over a Billion people moved into cities with more resource intensive diets and life stylesand 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 andrapid changes to ecosystems in the last 20 years than at any other time in human history. Ithas various dramatic consequences such as loss in biodiversity, acidification of oceans,desertification, tropical deforestation and more. Shortages of a growing number of keyresources are becoming apparent, from water to fossil fuels, metals and arable lands. In thiscontext, businesses have to adapt and to place sustainability and connectivity at the core oftheir strategy. Those conditions, while challenging for traditional players create a fertileground for alternatives. In this category, collaborative consumption is an eminent example,the movement mainly based on the better utilization of resources have increasing impact ontraditional businesses even if yet difficult to assess. The car industry, an already old one butnot yet totally mature is an interesting case since it is undergoing profound changes. We willthen present in a first part the collaborative consumption movement, explaining its majordrivers, principles and systems and overviewing its strengths, weaknesses and its globalimpact. Secondly, we introduce the European car industry with a short history, key figuresand 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 theimpact of collaborative consumption on the European car industry. Based on these scenarios,recommendations for both car manufacturers and collaborative consumption companies willbe made.! 6G!
1. Collaborative consumption a. Short historyHumans collaborate since prehistoric times. Most ancient human societies (hunter-gatherersocieties in which most or all food is obtained from wild plants and animals) are dated back asfar as 1.8 million years ago (Homo Erectus). They constantly needed to move around insearch 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 thesubsistence 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 funeralcontext, may have played a key role, serving to integrate communities by providing the senseof 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 tothe rise of population aggregation and formation of villages, cities and other communitytypes. After the agricultural revolution (c. 8500 BC.), communities grew in numbers thanks toa more secured and increased food supply. Towns became centers of trade supporting variousrulers, educators, craftspeople, merchants and religious leaders. Rapidly, greater degrees ofsocial stratification appeared. Societies became more centralized with the shift to feudalsocieties (From 476 AD) and the power concentrated in the hands of landowners. With theindustrial revolution (which occurred between 1750 and 1850), the power became even moreconcentrated. Countries like United Kingdom and France were competing in the race toindustrialize. It was the rise of our current system, capitalism, ruled by open competition in afree market, in which the means of production are privately owned and where the economy isbased on machines powered by fuels for the production of goods. Thanks to innovations intextiles, steam power and iron making, the production dramatically increased.2Population boomed and many people moved to cities to find employment. After the secondindustrial revolution and throughout the XXth century, the mainstream system kept this racefor 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 theUnited States has fallen 58 percent, family dinners are down 33 percent and having friendsvisit 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 differentvision. 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 theservice provider. With information technologies, people can communicate more, collaborateeasily 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 messagesto one or more categories called newsgroups.In 1991, a young Finnish student posted a simple request on Usenet, asking feedback aboutthe operating system he was building during his free time. He received thousands of answers!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!6!NOOPHQQRRR7STUVWTVXYZYZ7TZ[QWVRSQAG6GG?:GAA6$#?XOX]O^_WT]S`S7SNO[a!A!NOOPHQQVW7RUbUPVUX7Z^YQRUbUQ-_[XW]SZTUVO`!:!9_OWX[c!0ZdV^O!37!6789):;197:%<=(%/799">#%":.?%-)-"97@1A%&)B":/7AAC:)$+DAGGG! ! 66!
from all other the world and his hobby became Linux, now the most famous open-sourcesoftware 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) byanyone under licenses4.By the same period, between mid-80s and early-90s, another significant example ofcollaboration started to spread across America and Europe. We call it Internet, a short versionof internetwork. It is a global system of interconnected computer networks. It is made of threeservices : 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, makingcollaborative work far easier. Numerous Internet-based services aiming to make easiercollaboration appeared and continue to appear every day. Two emblematic examples areNapster and Wikipedia. Founded in 1999, Napster was first an independent peer-to-peer filesharing 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 isemblematic 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 multilingualInternet encyclopedia launched in 2001. With 23 million articles, it is the largest encyclopediaof the world. Students use Wikipedia more than libraries for their researches. Several studieshave shown that articles are generally of similar quality than traditional encyclopedia.5 Tokeep this high level of quality, administrators (experienced and engaged users) monitorbehaviors 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. Itis 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 havesignificant impacts. Early examples are as old as Napster or Wikipedia. Craigslist was createdduring 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, forsale, items wanted, services, community, gigs, résumés and discussions forums). Today, itcovers more than 700 cities in 70 countries and has more than 60 billion monthly users in theUS alone.7 Another example is Couchsurfing, an hospitality exchange and social networkingservice created in 2003. As an example, a young worker from Austria, say Wilfried, is goingto Thailand. He can use couchsurfing to find a place to stay and to find activities to do withlocals in Thailand. He can also offer activities and a space in his flat in Austria (non monetaryexchange) to other couchsurfers (name for members of the community). The website hasroughly 5 million members in more than 93,000 cities in 207 countries.8 This is a new visionfor hospitality. This is collaborative consumption.!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!"!ZOS[XWc!0XTNVa!e!0ZYV^Sc!0ZZ7! AG66!#!NOOPHQQVW7RUbUPVUX7Z^YQRUbUQ;UbUPVUX!$!NOOPHQQRRR7aVTZ_^^UV^7TNQaX]Pa_S]Y^XWV]VWT`TaZPVUV]_][ZWV]G!?!NOOPHQQRRR7T^XUYSaUSO7Z^YQXdZ_OQfXTOSNVVO!@!NOOPHQQfUaVS7TZ_TNS_^fUWY7S:7X[XgZWXRS7TZ[Q5Z_TN/_^fUWY.WfZY^XPNUT]WZOVhO7iPY!! 6A!
Collaborative consumption describes the rapid explosion in traditional sharing, bartering,lending, trading, renting, gifting and swapping reinvented through network technologies on ascale and in ways never possible before. In a nutshell, it is « Using the Internet to get off theInternet ». Reputation and community are at core of this economy. Users are characterized bywhat they access, how they share and what they give away. This is a worldwide and trendymovement now. More and more areas of our lives are created, produced and consumed incollaborative ways, as we will see later in this first part. b. Drivers, principles and systemsRachel Botsman and Roo Rogers championed the concept of collaborative consumption andstarted the movement with their 2010 book « yours: the rise of collaborativeconsumption ». They notably defined the drivers, principles and systems sustaining themovement. According to them, the four drivers are P2P Technologies, resurgence ofcommunity, environmental concerns and cost consciousness; the four principles are trustbetween strangers, belief in the commons, idling capacity and critical mass; the three systemsare Product Service Systems, Redistribution markets and Collaborative lifestyles (cf. exhibit1). We will dive deeper in those drivers, principles and systems and eventually challengethem. ! 2FGHIHJ!$K!6LMMNILONJHPQ!RLSTUVWJHLSK!XOHPQOT3!WOHSRHWMQT!NSX!TYTJQVT!NZJQO!+NRGQM!/LJTVNS![!+LL!+LQOT ! 6:!
i. Drivers 1. Social networking functionalitiesP2P technologies are based on a peer-to-peer computer network, one in which each computercan act like a client or a server for the other computers of the network and allow access toresources such as files without the need of a central server. Napster was the first popular P2Pfile-sharing system but collaborative consumption is rather based on P2P philosophy than P2Ptechnologies, P2P philosophy being free cooperation for the creation of a common good,accessible for the members of the network. Collaborative consumption initiatives are based onweb-based social networking functionalities: profile, social links for each member and emailand/or instant messaging. For example, the 2.2 million members of the ride sharing companyCovoiturage.fr 9 cooperate (« free cooperation ») by publishing upcoming trips (offers withprice, 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, generalinformation, contacts, reviews) and can send messages to other members. The main differencewith traditional social networks such as Facebook or Flickr is that here, the common good andthe cooperation have a major « offline » part: first, members arrange a meeting online andthen meet offline for a specific purpose, be it to share a ride, a workspace, a garden, etc. Bothare fueled by the sense of community that exists between members but collaborativeconsumption systems demand a higher level of community engagement to work. 2. Resurgence of communitySince ages, people in the same locality or region and with common interests gather and createcommunities, e.g. football clubs. With the emergence of telecommunications devices andsocial networking services, online communities developed, removing the notion of physicallocality in its first form: this is what we call social web. People can have many socialinteractions online (connect and communicate with friends, make new friends, create andshare content, share, buy or sale resources to others). Now, we count several hundred millionusers in the biggest social networks (Facebook being the major one with around 1 billionactive users). The second form of online communities, communities communicating online tomeet offline, is at the core of collaborative consumption. The notion of local is importantagain. According to the American sociologist Robert Putnam, the social capital (expectedcollective or economic benefits derived from the preferential treatment and cooperationbetween individuals and groups) is declining in United States notably because of televisionand urban sprawl.10 While the impact of online social networks on social capital is an ongoingdebate, collaborative consumption can have a positive impact on it by allowing people tomeet again, to trust their community and to try to give as much as they receive. Collaborativeconsumption nurtures the sense of community and the sense of community nurtures thecollaborative consumption. In this scheme, the self-interest meets the collective good.According to a Campbell Mithun study11, (environmental andeconomical crisis questioning values of our society) is a key driver in bringing peopletogether.!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!B!NOOPHQQRRR7TZjZUO_^XYV7f^QdaZYQ^VT^_OV[VWO!6G!NOOPHQQVW7RUbUPVUX7Z^YQRUbUQ/ZTUXa]TXPUOXa!66!NOOPHQQRRR7TX[PdVaaD[UON_W7TZ[Q$?@]WXOUZWXaDSO_`Dk_XWOUfUVSD^VXaUO`DZfDONVDSNX^UWYDVTZWZ[`D[ZjV[VWO!! 6"!
3. Environmental concernsWorld 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 tosustain everyone.12 Consumers are generally aware of those growing environmental pressuresthe global economy is facing. More and more are adopting an environmentally friendlyconsuming behavior: transportation patterns, household energy, resource use andconsumption of everyday consumer goods. Behaviors such as recycling waste, reducingenergy and water consumption, bringing back used batteries or giving old clothes aresystematized. But oftenly, peoplegreen products are more expensive. About 7 out of 10 French consumers would buy moresustainable products if their price was the same as other .13 People do want tohave a positive impact on the environment but they have to be encouraged. This is wherecollaborative consumption can play an important role. Indeed, to take an example, sharing aride with others is greener (if we consider that every participant actually planned to have thattrip) and 2 or 3 times cheaper than riding alone. While doing good for the earth, peoplediminish expenses and have a good time. 4. Cost consciousnessAccording to International Labour Organization (ILO) estimates, the global economic crisisincreased world unemployment from 178 million in 2007 to 212 million in late 2009. 14 Inthis context, households surf the Internet to find coupons, promotions and deals on websitessuch as Groupon (deal-of-the-day website). They consume less and big investments arepostponed. For example, in France, the construction of individual houses decreased from140,968 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 useall the time, people are liberating themselves from useless objects and get useful ones inexchange or get money. Collaborative consumption can give substantial amount of additionalrevenues. New Yorkers using AirBNB (website allowing non professional hoteliers to rentout 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 sharingmarketplace) make on average about $250 a month and people on TaskRabbit (onlinemarketplace that allows users to outsource small jobs and tasks to others in theirneighborhood) can make $5,000 a month in San Francisco.17!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!6A!http://worldcentric.org/conscious-living/expanding-eco-footprint!6:!)ONUTUO`!EF%#@&":G")#%$9"B7:#7AA"$)7:&%#>7:#"*9%H8X^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^UWYDVTZWZ[`Q#$A":6"AQ6! ! 6#!
ii. Principles 1. Trust between strangersIn traditional consumption schemes, there are a lot of middlemen betweenproducers and consumers and processes are not transparent. Rules and norms reinforced bycorporate communication and brand generate trust. In collaborative consumption schemes, wehave to trust someone we never met yet in person. If we trade on a barter website, we have totrust that the exchange is fair and the person is reliable; on a peer-to-peer accommodationwebsite such as AirBNB, that the person is harmless and will not destroy our flat. There is amore 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 tomonitor each other, letting them self-govern resources become possible. This is one big idea vernance, especially thecommons) awarded by a Nobel Prize in economy. Then, the role of the company is to act as acurator and ambassador, creating platforms that facilitate self-managed exchanges andcontributions, the most important facilitating element being a well-designed reputationsystem. This should help users in coordinating their specific needs on the platform andmonitor 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 userswe interacted with. Now, those systems are part of the most successful e-commerce websitessuch as Amazon or eBay. 2. Belief in the commonsThe notion of commons first appeared when Romans defined res publica (things set aside forpublic use). Res publica was made of parks, roads, public buildings. The concept becamegrowingly 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 byindividuals, 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 ina relatively self-managed way. Influential researchers, such as Lawrence Lessig and ElinorOlstrom, are promoting the value of a commons of cultural, educational and scientific ideas.In 2002, Lessig launched Creative Commons, a non-profit organization providing freecopyright licenses to encourage sharing and collaboration but which still restricts usages towhich the creator does not consent. Today, hundreds of millions licenses have been issued inmore than 50 countries. Collaborative consumption expands these principles beyond contentsunder license and apply it to other resources (e.g. car or houses), intending to provide the rightresources for the right person at the right place and the right moment, this being . 3. Idling capacityThe unused potential of a resource when not in use is referred to as idling capacity. Tangibleresources such as bikes, cars, drills but also intangible assets such as time, space or energyhave an idling capacity. In our current economic system based on private ownership andcentralized networks, there is a huge opportunity. For example, people owning a power drilluse it on average only between six and thirteen minutes in its entire lifetime. Private ownedcars are parked on average 95% of the time. With modern technologies including socialnetworks and real time location capabilities of hand-held devices, it becomes easier toredistribute 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, andlearn to use it if necessary. Available and upcoming technologies are a big help in that. Thechallenge is more psychological: it is necessary to lower the transactions costs. To changegreater 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 perceivedcosts. The trick is to provide substantial benefits to users, taking advantage of the most idlingcapacity possible without being privative or intrusive. 4. Critical massIn social dynamics, critical mass is a sufficient number of adopters of an innovation in asocial system so that the rate of adoption becomes self-sustaining and drives further growth.18These early adopters help people to cross the psychological barriers and convince them thatthey should try. In this scheme, the first experience is very important. An incident occurringduring the first experience is very likely to have much more significance and negative impactthan 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 wherethe social experience consumers have is pretty different to the one they have in conventionalstores. More, it calls new behaviors with high interactivity between users. It is also importantin terms of value proposition. To shift from conventional shopping, the offer (built byplatform users: community is the product) must be at least as large and satisfactory. Forexample, AirBNB listings must be at least as rich as those of Booking (leading online hotelbooking website). An important leverage to reach critical mass is social proof: where peopleassume the actions of others reflect the correct behavior in a given situation. As RachelBotsman and Roo Rogers state in their book , the social phenomenon of role in collaborativeconsumption. iii. Systems 1. Product service systemsAs 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 managingtheir profile on social networks as a brand: this is what we call personal branding. Beingassociated to a bad video on YouTube is much more damaging than being seen downtowndriving an out-of style car. It has an important impact on consumption. We do not want stuffbut 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 infrastructurethat is designed to be competitive, to satisfy customer needs and to have lower impact onenvironment than traditional business models. There are considerable debates about theclassification 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:$&7.CB):;":..%-%97>):;"255B7:B%>$):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 economywhere there is no waste, just biological nutrients designed to reenter the biosphere safely andtechnical nutrients designed to circulate without entering the biosphere as opposition to our ). It can have huge positive impacts on theenvironment. It is estimated that just shifting a fifth of household spending from purchasing torenting would cut annual CO2 emissions by about 2 per cent (13 million tones of CO2).20 2. Redistribution marketsUsed goods have been exchanged for centuries. The first known handwritten notices listinggoods 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 onor social networks are all forms of redistribution. It has neverbeen easier to form groups and communities than today, enabling redistributions markets toscale 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 aperson B and platforms such as eBay allow the transaction between person A and B avoidinghim/her to buy a new product. A less capitalistic form of redistribution is also growing on theInternet 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 toUser A) since the coincidence of wants is very limited in a two-way form. Experience showsthat swapping can provide choice and instant gratification as conventional shopping does andthat it becomes an habit for most users that subscribed to such websites. Once again, thepositive environmental impact can be significant. Even with the impact of transportationassociated to the transaction of the (re)used good, using and reusing is still better than buyingsomething new. According to William McDonough, one of the fathers of circular economy, aproduct itself contains only 5 per cent of the raw materials used to produce it. 3. Collaborative lifestylesout 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_SDS_^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 marketsFinance/Banking Kickstarter (Crowdfunding) 73,620 launched projects $381 million dollars pledged Zopa (P2P lending) Over £238 million lendHotels AirBNB (P2P + 200,000 listings accomodation) 5 million nights booked during S1 2012Tourism tours and Vayable (P2P tourism activities and More than 2,500 experiences in 600 citiesevents events)Taxi SideCar (Real-time More than 50,000 rides in 4 months in the P2P Ride sharing) San Francisco Bay AreaEducation Skillshare (Skill sharing) More than 15,000 hours of classes in 9 monthsEnergy 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 marketplaceCar 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/100kmFood industry La Ruche Qui Dit Oui ! (social e- + 60,000 members commerce platform for agricultural products) Landshare (Urban community garden) + 70,000 membersRetail 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 collaborativeconsumption 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.SWOTCollaborative consumption has both rational and emotional benefits driving its adoption byusers: 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 theimportance of trust between strangers. This is still a weakness despite all efforts made bycompanies because 22Since it is a new service, there is a general lack of awareness. What is and what is notcollaborative consumption is not always clear to understand for non-specialists andconfusions (they have a blur perception of collaborative consumption/collaborativeeconomy/sharing economy) can easily be made. For example, P2P car sharing and carsharing/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 stillyoung movement. Another drawback is that, even if people are aware and willing to try theservice, -based lifestyle, where our resourcesare always available when we need them, to an usership-based lifestyle, where a process isnecessary to access to the resources when we need them (transaction costs). Based on I CT strength but it is also a weakness since a growingnumber of people is voluntarily disconnected and want to live a life offline. They alreadyrepresent around 15% of the 15+ years old population in France. As technologies evolve 23 .Collaborative consumption is based on exploiting existing resources (transforming themaximum quantity of waste in valuable resource and chasing idling capacities), whichprocesses and generates huge amounts of waste (about 3,500 Billion kilos of waste producedin the world in 2009!)24. Environmental issues are another opportunity since we are now at apoint 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 asolution 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 themovement. More data have been produced in the last 3 years than ever before. The rise ofconnected objects (tablets, mobiles, fridges, cars, houses and even white stick, etc.) willamply this phenomenon. Big Data (technologies enabling exploitation and interpretation ofdata sets too large to be processed by traditional technologies) and ATAWAD (technologiesenabling connection to a network at Any Time, AnyWhere and with Any Device) will allowapplications unimaginable today. This is a big opportunity for collaborative consumptionsince it will be possible to measure new sorts of waste and to make user generated contentrelevant for new areas. For example, social networks where people share the real performanceof their products could develop.Such a movement is disruptive to traditional businesses since they are not so based onoptimization of resources. It generates frictions and P2P accommodation, car sharing, realtime car sharing or couchsurfing websites have all faced lobby from traditional actorsaiming to get those websites closed (e.g. AirBNB vs the Hotel Industry). This is a potentiallystrong threat to collaborative consumption companies even if the movement as a whole seemstoo strong to be stopped. 25 Another threat is the taxation of financial gains obtained bylisting resources on websites and sharing them. With the development of the movement, thosefinancial gains will likely be regulated and taxed. People could see less appeal in sharing orcould try to short-circuit collaborative consumption platforms (e.g. Through AirBNB, personA arrange a stay at personand 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, thecollaborative consumption movement/sharing economy can impact (and is impacted by) itswhole environment. More precisely, we can ask what impacts could collaborativeconsumption 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[PZ^OXWO! U[PXTO! Kf^Z[! ZWDSUOV! RZ^bV^S! OZ! ^V[ZOV! TZWO^Ud_OZ^S!RNUTN!U[PaUVS!XaSZ!aVSS!XSSVOSQPN`SUTXa!d_UaUWYSL7! 0VSVX^TN! e! 3VjVaZP[VWOH! 1V^`! U[PZ^OXWO! U[PXTO! Kf^Z[! UWDNZ_SV! UWWZjXOUZW! OZ! ZPVW!UWWZjXOUZW!_SUWY!T^ZRSZ_^TUWY!XW!VhOV^WXa!TZWO^Ud_OUZWSL! 3VSUYWH! 1V^`!U[PZ^OXWO!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[PZ^OXWO!U[PXTO7!K=VWV^XaUgXOUZW!Zf![XSS!PV^SZWXaUgXOUZW!XW! [XSS! P^Z_TOUZW! PZSSUda`! ^VPaXTV! d`! XW! ZW! V[XW! P^Z_TOUZW! XPPa`UWY! ONV! [ZVa!Zf!P^UWOUWY!OZ!ZdiVTOSL7! 8X^bVOUWY! e! 5Z[[_WUTXOUZWH! 1V^`! U[PZ^OXWO! 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^`ONUWY!US!X!P^Z_TOL7! /XaVS!e!5_SOZ[V^!SV^jUTVH!1V^`!U[PZ^OXWO!U[PXTO7!+^Z[!XW!ZffV^DV[XW![ZVa! OZ!X!TZZPV^XOUZW![ZVa7! ! 2FGHIHJ!CK!6LMMNILONJHPQ!RLSTUVWJHLS! A$!
2. European car industry a. Short historyThe 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 thatfirst automobiles are produced (by Karl Benz in Germany). Panhard et Levassor (1889) andPeugeot (1891) are the two first automobile-only companies. Half of the world production isconcentrated in France at the beginning of the XXth century. At this time, automotivetechnology was growing rapidly due to an important number of manufacturers competing andtrying to gain attention (it was still a niche market). Steam, electricity and petrol/gasoline-powered vehicles were compengines achieved their dominance. Then began World War I in Europe, affecting a lot the carproduction and playing in favor of the American car industry (producing about 2 millionvehicles in 1918). The period between 1919 and 1929, known as vintage era, is marked by thetransition from open-bodies cars to closed-bodies cars. 26 In 1930, the number of automanufacturers declined sharply as the industry matured and consolidated in a context of GreatDepression. Mechanical innovations (e.g. Front-wheel drive) and the United Statesdomination are characteristics of this decade. Until the 1960s the Big Three (Chrysler, Fordand General Motors, American firm from Detroit) dominated the world car production whileEurope 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 majorplayers on the international scene (with brand such as BMW, Toyota, Nissan). Asia becamedefinitively the first production region in the modern era (1980s-2000s), an era characterizedby mutualized production platforms, fuel efficiency and environmental concerns. A crisissurged in 2008-2010 (global financial downturn, high prices of automotive fuels), affectinghugely all players, the American ones being the most impacted (General Motors and Chryslerwent 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 carmanufacturers if they are up to survive.We cannot relate the story without mentioning productive models. It is interesting to noticethat, throughout the car history, at least two productive models coexisted. They can bedefined as a corporate governance compromise, enabling the sustainable implementation of aprofit strategy viable in the growth modes framework (e.g. heterogeneous market and flexiblework) of countries where firms have activities thanks to coherent and acceptable means forconcerned stakeholders (banks, directors, unions, governments, workforce, etc.). 27 Newproductive models will very likely spread throughout the XXIth century. In this context, it isimportant to understand how they can come to existence and spread. Six productive modelsmarked the XXth century and ruled the car production upon different forms in differentcountries: 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 figuresIn 2011, 13.4 million new cars have been registered in Europe. A negative growth is expectedfor 2012 (-6,8% vs 2011) and levels of 2011 will not be recovered before 2014 (forecastPWC: 13,5 new cars registrations in 2014). Car manufacturing follows the same trend: 16.7million cars in 2011, 15.9 million in 2012 and 17.4 million in 2014. This is an importantindustry since it is a large employer (2 billion direct jobs and 10 million indirect jobs inEurope) and a leading European Union export sector with a net trade contribut - ii. Market trendsDuring the last years, the market dramatically evolved. China became the biggest market inthe world with more than 17 million cars sold in 2011. At a slower pace, Brazil, Russia andIndia 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]<%$$_!NZJQO!4:6]&UJLZNRJT!!In those countries, opportunities are huge for car manufacturers because they are equipmentmarkets (16 cars per 1000 inhabitants in India, 47 in China and 153 in Brazil). In opposition,more mature markets such as North America and Europe are replacement markets since mostof the population already owns a car (814 cars per 1000 inhabitants in USA, 587 in UE15).economic context, US market faced a huge slowdown from 2007 to 2009, years of thesubprime crisis. To a lesser extent, Europe was also impacted. Government subsidizes(scrappage program) sustained the customer demand and helped the industry to overcome thisperiod. As the Old Continent is living the sovereign debts crisis since 2009, states are underpressure, have to cut expenses and cannot afford sustaining the demand for cars again. This isa more structural crisis for manufacturers since car sales will likely never reach levels of the ! AB!
early 2000s (they agree on an average of 13 million car sales versus 16 million in the2000s28). With important and capital-intensive production sites in Europe (16 million carsproduced in 2011 cf. exhibit 7), restructurations and market consolidation are to be expected. 2FGHIHJ!=K!:LOMX`HXQ!WNTTQSQO!RNO!WOLXURJHLS!QPLMUJHLS!WQO!OQHLS!^<%%%]<%$$_!NZJQO!&62&!!Players with a strong internationalization (e.g VolksWagen Group, Hyundai-Kia) have cashand conduct a very aggressive commercial strategy (large discounts and promotions)involving a price war and endangering players focused on Europe. These will have toaccelerate their internationalization by building production sites in key locations (with lowproductions costs, flexible workforce and strong customer demand) while reducing theirpositions in declining markets (such as France, Spain, Italy). Strategic alliances will be key insuch a context since the vicious cycle they are in can hardly be broken alone. Indeed, for thosegenerating most part of their margins and/or having most of their activity in Europe, thepressure on prices have direct impact on their global margins, which means less investmentsand less innovations, a pitfall in a long-term flat market where releasing regularly new modelsis 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_DO^VSDdXSDVDaXDV[XWVDVSOD_^XdaV]@#?@#:!KUW!+^VWTNL!! :G!
iii. PORTERTo analyze the European car industry and its relative competitive pressures, we conduct aPORTER analysis, based on the model developed by Michael E. Porter from HarvardBusiness School in 1979. The initial model considered five forces: buyer bargaining power,supplier bargaining power, threat of substitutes, threat of new entrants and intensity ofcompetition. 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 (complementaryproducts and services). For the car industry, the government is the most prominent force andwill 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 thepressure exerted by buyers. First, clients are more versatile than before and no longer buy carsfrom the same brand all life long, thus efforts have to be made to get their loyalty. Customerscan afford several cars, generally two, each with a more specific use. The offer is now verylarge (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 lowersales), 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 valueadded for getting from a point A to a point B. This is the era of the servicial car. Implicationsare 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 reallyincreased since then. With the advent of the toyotist productive model, car manufacturershave concentrated on their core business (vertical disintegration) even if they keep financialcontrol on their supplier subsidiaries when they have ones (e.g. PSA with its subsidiaryFaurecia). Purchases can represent today up to 80% of the total cost price29. Car suppliershave gained importance, they restructured and built worldwide oligopolies, creating a wholeindustry and increasing dramatically their power on manufacturers. In the future, growingpressures from suppliers are expected. The connected car will move the value chain. The riskfor 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 byexternal players already well advanced in those domains. Those types of suppliers couldbecome competitors. For example, Bolloré, based on its expertise on capacitors, launched itselectric car, the BlueCar, and won the call for tenders for the car sharing service Autolibsponsored by the mayor in Paris. This is also especially true in China where technology inbatteries 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 mostdifficult in the world. Tax burden, heavy regulation combined with regional disparities andhigh expectations from customers (high standards) are basic elements to manage to succeed inthe 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 animportant competition, even more now in this context of crisis. Industry leaders such asVolkswagen 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 fromBRIC (Brazil Russia India China), software companies and traditional suppliers could enterthe market, bringing even tougher competition. I ntensity of rivalry: 4/5 trend: +New entrants: At the beginning, only European car manufacturers were present in theEuropean market. Quickly, Americans entered the market followed by Japaneses in the 60sand the Koreans in the 90s. We count now three Japanese groups, two Americans and oneKorean among the thirteen biggest groups in Europe. Great Wall, a Chinese company enteredthe European market this year with a low-cost offer first targeting Bulgaria, Macedonia,Albania and Montenegro, more accessible and dynamic countries than Spain, France orGermany. Making the most of the low-cost segment dynamism, manufacturers from Chinaand 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 newmotorizations (such as fuel cells) and software companies (cars are becoming more and morerobots, the most advanced step being self-driving cars). Existing car manufacturers havegenerally strong history, culture, brand and heavy structures, making them reluctant to changeand 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 andstatuses on social networks. In the 70s, admiration could be won by driving a fancy car ; inthe 2000s, this is more the number of followers that someone has on its social networks thatcould play this role. As a transportation mean, the private car is still the most commontransportation mode (3 out of 4 trips are made by car) but is in competition with a growingnumber 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 oftelecommuting and e-commerce. A significant number of cities is about to plan to reduce theplace of the private car in the future, hence favoriting alternatives. In Europe, London hasalready 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 carmanufacturers : respectively restrictive safety and environmental norms, oil taxes and statesubsidizes, car restriction policies (tolls and taxations). Car innovation is entirely conditionedby those norms, especially environmental ones. In 2015, at least 95% of the average weight ofan out-of-order car will have to be upcycled (85% in 2006) and CO2 emissions from cars willhave to be reduced to 95 grams/kilometer by 2020. Being a key industry in crisis (especiallyin 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 behaviorOn one hand, Internet and telecommunication networks are pervasive technologies. Internet-based softwares are capturing increasing value in many industries, if not all. On the otherhand, having become accustomed to instant internet access at home and in the office, peopledeveloped, in « rich » countries, expect the same connectivity when on the move, with accessto smartphones, tablets and mp3 players, as well as satellite navigation. This will lead toconnected objects generalization (« The Internet of Things ») and to changing customerdemand. For car manufacturers, it brings several challenges. With extensive and transparent at their disposal and growing appetencefor (internet-based) services, customers will demand a personalized and hassle-freeexperience, forcing manufacturers to find ways to provide mass personalized and connectedcars along with mobility services. 1. All knowing consumerToday, 79% of American consumers use their smartphone while shopping and 77% of Frenchinternet 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 byregulations 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 soldvehicles31. Via worldwide online communities supported and financed by third players suchas NGOs or citizens associations, consumers will be able to get all the strategic data to guidetheir purchase (peer reviews, production mode, carbon footprint, work conditions, distributionof 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 sectorcould reach an even greater level of empowerment: they could become their own carmanufacturers. Thanks to management methods such as Agile, Scrum and Lean (used notablyfor software management) and tools such as 3D printers and online collaborative applications(Dropbox, Google docs, etc.), financial and equipment resources necessary to build acompetitive 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 tochange a tyre or the engine. To avoid disruption, car manufacturers will have to adopt thosemethods. Will they understand this challenge and eventually sell cars by modules lettingconsumers to build their very own car or else will they integrate social data in their marketingto deliver personalized finished products or do anything else? The first initiative would faceimportant resistance from governors and employees since it would be accompanied by drasticreductions in production capabilities and certainly employment. The second approach, even ifcloser to the current model of car manufacturers, is also challenging. Indeed, the availablemarket being a sum of niche markets, customers-influencers have to be identified, influencedand integrated in innovation processes to provide the « right » offer to the « right » people. Inorder to do so, companies need to disclose strategic data, to tie those data with data fromsocial networks and to include them in the service or product provided to consumers: this is acall for the connected car. 2. Connected carEarly signs of connected car (in this scheme, car, like a mobile phone, is an element of atelecommunication network, Internet in general) came to public use during the 1990s viaGPS, sensor-based driver assistance such as water and oil level monitoring and on-boardcommunication 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 featurephones in 2010 (low-end devices), smartphones (high-end devices with most advancedcomputing 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 connectedeven 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 millioncars in 2016 (penetration of 16%) to reach $40 Billion. This is a big opportunity for carmanufacturers as much as a big challenge. Major issues and questions lies in the impacts on the control of connectivity, the divergence ofdevelopment 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_OD4SQ2VRSQ.WSUYNOQ/[X^OPNZWV]PVWVO^XOUZW]&_YAG66Q!! ! :#!
As of today, connectivity is a bunch of additional paying services. Only few manufacturerssuch as GM with Onstar succeeded with this approach, consumers having the powerful habitto pay for a whole product. In the same time, they cannot include the access to all connectedservices by rising the initial price of the car since sales are already dramatically falling. Theywill have to envision the car as a platform open to all sorts of external developers allowingthem to provide dedicated applications.The design of the connectivity depends on the approach taken. As of today, somemanufacturers 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 theintegration 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 purchaseIt appears that in most cases, car manufacturers do not control connectivity. It is an alarmingpoint for them since more and more value will be concentrated in the software, especially forautonomous 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 Googlecar, authorized in some US federal states such as Nevada. The car is a Toyota Prius but all thevalue is in the cameras, other sensors and information retrieved from Google Street Viewpowering the car. Those softwares and technologies can be produced in a matter of monthswhile cars can take years to come to market. Here lies another problem: divergence ofdevelopment cycles. To tackle this problem, Audi integrates new products and services intoexisting vehicles seemlessly thanks to a modular approach. At a higher level, this approachcould even allow development cycles to converge (cf. Wikispeed). It is a key point sinceconnectivity is less an enabler for entertainment than a way to increase safety and reducetraffic 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 objectconnectivity), infrastructures (red lights operating mode can be adapted to the traffic andcould even disappear with autonomous cars), car manufacturers, software companies andmobility services operators. 3. Mobility servicesTraditionally, car innovation is concentrated in the product (design, motorization, safetytechnologies, driver assistance, etc.). With an important focus on technologies, car prices didnot decrease while usage costs largely increased (oil prices, increasing price of carmaintenance) in a context of economic downturn. Added to that, the rise of the Internet, socialnetworks and video games reduced the car appeal for youngsters. For many people especiallyin remote areas, owning a car is still a necessity, as mobility needs grow, but it is not apleasure or a real satisfaction anymore. For people living in cities such as Paris, Tokyo orAmsterdam, owning a car is a reality for only 40% of the population or even less. The modalpart of the owned car is decreasing at a growing pace. But they are also part of the solution:!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!::!NOOPHQQRRR7ONVTX^TZWWVTOUZW7TZ[QWVRSQ6G?BA$6]UVVVDSX`SDONXOD?#DZfDjVNUTaVSDRUaaDdVDX_OZWZ[Z_SDd`DAG"G!!! :$!