Auto Industry Mirrors Telecom Industry Transition

Eventually, the auto industry will make vehicles as the foundation of a range of other revenue-generating activities, but not as the sole driver of revenue, much as the telecom industry is in transition to business models that are built on the need for connectivity, but not connectivity revenue itself.

It is easy to forget that whole industries, not just products created by any industry, have product life cycles. Now it is the auto industry as a whole that seems to have reached a peak of its life cycle, something we already have seen in the telecom industry regarding voice and messaging products, might be seeing in mobility and video entertainment as well, and will soon affect internet access.

source: Marketing Fanatics

With the caveat that global trends sometimes are not reflected in some particular markets, Moody’s Investors Service says the global auto industry outlook is negative, with “stagnant or falling demand for vehicles, a shift back to larger vehicles despite new energy efficient technologies, historically high levels of lease expirations and lengthening auto loan terms” in the U.S. market.

Eventually, as the legacy revenue model erodes, the industry will try--as others have--to create a new business model. For the auto industry, that might well include a shift to autonomous vehicle transportation or other transportation services, not the production, sale and maintenance of autos themselves.

If the telecom industry provides any useful model, the model will still include “making vehicles,” as telecom builds on its connectivity platform. But as connectivity itself does not drive revenue growth, making vehicles will become just a part of the revenue stream.

It is worth recalling that the only reason the early telecom industry built networks at all--and continues to do so--is that the application it wanted to sell required such networks. LIke Facebook, Google, Netflix or Amazon, which require the existence of internet access networks for their business models, so early telcos needed telephone networks to sell voice.

Eventually, if they are successful, automakers will continue to make vehicles, but only as an underpinning for their transportation services businesses.